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Quality Management Practices for Business Services

from a Buyer’s Perspective

D I S S E R T A T I O N

University of St.Gallen, School of Management,

Economics, Law, Social Sciences

and International Affairs

to obtain the title of

Doctor of Philosophy in Management

submitted by

Elmar Holschbach

from

Germany

Approved on the application of

Prof. Dr. Wolfgang Stölzle

and

Prof. Dr. Thomas Friedli

Dissertation no. 3901

Dierkes DWS, Paderborn, 2011

I

The University of St. Gallen, School of Management, Economics, Law, Social Scienc-

es and International Affairs hereby consents to the printing of the present dissertation,

without hereby expressing any opinion on the views herein expressed.

St. Gallen, May 13, 2011

The President:

Prof. Dr. Thomas Bieger

II

Vorwort

Diese Dissertation ist das Ergebnis meiner Forschungstätigkeit als externer Doktorand

am Lehrstuhl für Logistikmanagement der Universität St. Gallen (LOG-HSG). Die

anfängliche Motivation zu dieser Arbeit entstammt Beobachtungen, die ich in ver-

schiedenen Positionen im Bereich der Beschaffung machen konnte. Insbesondere habe

ich den Eindruck gewonnen, dass beschaffende Unternehmen ein intensiveres Quali-

tätsmanagement für zugekaufte Produkte als für Dienstleistungen betreiben. Dies ist

überraschend, da der Anteil industrienaher Dienstleistungen am Beschaffungsvolumen

signifikant ist und sogar weiter steigt.

Ich möchte dieses Vorwort dazu nutzen, mich bei all jenen zu bedanken, die meinen

Dissertationsprozess aktiv begleitet und unterstützt haben.

An erster Stelle sei hierzu mein Referent, Prof. Dr. Wolfgang Stölzle, genannt. Ihm

gilt mein besonderer Dank, da er mir die Möglichkeit eingeräumt hat, als externer

Doktorand bei ihm zu promovieren. Die Konstellation der externen Promotion stellt an

die beteiligten Parteien immer besondere organisatorische Anforderungen. Prof. Stölz-

le war stets dazu bereit, mich bei der Bewältigung dieser Herausforderungen zu unter-

stützen und sie gemeinsam zu schultern. Desweiteren möchte ich mich bei Prof. Dr.

Thomas Friedli für die Übernahme des Koreferats und die damit verbundene rasche

Begutachtung meiner Arbeit bedanken. Insbesondere danke ich auch meinem Projekt-

leiter Prof. Dr. Erik Hofmann, der mich auf Basis seines reichen akademischen Erfah-

rungsschatzes und mit seinen stets konstruktiven Empfehlungen und Anmerkungen

sehr inspiriert hat.

Weiterhin bedanke ich mich bei meinen Kondoktoranden und Kollegen am LOG-

HSG, die mir durch ihre offene und hilfsbereite Art sehr dabei geholfen haben, einige

Klippen im Dissertationsprozess zu umschiffen. Besonders hervorheben möchte ich

hierbei meinen Ex-Kollegen, Kondoktoranden und Freund Jörg Grimm, von dessen

Einsichten, Empfehlungen und Hilfe ich sehr profitiert habe.

Praxisrelevante Forschung in der Betriebswirtschaftslehre ist i.d.R. nur durch die Mit-

hilfe von Unternehmen möglich. Dies war auch bei der vorliegenden Dissertation der

Fall. Daher möchte ich mich darüber hinaus bei den Vertretern aus der Unternehmens-

praxis sehr herzlich bedanken, die trotz ihrer vielfältigen beruflichen Belastungen die

Zeit gefunden haben, das Thema im Rahmen der Fallstudien mit mir zu diskutieren

und den daraus resultierenden Fragebogen zu beantworten.

III

Mein größter Dank gilt schließlich meiner Familie, die mich in so manchem Sturm

meines bisherigen Lebens stets unterstützt hat. Besonders bedanke ich mich bei meiner

Mutter, Maritta Holschbach-Kamps, und meiner Lebensgefährtin, Ágnes Nagy, deren

permanente Ermunterung und wahres Mitgefühl einen entscheidenden Baustein zur

Fertigstellung dieser Arbeit darstellten. Ich habe von ihnen unermüdliche Unterstüt-

zung und großes Verständnis erfahren. Daher möchte ich ihnen diese Arbeit widmen.

Salzkotten, im Juli 2011 Elmar Holschbach

Quality Management Practices for Business Services from a Buyer‟s Perspective

IV

Table of contents

Table of contents ...................................................................................................................... IV

List of tables ............................................................................................................................. VI

List of figures ......................................................................................................................... VIII

List of abbreviations ................................................................................................................. IX

Abstract ..................................................................................................................................... X

1. Introduction ............................................................................................... 1

1.1 Significance of BS and problem formulation ......................................................................... 1

1.2 Services, BS and scope of work ............................................................................................ 3

1.3 Classification of BS ............................................................................................................. 6

1.4 Research overview............................................................................................................... 7

1.5 Research objectives ............................................................................................................. 9

2. Current status of research ........................................................................ 11

2.1 Relevant research on purchasing of services .........................................................................11

2.2 Relevant research on service quality ....................................................................................20

2.3 Relevant research on QM ....................................................................................................27

2.4 Summary of the current status of research ............................................................................32

3. Research methodology .............................................................................. 34

3.1 Research questions .............................................................................................................34

3.2 Positioning and phases of the research..................................................................................35

3.2.1 Positioning of the research ......................................................................................35

3.2.2 Phases of the research .............................................................................................36

4. Publication structure and key results ........................................................ 49

4.1 Paper A: Quality Management Practices for Business Services: A Research Agenda from a

Buyer‟s Perspective ............................................................................................................49

4.2 Paper B: Exploring quality management for business services from a buyer‟s perspective

using multiple case study evidence.......................................................................................50

4.3 Paper C: Comparison of quality management for externally sourced business services ............51

4.4 Paper D: Quality management for business services from a buyer‟s perspective .....................53

5. Overall conclusion .................................................................................... 55

5.1 Summary of the objectives and research questions ................................................................55

5.2 Theoretical implications ......................................................................................................55

5.3 Managerial implications ......................................................................................................57

5.4 Limitations and future research ............................................................................................60

References ...................................................................................................................................62

V Quality Management Practices for Business Services

from a Buyer‟s Perspective

Appendices ...................................................................................................... 79

A Quality Management Practices for Business Services: A Research

Agenda from a Buyer’s Perspective........................................................... 80

A.1 Introduction .......................................................................................................................80

A.2 Background........................................................................................................................82

A.3 Literature review ................................................................................................................85

A.4 Problem formulation ...........................................................................................................90

A.5 Initial propositions and preliminary research framework .......................................................90

A.6 Methodology ......................................................................................................................94

A.7 Conclusion .........................................................................................................................95

References of paper A ..................................................................................................................97

Appendices of paper A ............................................................................................................... 105

B Exploring quality management for business services from a buyer’s perspective using multiple case study evidence .........................................109

B.1 Introduction ..................................................................................................................... 110

B.2 Theoretical foundation ...................................................................................................... 112

B.3 Case study methodology ................................................................................................... 117

B.4 Key findings from the empirical study................................................................................ 121

B.5 Discussion and conceptual model ...................................................................................... 138

B.6 Conclusion ....................................................................................................................... 142

References of paper B ................................................................................................................ 147

Appendices of paper B ............................................................................................................... 155

C Comparison of quality management for externally sourced business

services ....................................................................................................161

C.1 Introduction ..................................................................................................................... 162

C.2 Theoretical background..................................................................................................... 163

C.3 Research hypotheses and methodology .............................................................................. 176

C.4 Results and discussion ...................................................................................................... 179

C.5 Conclusions, limitations and future research ....................................................................... 202

References of paper C ................................................................................................................ 207

D Quality management for business services from a buyer’s perspective .....216

D.1 Introduction ..................................................................................................................... 216

D.2 Theoretical background..................................................................................................... 219

D.3 Research methodology ...................................................................................................... 230

D.4 Discussion........................................................................................................................ 243

D.5 Conclusion ....................................................................................................................... 247

References of paper D ................................................................................................................ 252

Appendices of paper D ............................................................................................................... 264

E Author's Curriculum Vitae ......................................................................273


VI

List of tables

Table 1: Overview of BS in scope ................................................................. 5

Table 2: Summary of selected publications examining differences in

purchasing of services to purchasing of goods ................................. 14

Table 3: Overview of different process models for purchasing of services ....... 16

Table 4: Description of service quality dimensions in B2C contexts and

their assignment to physical context, interaction, and outcome

quality.......................................................................................... 22

Table 5: Summary of selected publications examining the dimensions of

service quality in a B2B environment.............................................. 25

Table 6: QM practices ................................................................................ 29

Appendix A

Table A- 1: Overview of business services in scope ..........................................105

Table A- 2: Description of service quality dimensions in B2C contexts and

their assignment to physical context, interaction, and outcome

quality.........................................................................................106

Table A- 3: Summary of publications examining the dimensions of service

quality in a B2B environment ........................................................107

Table A- 4: Quality Management Practices ......................................................108

Appendix B

Table B- 1: Quality management practices .......................................................155

Table B- 2: Overview of business services in scope ..........................................156

Table B- 3: Selected companies and their key characteristics .............................157

Table B- 4: Selected services and list of interviewees .......................................158

Table B- 5: Interview protocol (shortened version) ...........................................159

Table B- 6: Major findings regarding the design of quality management

practices for externally sourced business services............................160

VII Quality Management Practices for Business Services


Appendix C

Table C- 1: Selected empirical studies comparing QM in manufacturing and service companies ........................................................................168

Table C- 2: Selected empirical studies comparing QM in small and large

companies ...................................................................................172

Table C- 3: Response sample composition .......................................................178

Table C- 4: Adoption of QM practices for externally sourced BS in

manufacturing, service, small and large companies .........................186

Table C- 5: Effects of QM practices for externally sourced BS in

manufacturing, service, small and large companies .........................193

Table C- 6: Barriers to the implementation of QM practices for externally

sourced business services in manufacturing, service, small and

large companies ...........................................................................199

Table C- 7: Determinants of QM practices for externally sourced BS in manufacturing, service, small and large companies .........................201

Appendix D

Table D- 1: Response sample composition .......................................................233

Table D- 2: Results of testing the measurement model ......................................238

Table D- 3: Results of testing the structural model ............................................243

Table D- 4: Selected empirical studies supporting the proposed hypotheses ........264

Table D- 5: Measurement scales, items and their sources ..................................268


VIII

List of figures

Figure 1: Structure of the thesis ...................................................................... 8

Figure 2: Research phases ............................................................................ 37

Figure 3: Process of data analysis during the second research phase................. 43

Appendix A

Figure A- 1: Preliminary conceptual model ........................................................ 94

Appendix B

Figure B- 1: Initial research model ...................................................................117

Figure B- 2: The conceptual model...................................................................142

Appendix D

Figure D- 1: Research model ...........................................................................223

Figure D- 2: Structural model ..........................................................................242

IX Quality Management Practices for Business Services


List of abbreviations

AVE Average variance extracted

BME Bundesverband Materialwirtschaft, Einkauf und Logistik e.V.

(German Association Materials Management, Purchasing and Logistics)

BMÖ Bundesverband Materialwirtschaft, Einkauf und Logistik in Österreich

(Austrian Association Material Management, Purchasing and Logistics)

BS Business service(s)

B2B Business-to-business

B2C Business-to-consumer

Cf. Confer

Ed(s). Editor(s)

e.g. exempli gratia (for example)

et al. et alli, lat.: "and others"

i.e. id est, lat.: "that is"

IMP Industrial Marketing and Purchasing Group

ISO International Organisation for Standardization

KPI Key performance indicator(s)

m Million

Mgt. Management

ML Maximum likelihood

n/a Not available/applicable

PLS Partial least squares

QM Quality management

RQ Research question

SC Supply chain

SCM Supply chain management

SEM Structural equation modelling

Sig. level Significance level

Std. dev. Standard deviation

SVME Schweizerischer Verband für Materialwirtschaft und Einkauf

(Swiss Association Material Management and Purchasing)

TQM Total quality management


X

Abstract

This cumulative doctoral thesis presents research results on the basic question how

buying companies manage the quality of externally sourced business services. Busi-

ness services are services which are delivered by firms or organizations and bought by

other firms or organizations (Axelsson & Wynstra, 2002).

The importance of business services for economies and buying companies has risen

during the last years. Studies show that the share of business services on a company‟s

total spend is growing. Despite this significance, the purchasing of business services

has not yet received the attention it deserves neither from practitioners nor from aca-

demics. One reason for this disregard is the focus on the purchasing of goods in com-

panies as well as in academic literature.

Some research shows, however, that the quality evaluation of business services is one

of the major concerns of purchasing managers. This is not surprising considering the

peculiar characteristics of services and the positive effects high-level quality of incom-

ing services may have on a buying firm‟s performance. Therefore, this research aims

at discovering how buying companies utilize practices of quality management for their

externally sourced business services, how their usage may affect business performance

and what may be major determinants of their design. To achieve this objective, this

thesis draws upon literature in the areas of purchasing of services, service quality and

quality management. The analysis of this work utilizes a three-phased research meth-

odology. While the first research phase predominantly deals with the description of the

theoretical and practical problem, the second stage provides potential explanations. In

the third phase of research, the previously developed and refined conceptual model

with its related propositions is tested using several quantitative methods of data analy-

sis.

The findings of this thesis suggest that the utilization of quality management practices

for externally sourced business services has positive effects on the buying company‟s

performance and may therefore represent a valuable investment. In particular, the ap-

plication of customer involvement, service design, process management and provider

involvement enhances the quality of incoming business services. Buying companies

should focus their activities for quality management of incoming services on the ones

whose quality failure would represent a critical risk, which embody an important share

of their purchasing volume, are important to the production process or transferred to

the buying company‟s customers.


1

1. Introduction

This cumulative doctoral thesis deals with quality management (QM) practices for

business services (BS) from a buying company‟s perspective. The following sections

illustrate the significance of BS and formulate the underlying problem, define crucial

terms and the scope of work. Furthermore, an overview of the research process of this

thesis and its objectives will be given.

1.1 Significance of BS and problem formulation

The importance of services for economies and companies is significant and still in-

creasing (Axelsson & Wynstra, 2002; Jackson, Neidell, & Lunsford, 1995; OECD,

2000; Schneider & White, 2004). For example, the share of services of the gross value

added in Germany increased from 48.4% in 1970 to 68.9% in 2007 (Statistisches Bun-

desamt, 2009: 10) and the German Association Materials Management, Purchasing

and Logistics (BME) estimates that the ratio of BS to total purchasing volume lies be-

tween 17 and 28% for manufacturing companies (BME, 2005b: 5). Other authors even

suggest that externally purchased services on a weighted average account for more

than half of a company‟s total spend (Fearon & Bales, 1995). The share of these busi-

ness-to-business (B2B) services may increase in the future due to a continuous trend

towards outsourcing and concentration on core competencies (Cox, Chicksand, Ire-

land, & Davies, 2005; Ellram, Tate, & Billington, 2007; Fuller, 1998; Miettinen, Ven-

tovuori, & Hyttinen, 2005; Matiaske & Mellewigt, 2002; Murray & Kotabe, 1999; van

der Valk & Rozemeijer, 2009). In addition, the portion of services on many product

offerings is increasing due to a risen demand for augmented core goods (Nilsson,

Johnson, & Gustafsson, 2001; Wise & Baumgartner, 1999).

Despite the significance of BS for purchasing, most purchasing departments have fo-

cused on the optimization of the supply of goods (Axelsson & Wynstra, 2002; Ellram

et al., 2007; van der Valk, 2008; van der Valk, 2007). Similarly, the academic litera-

ture predominantly has been concentrating on the supply of materials (Bals, Hartmann,

& Ritter, 2009; Cox et al., 2005; Ellram et al., 2007; Smeltzer & Ogden, 2002; van der

Valk & Rozemeijer, 2009; van der Valk, 2008; van der Valk, 2007; Wynstra, Axels-

son, & van der Valk, 2006).

2 Quality Management Practices for Business Services


In particular, QM of externally purchased BS (i.e. incoming BS) from the perspective

of a buying company has received little attention so far by academics (Hemsworth,

Sánchez-Rodríguez, & Bidgood, 2008; Hemsworth, Sánchez-Rodríguez, & Bidgood,

2005; Sánchez-Rodríguez & Martínez-Lorente, 2004). Accordingly, the literature on

service quality in most cases has been written from a business-to-consumer (B2C) per-

spective (Bienstock, Mentzer, & Bird, 1997; Fitzsimmons, Noh, & Thies, 1998; Jack-

son et al., 1995; Hernon, 2002; Kong & Mayo, 1993; Niranjan & Metri, 2008; Patter-

son & Spreng, 1997; Woo & Ennew, 2005). The few existing studies on service quali-

ty in a B2B setting mostly analyzed the dimensions according to which customers

evaluate service quality for distinct types of services but not which practices they use

for this evaluation (see, for example, Bienstock et al., 1997; Fehl, 2006; Patterson &

Spreng, 1997).

In addition, the literature on QM has predominantly adopted the viewpoint of a pro-

vider of goods or services, and tried to answer the question how they can improve the

quality of the products or services offered to their customers (Bruhn, 2006; Flynn,

Schroeder, & Sakakibara, 1994; Forker, 1997; Fynes & Voss, 2002; Flynn et al., 1994;

Kamiske & Brauer, 2006; Rönnbäck & Witell, 2008). However, research on the ques-

tion, how companies receiving BS manage the quality of them is scarce (Forker, Men-

dez, & Hershauer, 1997; Fynes, 1999; Fynes & Voss, 2002; Molina-Azorín, Tarí,

Claver-Cortés, & López-Gamero, 2009; Stanley & Wisner, 2001).

The little research examining QM practices used by purchasing departments solely

considers manufacturing companies receiving goods as unit of analysis and has been

limited to perceptions of purchasers regarding a reduced set of QM practices (Hems-

worth et al., 2008; Hemsworth et al., 2005; Sánchez-Rodríguez & Martínez-Lorente,

2004). These studies may, however, neglect the particular characteristics of services

and their impact on the adoption of QM practices by buying companies.

The relative disregard of QM from a buyer‟s perspective is surprising as it is estimated

that – regarding manufacturers offering goods – approximately 50% of quality prob-

lems result from defects in the materials purchased (Crosby, 1984; Dowst, 1987).

Thus, the quality of a company‟s output is highly dependent on the quality of its input

(Forker, 1997; Forker et al., 1997; Ghobadian & Gallear, 1997; Krause, Pagell, &

Curkovic, 2001; Yang, Wong, Lai, & Ntoko, 2009). A similar relation may also be

true considering the quality of incoming services.


3

1.2 Services, BS and scope of work

Although the discussion about what services actually are had started already in the

1960s (Fisk, Brown, & Bitner, 1993), until today no agreement on a universal defini-

tion has been achieved (Corsten, 2001; Seth, Deshmukh, & Vrat, 2006c). Nonetheless,

authors agree that services possess several characteristics which differentiate them

from goods (Schneider & White, 2004; Svensson, 2006). Among these are their heter-

ogeneity, intangibility and inseparability of production and consumption (Parasuraman

& Varadarajan, 1988; Parasuraman, Zeithaml, & Berry, 1985) as well as the fact that

service production normally, but not necessarily always, involves some interaction

between customer and provider (Grönroos, 2007; Meffert & Bruhn, 2000). These

characteristics can all be considered continua on which different service types vary

(Jackson & Cooper, 1988; Schneider & White, 2004). BS in this context are under-

stood as services which are delivered by firms or organizations and bought by other

firms or organizations (Axelsson & Wynstra, 2002; van der Valk & Rozemeijer,

2009).

It is important to note that the characteristics of services may have some implications

on the design of QM for BS from a buying company‟s perspective, which may differ-

entiate it from QM for goods (cf. Jackson et al., 1995; Rönnbäck & Witell, 2008;

Schneider & White, 2004; van der Valk & Rozemeijer, 2009):

Heterogeneity of services may make it complex to design a QM that fits to all

types of BS. In contrast, it may be necessary for a buying company to decide

which combinations of QM practices are best suited for a specific type of busi-

ness service.

Intangibility may result in difficulties in the evaluation and comparison of BS as

a customer cannot see, hear, feel, smell or taste them (Haller, 2002; Jackson &

Cooper, 1988). As a result, business customers will possibly put greater emphasis

on personal (and thus subjective) information sources to substitute more objec-

tive measurements and/or include criteria to measure the results and outcomes of

services into their QM (Schneider & Bowen, 1995).

The inseparability of production and consumption of services implies that the

services do not yet exist when the buying company purchases it. This stresses the

need for clarifying the content of the service as requested by the customer and

suggests that QM of BS may already start before the purchase contract is signed.



Furthermore, it means that BS cannot be stored. Consequently, a buying compa-

ny may put particular emphasis on the availability of BS.

As service production often involves interaction between service provider and

customer, this interaction is an essential ingredient to the service experience.

Therefore, buying organizations may include an assessment of the interaction

process into their QM of BS. Furthermore, the variety of (internal or external)

customers of a buying company may result in different service demands. Thus, it

possibly is necessary for a buying company to adjust their QM practices to the

usage of the business service by their customers in order to meet expectations.

Due to the heterogeneity of BS it is vital to define which BS are in scope of this re-

search project. The aim of defining the scope is to list the BS which account for a sig-

nificant section of service spend of companies within a range of industries. Further-

more, the services in scope should be clearly distinguishable from each other. To

achieve this, the BS examined by two benchmarking studies on indirect spend man-

agement (CAPS Research, 2003; BME, 2005b) and a service classification proposed

by Axelsson & Wynstra (2002) were compared with regard to their classification of

BS. The BS used by these three studies as well as those in scope of this research pro-

ject are depicted in Table 1.


5

Table 1: Overview of BS in scope

No. BS in scope of

paper

(in alphabetical

order)

Examples of BS

in scope of this

paper

Axelsson &

Wynstra (2002)

BME (2005b) CAPS Research

(2003)

1 Computer installa-tion and mainte-nance services

Hardware and software imple-mentation, cus-tomization,

maintenance on single user level, telecommunication services

Information IT services Computer hard-ware, software

2 Facility services Cleaning, catering, security, real es-tate maintenance

Real estate, rental and leasing

Facility manage-ment

Facilities mainte-nance

3 Financial services Banking, finance, insurance

Finance and insurance

Financial services Insurance

4 Professional ser-vices

Management con-sultancy, software

development and implementation on company or unit level, accounting and auditing, legal, architects

Professional, scientific and

technical; man-agement of com-panies and enter-prises

Consulting, patent and legal services,

purchasing ser-vices

Consulting

5 Research and development ser-vices

Development, engineering

Professional, scientific and technical

Research and development

Engineering and manufacturing equipment

6 Technical mainte-nance and repair services

Maintenance and repair of produc-tion equipment

Administrative, support, and waste manage-ment

Industrial mainte-nance

Industrial supply

7 Transportation and distribution services

Warehousing, value-added logis-tics, transport

Transportation and warehousing

Logistics services Logistics freight

8 Fleet management services

Provision of vehi-cles for transporta-tion of staff or goods

Not included Fleet management Fleet (executive, non-executive)

9 Human resource services

Training, recruit-ment

Not included Human resource services

Employee bene-fits

10 Marketing ser-vices

Campaign devel-opment, produc-tion, print services

Not included Marketing ser-vices

Marketing; print-ing

11 Travel manage-ment services

Organisation and booking of busi-ness travels

Accomodation and food services

Travel manage-ment

Total Travel

The BS in scope of this research project cover most of the services examined in the

aforementioned studies. The business service “purchasing services” used by the Ger-



man Association Materials Management, Purchasing and Logistics (BME) will, how-

ever, not form part of further investigation in the research project due to their missing

definition in the study. Furthermore, it is assumed they do not reach the threshold of

portion of a company‟s spend in a B2B environment to be considered significant.

1.3 Classification of BS

In order to better handle the heterogeneity of the BS in scope, this thesis will make use

of a classification. The services management and marketing literature offers various

examples of service classifications for consumer services (see, for example, Bruhn,

2006; Grönroos, 2007; Lovelock, 1983; Meffert & Bruhn, 2000; Schneider & White,

2004). However, Boyt & Harvey (1997) and Smeltzer & Ogden (2002) emphasize that

less attention has been given to the classification of BS. Furthermore, most of the cate-

gorizations of BS hinge on the characteristics of the provider rather than on the ones of

the buyer (van der Valk, 2007). These classifications may therefore not be sufficient in

the attempt to understand how professional procurement manages the quality of pur-

chased BS. Jackson et al. (1995) suggest that usage of a BS affects the classification.

Wynstra et al. (2006) share this view and conclude that the application of a BS by a

buying organization affects the buyer-supplier interaction patterns. They propose a

classification consisting of four different types of services (Wynstra et al., 2006; van

der Valk, Wynstra, & Axelsson, 2009):

Component services become a rather unaltered part of the buying company‟s of-

fer to the end customer

Semi-manufactured services are offered to the end customer as well but only af-

ter being changed by the buying company

Instrumental services are used as tools or instruments by the buying company in

order to produce their own product or service

Consumption services are used completely within the buying organization and

are not part of the final offer to the end customer

This scheme is also used to arrange BS according to their usage in this research project

as it entails several advantages for research in a B2B environment. First, it is rather

independent from the characteristics of the service and may thus allow industry specif-

ic answers regarding QM. For example, facility services may be regarded as a con-


7

sumption service for manufacturers but as a component service for real estate compa-

nies. Thus, various organisations may adopt different types of QM for the same ser-

vice. Second, this classification will still allow businesses to provide information even

if they have not yet implemented QM practices for the full range of their externally

sourced BS as it is suggested by the focus on purchasing of goods of many companies

(BME, 2007). Not many buying companies, for instance, may have implemented QM

for consumption services due to their presumably low impact on customer satisfaction,

sales etc. Nonetheless, they may still have some kind of quality QM practices in place

for some of their component services. After all, this thesis also wants to discover what

the major determinants of QM for BS in buying companies are. As the application of

BS may be one of them, the classification by Wynstra et al. (2006) and van der Valk &

Rozemeijer (2009) will be used as a guide to answer the question whether usage of the

BS by the buying company affects their QM.

1.4 Research overview

The thesis is organized in five chapters. The first chapter introduces the topic by clari-

fying the significance of BS for buying companies and formulating the problem. Fur-

thermore, the research objectives and major definitions, such as services and BS, are

presented. In addition, the scope of work and a potential classification of BS are intro-

duced as means to handle the heterogeneity of BS and the associated complexity of the

topic.

8 Quality Management Practices for Business Servicesfrom a Buyer’s Perspective

Figure 1: Structure of the thesis

1. Introduction

2. Current status of research

3. Research methodology

3.3.2 1st phase: Case studies

1.1 Research overview

1.2 Significance of business services

1.3 Research objectives

1.4 Classification of business services

2.5 Summary of current status of research

2.3 Relevant research on service quality

2.2 Relevant research on purchasing of services

2.4 Relevant research on quality management

3.1 Research questions

3.2 Positioning and phases of the research

3.2.1 Positioning of the research

3.2.2 Phases of the research

4. Publication structure and key results

5. Overall conclusion

5.1 Summary of objectives

5.2 Theoretical implications

5.3 Managerial implications

5.4 Limitations and future research

Appendix: Full papers

Paper B Paper A Paper DPaper C Quality

Management Practices for

Business Services: A

Research Agenda from a Buyer’s

Perspective

Exploring quality management for business services from a buyer’s

perspective using multiple case

study evidence

Comparison of quality

management for externally

sourced business services

Quality management for business services from a buyer’s

perspective

3.2.2.1 First phase: Description of the research problem

3.2.2.2 Second phase: Explanation of the research problem

3.2.2.3 Third phase: Hypothesis testing

Abstract

Introduction

Paper A Abstract

Introduction

Paper DAbstract

Introduction

Paper C Abstract

Introduction

Paper B


9

The second chapter describes several concepts and streams of literature regarding pur-

chasing of services, service quality and QM. The aim of this chapter is to structure the

problem from a scientific viewpoint and to assess what existing research contributes to

the overall research question. Furthermore, research gaps are identified and the basis

for preliminary propositions and the development of a research framework is built.

The objective of Chapter 3 is to provide a detailed overview of the research process.

Therefore, the chapter begins with the definition of the research questions based on the

research gaps identified in the previous chapter. Afterwards, the three-phased research

methodology is outlined.

Chapter 4 introduces the publication structure and the key findings of the four scien-

tific papers which form this cumulative thesis.

Ultimately, an overall conclusion is drawn in Chapter 5. After summarizing the objec-

tives of this thesis, the theoretical and managerial implications are reviewed. Further-

more, potential paths for future research are explicated based on identified limitations

of this thesis. The full versions of the four papers building the cornerstones of this cu-

mulative thesis are given in the appendix.

1.5 Research objectives

To a large extent, the academic research on service quality has focused on B2C ser-

vices and research on QM mainly assumes the perspective of a goods or service pro-

vider. A closer investigation of QM practices utilized by buying companies for exter-

nally sourced BS may therefore enrich academic and practical knowledge in several

ways: First, it may contribute to theory in the area of QM by examining QM practices

from the perspective of a customer in a B2B environment instead of a vendor. Fur-

thermore, it specifically focuses on QM practices for externally sourced BS and tests

the relationships between QM practices and their effects on organizational perfor-

mance. Such an inquiry may confirm or disconfirm findings of earlier research by

transferring knowledge into an unchartered area and testing its applicability in this new

environment. Second, it provides practitioners in buying companies with recommenda-

tions regarding the design and usage of QM practices in this specific context. Thus, it

may assist purchasers in integrating service quality in their overall evaluation of ser-

vice offers. Service providers, however, may benefit from further insights into how

their services are assessed by buying companies and thus may be better enabled to ad-



just their service offerings to the requirements of their professional customers. There-

fore, the objective of the proposed thesis is to make a contribution to the development

of theory in the area of QM by transferring findings of earlier research and testing their

validity from a different angle than the one taken by most of the previous studies. Fur-

thermore, this thesis attempts to provide practical recommendations for QM initiatives

for externally sourced BS and thus to increase practical knowledge in the area of quali-

ty and supply management.


11

2. Current status of research

The following chapter will present three areas of literature which promise to possess

the potential of providing further insights into the question how buying companies

manage the quality of externally sourced BS and how the usage of QM practices for

them is related to service quality and business performance:

a) Purchasing of services − which will be used to illustrate how BS are purchased

and what the major differences and difficulties in their procurement are. Due to

the rather infant state of research in this field it will be employed as an intro-

ductory remark to the subsequent fields of research.

b) Service quality − which is part of the wider domain of service marketing. This

topic will be used to clarify according to which dimensions buying companies

may evaluate service quality. Furthermore, this area may provide insights into

what differentiates service quality from other constructs such as satisfaction and

value.

c) QM − which constitutes a section of operations management. This literature

will shed light on the question which components represent QM and what their

impact on business performance is.

These streams of literature are presented and shortly discussed with respect to their

contribution to the overall research questions how buying companies manage the qual-

ity of incoming BS and if QM for externally sourced BS has effects on the perfor-

mance of the buying company.

2.1 Relevant research on purchasing of services

Although the actual figures may vary, BS represent a significant share of a company‟s

total acquisition cost for external resources (Axelsson & Wynstra, 2002; Cox et al.,

2005; van der Valk & Rozemeijer, 2009; Van Weele, 2005). For example, Fearon &

Bales (1995) estimated that, on a weighted average, externally purchased services rep-

resent more than half of a firm‟s total spend (Fearon & Bales, 1995). A more recent

study by the London School of Economics amongst 225 purchasing managers suggests

that BS account for approximately 15% of a firm‟s total expenditures (Centre for

Management Development, 2005). However, the study underlines that these figures



can only be roughly estimated as respondents do not possess full transparency of their

company‟s service spend (Centre for Management Development, 2005). The German

Association Materials Management, Purchasing and Logistics (BME) conclude that

BS comprise between 17 and 28% of German manufacturing companies‟ total operat-

ing expenses (BME, 2005b).

Despite their significance, purchasing of BS has not attracted the same attention by

management as purchasing of goods (Axelsson & Wynstra, 2002; Ellram et al., 2007;

van der Valk, 2008; van der Valk, 2007). This lack of professional attention may con-

tribute to survey results indicating that the majority of responsible managers worry

about how their companies buy professional services (Patel, 2005; Smeltzer & Ogden,

2002). Academic knowledge about purchasing of services also seems to be limited

compared to knowledge about purchasing of goods (Bals et al., 2009; Cox et al., 2005;

Ellram et al., 2007; Smeltzer & Ogden, 2002; van der Valk & Rozemeijer, 2009; van

der Valk, 2008; Wynstra et al., 2006).

This relative neglect may be partially due to the perception of purchasers that certain

aspects of the purchasing process for BS are more important and/or difficult than, or

just different in comparison with, the purchase process for goods (Axelsson &

Wynstra, 2002). Thus, existing purchasing practices for goods may not be directly ap-

plicable to services (van der Valk & Rozemeijer, 2009; Wittreich, 1966). Most of the

relatively little research available supports the notion that purchasing of services is

more difficult from a buyer‟s perspective than purchasing of goods. As several inquir-

ies depicted in Table 2 show, the higher complexity of service purchasing is mostly

related to the higher risk associated to quality failures (Fitzsimmons et al., 1998; Jack-

son et al., 1995; Mitchell, 1994; West, 1997) and the difficulties to evaluate the quality

of services (Ellram et al., 2007; Fitzsimmons et al., 1998; Jackson et al., 1995; Mitch-

ell, 1994; Smeltzer & Ogden, 2002).

Most authors agree that these differences between purchasing of services and goods

have their origin in the specific characteristics of services mentioned in Section 1.2

(Jackson et al., 1995). The intangibility and heterogeneity of BS exacerbates, for ex-

ample, their examination by organisational purchasers before or even after the pur-

chase and thus amplifies the perceived risk associated with the purchase (Jackson et

al., 1995; van der Valk & Rozemeijer, 2009). The inseparability of production and

consumption of services implies that the buying company is both consumer and co-

producer and cannot store services (Grönroos, 2007; Ellram et al., 2007). This makes a

clear specification of the service before the purchase more crucial but also complex


13

and highlights how closely connected the selection of a supplier is to the post-purchase

quality evaluation (Jackson et al., 1995; Lindberg & Nordin, 2008). Finally, services

are delivered in interactions between human representatives of the service provider

and the buying company. Thus, it is difficult to produce them with consistent charac-

teristics and quality (Jackson et al., 1995; van der Valk & Rozemeijer, 2009). This

again complicates their standardization, counting and valuation (Lindberg & Nordin,

2008) and requires an assessment of the interaction process by various stakeholders

(Axelsson & Wynstra, 2002). Taken together the peculiarities of services imply that

they entail greater performance ambiguity (Bowen & Jones, 1986).



Table 2: Summary of selected publications examining differences in purchasing of services to pur-

chasing of goods

Publication Type of study Sample size

and respond-

ents

Service

examined

Major differences between service and

goods purchasing

Ellram et al. (2007)

Conceptual n/a Business services

Evaluation of service quality and perfor-mance are not as easy to measure and speci-fy objectively as product quality. The lack of professional quality evaluation may offer opportunities for the service provider to take

advantage of their customers. Quality per-ceptions of services may be user-dependent.

Fitzsimmons

et al. (1998)

Conceptual n/a Business

services

Service purchasing is more complex due to

buyers facing higher risk exposure based on the relative intangibility of services, the need for customization of services and satisfac-tion of a larger number of affected person-nel. The quality of services is more difficult to evaluate.

Jackson et al. (1995)

Empirical (survey)

86 purchasers Industrial services

Purchasing of services includes higher per-ceived risks and their evaluation is more difficult. A higher degree of collaboration is required between buyer and seller in pur-

chasing of services. Respondents managed services differently according to their appli-cation by the buying company.

Mitchell (1994)

Conceptual n/a Consul-tancy ser-vices

The search for professional services and their post-purchasing evaluation are more difficult. Higher risk is associated with the purchasing of services.

Smeltzer & Ogden (2002)

Empirical (survey)

82 purchasing managers

Business services

The process activities which are seen as most complex in purchasing of services in comparison to goods are the evaluation of service performance, the definition of ser-vice specifications and the establishment of target costs.

Stock & Zinszer (1987)

Empirical (survey)

270 logistics executives

Profes-sional services

Personal sources of information (e.g. reputa-tion, recommendations) are most essential for purchasers of services. Quality of ser-

vices is a more crucial selection criterion than cost.

West (1997) Empirical (interviews)

10 senior purchasing

managers

Adverti-sing ser-

vices

Higher risk is associated with the purchasing of services. Poorly supplied services can

cause greater problems than low-quality goods as they can remain undetected longer.

It has to be noted, however, that more recently some researchers challenge the notion

of goods and services being different. These authors postulate that the similarities be-

tween services and goods have been underestimated. Levitt (1972), for instance, en-

courages the transfer of manufacturing principles such as standardization or specifica-

tion to the production of services in order to increase their quality and efficiency

(Levitt, 1972). Levitt‟s basic idea has been further elaborated into what has been la-

beled „lean service‟ (Bowen & Youngdahl, 1998: 207) as well as „mass customization‟


15

(Duray, Ward, Milligan, & Berry, 2000: 605). These developments led Vargo & Lusch

(2004) to discard the characteristics of services (i.e. intangibility, inseparability and

heterogeneity) as these do not truly differentiate services from goods. They stress that

many services can have very tangible results (Vargo & Lusch, 2004).

Lindberg & Nordin (2008), however, have taken a medium and more dynamic stance

between the product-dominant logic which views the service as something tangible

(high degree of objectification and specification) which can be exchanged at a distance

(low degree of relational proximity) and the service-dominant logic which sees the

service as something which is intangible (low degree of objectification and specifica-

tion) and can only be exchanged in close buyer-supplier relationships (high degree of

relational proximity). They argued that the degree of objectification and specification

of a service varies according to the type of service (Lindberg & Nordin, 2008). For

example, it may be possible that for some BS clear specifications exist whereas for

others, these must be defined during the purchasing process by customer and supplier.

We follow this more dynamic view on service procurement and argue that it is coun-

terintuitive to assume that goods and services are quite similar considering that organi-

zational buyers experience such fundamental difficulties with buying services. How-

ever, BS are not homogenous. They are instead located on a continuum ranging from

intangible dominant to tangible dominant services (cf., for example, Jackson &

Cooper, 1988; Shostack, 1977). Therefore, what may be a suitable procurement ap-

proach for a specific business service may be inappropriate for another (Lindberg &

Nordin, 2008). Hence, the literature on purchasing of services supports the idea that

the type of service may have a significant impact on purchasing behavior and QM

practices. This view is also reflected in the preliminary conceptual model which is de-

veloped in the first article of this cumulative doctoral thesis.

The inherent differences in services made some authors suggest that they require spe-

cific purchasing processes and instruments which cannot be directly applied from the

purchasing of goods (Ellram et al., 2007). Therefore, several authors specifically in-

vestigate the acquisition process for services or present a potential process design on

basis of conceptual considerations. An overview of the various process models for

purchasing of services is presented in Table 3.



Table 3: Overview of different process models for purchasing of services

Publication Type of study Sample size and

respondents

Service

examined

Process activities

(in chronological order)

Bals et al. (2009)

Empirical (interviews)

8 representatives of a German pharmaceutical company

Marketing services

Preparation

Search

Contracting

Monitoring

Day & Barksdale, Jr. (1994)

Conceptual n/a Professional services

Recognition of a need or problem

Identification of the initial consideration set

Evaluation of the consideration set

Selection of the service provider

Evaluation of the quality of service

delivery

Satisfaction/dissatisfaction

Ellram et al. (2007)


Plan

Source

Order

Receive and pay

Manage

Fitzsimmons et al. (1998)


Need identification

Information search

Vendor selection

Performance evaluation

Lindberg & Nordin (2008)

Empirical (interviews)

18 senior procurement managers from

various Swedish companies

Business services

Assignment specification

Supplier selection

Contract implementation

Outcome and evaluation

Mitchell

(1994)

Conceptual n/a Consultancy

services Problem identification

The search for consultancy suppliers

The briefing

Evaluation of alternatives

The appointment

Managing the project

Post-purchase evaluation Smeltzer & Ogden

(2002)

Empirical (survey)

82 purchasing managers

Business services

Write product specifications or

statement of work

Select suppliers

Ability to forecast future supplier

performance as a result of past performance

Trust in continuous performance reliability

Flexible delivery schedule

Transport from one location to another

Determine total cost

Negotiate prices

Compare suppliers‟ capabilities

Evaluate performance

Develop long-term relationship

Establish target cost

Manage early supplier involvement


17


respondents

Service

examined

Process activities

(in chronological order)

Conduct selection by supply or

sourcing teams

Make quantity purchases

Stock & Zinszer (1987)

Empirical (survey)

270 logistics executives

Professional services

Identification of the existence of a problem

Determination of internal or external

handling of the problem

Identification of possible consultants

Search for information about

consultants

Evaluation and recommendation of consultants

Selection of consultant

Review or evaluation of consultant performance

Management of project

van der Valk & Rozemeijer (2009)


Specify

Request for information

Detailed specification

Select

Contract

Order

Expedite

Evaluate

West (1997) Empirical (interviews)

10 senior purchasing

managers

Advertising services

Search

Alternative evaluation

Choice

What becomes obvious when regarding Table 3 is that so far no generally accepted

model of the purchasing process for services could be generated. Rather, the processes

put forward by the various authors differ greatly in number, content and granularity of

the activities included. Some processes comprise actions which are specific to certain

types of BS or may even not be within the sphere of responsibility of the employees

involved in the purchasing process (see, for example, the project management activity

in the models by Mitchell, 1994 and Stock & Zinszer, 1987). Other process models

seem to confound particular activities and their outcomes (for example, Smeltzer &

Ogden, 2002). Furthermore, it is interesting to note that some process models include

evaluation activities before and after the actual purchase (for example, Day & Barks-

dale, Jr., 1994; Stock & Zinszer, 1987) while others do not (see, for example, Bals et

al., 2009; Ellram et al., 2007). Van der Valk (2008) has underlined in this context that

research on purchasing of services focused on the initial stages of the purchasing pro-

cess (for example, supplier selection). Therefore, the quality of services is rarely chal-

lenged (van der Valk & Rozemeijer, 2009). Hence, with this research we follow a call

from Day & Barksdale, Jr. (1994) to investigate how the post-purchase evaluation of



services is handled by buying companies and how it may interrelate with the pre-

purchase selection process (Day & Barksdale, Jr., 1994).

Another recurring theme within the realm of literature on purchasing of services is

purchasing‟s involvement in the process of procuring services. The expression of

meaningful involvement has originally been coined by Stuart (1991: 30) as: “The time-

ly and useful collaboration of purchasing‟s knowledge and expertise […] in all aspects

of the acquisition process. This includes the decision-making process leading to the

best buy decision, with the objective of satisfying the immediate needs of the specifier

and the long term needs and strategic objectives of the [organization] as a whole.”

Johnson & Leenders (2003) also referred „meaningful involvement‟ (Johnson &

Leenders, 2003: 29) to an ideal level of involvement of the purchasing function associ-

ated with positive effects for a company. They emphasize, however, that purchasing

could also take different, less significant roles in the purchasing process resulting in

none, documentary or just professional participation (Johnson & Leenders, 2003).

Many authors assume a positive relationship between higher levels of purchasing in-

volvement in the procurement process for services and performance of the buying

company. For example, higher involvement of a firm‟s purchasing department can add

value by ensuring that funds are spent properly (i.e. in accordance with corporate and

functional goals), improving the quality of the good or service purchased, and saving

time (either by reducing the time invested by the client department during the purchas-

ing process or time which is lost when the service purchase fails) and money (i.e. re-

ducing acquisition costs) (see, for example, Bals & Hartmann, 2007; González-Benito,

2007; Lonsdale & Watson, 2005; Schiele & McCue, 2006; Young & Varble, 1997;

West, 1997). Furthermore, purchasing can contribute to a company‟s level of innova-

tiveness (Krause et al., 2001) and access to supplier markets (Walter, Ritter, & Ge-

münden, 2001). In addition, Mitchell (1994) pointed out that it could have most haz-

ardous effects on a company if certain services, such as professional services, are not

bought professionally (Mitchell, 1994).

Despite these desirable effects of purchasing involvement, Fearon & Bales (1995) de-

tected that the purchasing department, on average, was directly responsible in only

41% of total purchases (Fearon & Bales, 1995). Smeltzer & Ogden (2002) support the-

se findings adding that purchasing is much more likely to be bypassed in service rather

than goods purchasing. In many companies, services are purchased decentrally by the

requesting department which offers opportunities for placing orders with service pro-

viders unapproved by purchasing and for suppliers to deliver non-standardized ser-


19

vices (Ellram et al., 2007; van der Valk & Rozemeijer, 2009). Van Weele (2005) as-

serts that internal customers and specialists within the requesting departments often

have strong relationships with their service providers in which they do not accept pur-

chasing to interfere (Van Weele, 2005).

Various factors can influence the degree of purchasing involvement in the purchasing

process for BS. Most recently, Bals et al. (2009) investigated purchasing involvement

in a German pharmaceutical company and detected that lack of awareness and motiva-

tion to cooperate on part of the internal client as well as lacking skills of purchasers are

major barriers to purchasing participation. In addition, they ascertain that purchasing

involvement increased with higher levels of purchasing complexity and involvement

experience (Bals et al., 2009). Schiele & McCue (2006) highlight the role of purchas-

ing department‟s trustworthiness for higher levels of purchasing involvement in pur-

chasing of professional services in the public sector. They discovered that higher lev-

els of trustworthiness of the purchasing department led to greater willingness of the

internal clients to involve purchasing in the purchasing process. Finally, more intense

purchasing involvement results in more value added by purchasing. According to

them, factors that affect purchasing involvement are physical and social factors of pro-

curement, internal organization, personal factors of the purchasing and client depart-

ments as well as factors related to the service being purchased (Schiele & McCue,

2006).

What becomes obvious from the paragraphs above is that the purchasing process is a

cross-functional activity (Lonsdale & Watson, 2005) in which purchasing‟s involve-

ment is still lacking (Cox et al., 2005). For this thesis two conclusions can be drawn:

First, in order to examine how buying companies manage the quality of their external-

ly sourced BS it will not be sufficient to obtain insights from just the purchasing de-

partment. Rather, several process stakeholders, such as QM and the internal user of the

service, must be integrated in the research. Second, QM for BS may be an area in

which purchasing can assume leadership in order to professionalize the supply of ex-

ternally sourced BS. If purchasing accepted this role as an innovator of new business

processes, it may increase its involvement in the whole purchasing process for BS.

Thus, purchasing would follow a recommendation by Ellram et al. (2007) and assist

the user in developing methods, systems and tools to assess supplier performance tak-

ing on the full responsibility for the buyer-supplier relationship (Ellram et al., 2007).

As mentioned earlier, this section shows that research on purchasing of services is still

in a rather infant stage. So far, no agreement could be achieved on how the purchasing



process for services is organized and why purchasing has still not reached the level of

involvement its organizational role would purport. This relative disregard may have its

origin in the rather late consideration of purchasing as strategic function contributing

to competitive advantage (Krause et al., 2001; Zhang, 2008). Furthermore, the evolu-

tion of purchasing as a function has been comparably slow and therefore much of the

research on purchasing is still conceptual or based on a small number of case studies

(Ellram & Carr, 1994; Zhang, 2008). In particular, it can be shown that within pur-

chasing, the post-purchase processes and thus the evaluation of service quality have

been largely neglected (Day & Barksdale, Jr., 1994; Ellram et al., 2007; van der Valk

& Rozemeijer, 2009; van der Valk, 2008). Hence, although the literature on purchas-

ing of services underscores the need for the proposed research it cannot contribute

much to answering the general question how buying companies manage the quality of

externally sourced BS (see also Section 3.1 for the detailed research questions). In the

following, the potential contribution of two additional areas of literature will be con-

sidered: service quality and QM.

Notwithstanding, we assume that this research project will broaden the research on

purchasing in several ways. First, it will shed light on the so far neglected activities

which happen after the actual purchase is completed. Second, by using a three-step

research process consisting of a description and explanation of the research problem as

well as its testing by qualitative and quantitative research methods it will go beyond a

solely conceptual research in the area of purchasing.

2.2 Relevant research on service quality

Two research areas in the field of service quality may provide further insights to an-

swering the main research question of this thesis: (a) research on service quality mod-

els and dimensions, and (b) research on the relationship between service quality and

customer satisfaction.

The research on service quality models predominantly debates which dimensions are

evaluated when quality of a service is assessed by customers (Lehtinen & Lehtinen,

1991). Two schools have emerged from this literature (Brady & Cronin, Jr., 2001;

Woo & Ennew, 2005):


21

a) the “Nordic” school which is based upon ideas of Grönroos (1984; 2007) who

suggests that a technical (i.e. the “what”) and a functional (i.e. the “how”) dimen-

sion determine what customers perceive as service quality;

b) the “American” school with its widely used model of service quality proposed by

Parasuraman et al. (1985; 1988; 1991) which uses dimensions that conceptualize

service quality in terms of the characteristics of service delivery (i.e., reliability,

responsiveness, empathy, assurances, and tangibles) (Shonk, 2006).

Both the Nordic as well as the early conceptualizations of the American school are

based on the disconfirmation paradigm which posits that perceived quality is a result

of a comparison between customer service expectations and perceived service perfor-

mance (Brady & Cronin, Jr., 2001; Churchill & Surprenant, 1982; Oliver, 1980; Oli-

ver, 1981; Rust & Oliver, 1994b).1 In Table 4, major models of both camps are shortly

described in terms of the quality dimensions used. The aim is to illustrate which di-

mensions of service quality should be covered by a buying company‟s QM practices.

Although this review of service quality models does not claim to be a comprehensive

scrutiny, it is argued that – in spite of some conceptual differences – the dimensions

used in the various models represent the potential service quality dimensions of BS.

Moreover, we propose that they can be assigned to three overall categories of service

quality dimensions (see also Chelladurai & Chang, 2000; Shonk, 2006): Physical ap-

pearance (appearance of facilities, uniforms, documents etc. of the service provider),

interaction (process of service delivery, interpersonal relations etc. between service

provider and customer) and outcome quality (the result of the service). Table 4 assigns

the service quality dimensions of the models to these three categories to visualize this

notion.

1 It has to be noted, however, that the disconfirmation paradigm has been subject to debate as, for example, it

may be difficult for customers to clearly define expectations and for providers to interpret these expectations (Laesser, 2008; Schneider & White, 2004; Tian-Cole & Cromption, 2003).



Table 4: Description of service quality dimensions in B2C contexts and their assignment to physical

context, interaction, and outcome quality

Model Dimension Short description Assignment to

conceptual dimen-

sion

Brady & Cronin, Jr. (2001)

Interaction quality

Customers‟ interpersonal actions that ensue during service delivery

Interaction quality

Outcome quality

Customers‟ perceptions as what he is left with when the service has been rendered

Outcome quality

Physical environment

quality

Surrounding environment or physical facilities of a service provider

Physical context quality

Dabholkar, Thorpe, &

Rentz (1996)

Personal interaction

Way the customer perceives being treated by the retail store staff

Interaction quality

Physical aspects

Appearance and the layout of the retail store Physical context quality

Reliability Ability of a service provider to perform the prom-ised service accurately

Interaction quality

Grönroos

(1984)

Functional

quality

Outcome, i.e. what a customer actually receives Outcome quality

Technical quality

Perceived interaction, i.e. how the customer obtains the service

Interaction quality

Lehtinen & Lehtinen (1991) – first model

Corporate quality

Customers‟ view of the provider‟s reputation and image

Interaction quality

Interactive quality

Interaction processes between customer and service provider and/or their equipment

Interaction quality

Physical

quality

Materials and facilities of a service provider Physical context

quality Lehtinen & Lehtinen

(1991) – second model

Output quality

Customers‟ evaluation concerning the result of a service production

Outcome quality

Process quality

Customers‟ perception of the service production process and his/her participation

Interaction quality

Parasuraman et al. (1988)

Assurance Knowledge and courtesy of employees and their ability to inspire trust and confidence

Interaction quality

Empathy The caring, individualized attention the service

provider offers its customers

Interaction quality

Reliability The ability of a service provider to perform the promised service dependably and accurately

Interaction quality

Responsive-ness

The willingness of the service provider to help customers and provide prompt service

Interaction quality

Tangibles Physical facilities, equipment, and appearance of service providers‟ personnel


Rust & Oliver

(1994a)

Service

environment

Internal environment of the service provider in

regard to its organizational culture and philosophy towards service provision (e.g. organizational cul-ture and philosophy) and external environment, i.e. physical appearance of the service provider‟s loca-tion

Physical context

quality

Service delivery

Perceived quality of the interaction process between customer and service provider

Interaction quality

Service product

Design of the service including the specifications and service targets to offer

Outcome quality


23

As noted before, comparably little research exists, which examines the service quality

dimensions of BS. Some of the available studies are depicted in Table 5. In addition to

research regarding the dimensionality of service quality in a B2B context, some re-

searchers developed conceptual models for its measurement:

For example, Seth, Deshmukh, & Vrat (2006b) designed a framework for the assess-

ment of service quality in supply chains. It entails six potential gaps between custom-

ers‟ service expectations and their evaluations of service experiences which may arise

in the relationship between supplier, focal firm, distributor, and consumer. Moreover,

Niranjan & Metri (2008) proposed a conceptualization on the measurement of service

quality in a B2B environment regarding outsourced call centers. They suggest using

measures of B2B service quality regarding the relationship between call center ven-

dors and their business clients whereas utilizing B2C service quality dimensions con-

sidering the relationship between call center vendors and consumers.

Although these studies provide valuable insights into the dimensionality of service

quality in a B2B environment and offer first conceptual models, they do not examine

which QM practices buying companies use for managing the quality of their purchased

business services. Yet, the literature on service quality models and dimensions eluci-

dated above has several ramifications for QM practices for BS from a buyer‟s perspec-

tive. First, the practices employed should be able to establish the evaluation of quality

along the axes of physical appearance, interaction and outcome quality. Second, they

should be flexible enough to define the dimensions within these axes according to the

BS in focus and to assign different weights to different dimensions in alignment with

the subjective estimation of significance of a single dimension by the buying company.

Consequently QM practices may be used for all BS in the same way. Rather their de-

sign is subject to the quality dimensions and should be adjustable to them. Thus, the

service quality dimensions may represent an important determinant of the usage of

QM practices for BS by buying companies. This notion also informed the development

of the preliminary conceptual model in the first article of this cumulative thesis.

In addition to literature on service quality models and their dimensions, research on the

relationship between service quality and customer satisfaction provides further insights

for the topic of this thesis. Although similar, most authors consider service quality and

customer satisfaction as different constructs distinguished by the following differences



(see also Hernon & Nitecki, 2001; Laesser, 2008; Schneider & White, 2004; Tian-Cole

& Cromption, 2003)2:

Satisfaction can only result from an evaluation of a service and thus, a customer

has to experience the service to be satisfied or dissatisfied with it. In this sense

satisfaction is a post-experience decision. Quality, by contrast, can be assessed

without a direct experience but indirectly, for instance, by means of detailed in-

formation about a service before the actual purchase (Churchill & Surprenant,

1982; Bolton & Drew, 1991; Parasuraman et al., 1991; Rust & Oliver, 1994a;

Woodside, Frey, & Daly, 1989)

Evaluation of quality is in most cases more specific, objective and of normative

character whereas evaluations of satisfaction are more unspecific, emotional and

affective (Dabholkar, 1995; Hernon & Nitecki, 2001; Spreng & Mackoy, 1996).

Assessment of quality is more comprehensive and holistic, whereas evaluation of

satisfaction is mostly transaction-specific (Bitner, 1990; Cronin, Jr. & Taylor,

1992; Parasuraman et al., 1988; Reeves & Bednard, 1994; Kuo, Wu, & Deng,

2009).

2 Although some authors regard quality and value as highly interrelated (see, for example, Reeves & Bednard,

1994), throughout this thesis they are considered distinct concepts. Whereas quality incorporates the percep-tion of meeting or exceeding expectations, value focuses on the benefit for the consumer (Hernon & Nitecki, 2001). Most definitions regard value as “a ratio of total benefits received to total sacrifices” (Patterson &

Spreng, 1997: 416) and see quality as an antecedent to it (Bolton & Drew, 1991; Dabholkar, 1995; Patterson, Johnson, & Spreng, 1997; Storbacka, Strandvik, & Grönroos, 1994). Due to these differences, value and price will be viewed as constructs distinct to service quality.


25

Table 5: Summary of selected publications examining the dimensions of service quality in a B2B environment

Publication Type of

study

Sample size and

respondents

Service examined Model used Major findings regarding service quality dimensions

Bienstock et al. (1997)

Empirical (survey)

462 purchasers Physical distribution service

Revised SERV-QUAL

Timeliness, availability, condition have most significant impact on service quality perception of professional buy-ers.

Brensinger & Lam-

bert (1990)

Empirical

(survey)

170 purchasers Less-than-truckload

(LTL) motor carrier ser-vice

SERVQUAL The predictive quality of SERVQUAL in this context was

low.

Durvasula, Lysonski,

& Mehta (1999)

Empirical

(survey)

114 shipping

managers

Ocean freight services SERVQUAL Tangibles, reliability and a third factor combining respon-

siveness, assurance, and empathy best fit for measuring service quality.

Gounaris (2005) Empirical (survey)

515 senior man-agers from ser-

vice customers

Training and recruiting consultancies, corporate

banking, software devel-opment and maintenance, freight shipping.

SERVQUAL vs. alternative model

INDSERV

INDSERV comprising the dimensions potential quality, hard quality, soft quality, and outcome quality outper-

forms SERVQUAL.

Harte & Dale (1995) Conceptual n/a Professional services SERVQUAL and literature research

Tangibles, empathy, assurance, reliability, timeliness are requested most by clients of professional services.

Patterson & Spreng (1997)

Empirical (survey)

128 users of consultancy

services

Professional BS Dimensions based on Grönroos (1984)

The technical/outcome factor was more significant than the five process dimensions (methodology, service, rela-

tionships, global and problem identification).

Seth et al. (2006b) Empirical (survey)

117 professionals Transport services Revised SERV-QUAL

Service reliability, credibility, service competence, intra-organisational communication, service flexibility, finan-

cial trust and pleasant environment have most significant impact on service quality perception of professional buy-ers.

Woo & Ennew

(2005)

Empirical

(survey)

185 senior gov-

ernment engi-neers and profes-sional architects

Consulting engineering

services

International/ Indus-

trial Marketing and Purchasing Group (IMP) interaction model (Håkansson, 1982; Ford, 1997)

The quality criteria social exchange and cooperation are

relatively more important than financial exchange, prod-uct/service exchange, information exchange, and adapta-tion in customer‟s evaluation of quality for professional services.



The implications of these distinctions are that (a) a QM for BS in buying companies

should allow for indirect assessment of service quality, for example, by an in-depth

communication process about quality before service production, (b) it should include

normative criteria whenever possible so that it can serve as a quality diagnostic and

planning tool (for example, by clearly defined service specifications), and (c) whenev-

er appropriate, it should not only regard single transactions but should take a more

comprehensive view, for example, by building up service quality data on several past

service deliveries.

Most authors – although not all (cf., for example, Bitner, 1990; Bolton & Drew, 1991)

– now conclude that there is a causal relationship between service quality and custom-

er satisfaction and that service quality is an antecedent of customer satisfaction

(Churchill & Surprenant, 1982; Cronin, Jr. & Taylor, 1992; Cronin, Jr., Brady, & Hult,

2000; Schneider & White, 2004; Storbacka, Strandvik, & Grönroos, 1994; Woodside

et al., 1989). Moreover, many researchers also posit that customer satisfaction is posi-

tively related to customer‟s repurchase intentions and thus to a firm‟s sales volume

(Cronin, Jr. et al., 2000; Patterson & Spreng, 1997; Schneider & White, 2004; Shonk,

2006; Kuo et al., 2009). These relationships are conceptually reflected in the service

profit chain, a theoretical framework developed by Heskett, Jones, Loveman, Sasser,

Jr., & Schlesinger (2008). The model proposes that „[…] profit and growth are stimu-

lated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction.

Satisfaction is largely influenced by the value of services provided to customers. Value

is created by satisfied, loyal and productive employees. Employee satisfaction, in turn,

results primarily from high-quality support services and policies that enable employees

to deliver results to customers‟ (Heskett et al., 2008: 120).

What do the relationships specified above mean for the research topic? First, buying

companies may ultimately enhance their financial performance by improving the

quality of their externally sourced BS. The adoption of QM practices may help to ame-

liorate this quality. Second, it signifies that the alleged enhancement of financial per-

formance may roughly be reached in two ways: either by increasing the quality of BS

transferred to external customers by the buying company or by an improvement of the

quality of BS utilized by internal employees. The first way may lead to raised custom-

er satisfaction resulting in loyalty and higher revenues. The second way may cause

superior internal process efficiency and employee satisfaction resulting in reduced

costs.


27

2.3 Relevant research on QM

It belongs to the most problematic issues for a researcher in the field of quality to find

a clear and appropriate definition for it (Fynes, 1999). Consequently, until today no

generally accepted definition of quality has been developed (Scharitzer, 1997; Sousa &

Voss, 2002). Various perspectives on quality can be adopted (Evans & Lindsay, 2002)

which were summarized by Garvin in an early stage of research on QM (Garvin, 1984;

Hardie & Walsh, 1994):

The transcendental perspective which puts quality on a level with excellence and

highest standards

The product-based view which regards quality as a measurable existence of a

product attribute

The user-based point of view which equalizes quality with satisfying the wants of

a customer

The manufacturing-based perspective which defines quality as conformance to

specifications

The value-based view in which quality is the result of an evaluation process by

the customer on basis of value considerations

Hardie & Walsh (1994) suggest that what the above mentioned stances on quality have

in common is that they include a comparison of two states - the state of how things

should be (requirement specification) and how things actually are (actual perfor-

mance). The difference of the two states represents the degree of quality. This notion is

also reflected in the definition of quality contained in the European Norm ISO

9000:9005 which defines quality as „[…] the degree to which a set of inherent charac-

teristics […] fulfils requirements‟ (DIN Deutsches Institut für Normung e.V., 2005:

18). This short delineation of a definition of quality adopted in this paper underlines

the need for companies buying BS to allow for opportunities for the specification of

requirements of these services in their QM.

Two streams within the research on QM may provide insights for the questions asked

in this paper and are presented and discussed shortly below: (a) literature on QM prac-

tices and (b) literature on the relationship between QM practices and firm perfor-

mance.



Regarding the literature on QM, three levels of examination have to be distinguished

(Dean & Bowen, 1995; Evans & Lindsay, 2002; Rönnbäck & Witell, 2008; Sousa &

Voss, 2002): (a) principles, i.e. the basic management systems necessary for QM to

function, for example, continuous improvement, customer focus etc. (Zu, 2009), (b)

practices, i.e. the observable constructs of QM, for example, top management support,

quality information etc. (c) techniques, i.e. the guidelines and methods to perform cer-

tain activities, for example, quality function deployment, histograms etc. (Rönnbäck &

Witell, 2008). Sousa & Voss (2002) recommend that research on QM should deal with

the level of practices since „principles are too general for empirical research and tech-

niques are too detailed to obtain reliable results‟ (Sousa & Voss, 2002: 92). This thesis

concedes their view.

Saraph, Benson, & Schroeder (1989) were the first who identified a core set of eight

QM practices. Later, Flynn et al. (1994) categorized QM practices into seven dimen-

sions: top management support, quality information, process management, product (or

service) design, workforce management, supplier and customer involvement. Accord-

ing to Fynes (1999), these practices also mirror the dimensions used in quality award

schemes such as the Malcolm Baldrige National Quality Award (Baldrige National

Quality Program, 2010) or the European Foundation for Quality Management Award

(European Foundation for Quality Management, 2010) and are therefore the ones most

commonly examined (Molina-Azorín et al., 2009; Zu, 2009). Thus, they will form the

constructs, along which QM for BS by buying companies will be explored in this the-

sis. Their definitions and examples of potential techniques are shortly illustrated in

Table 6.


29

Table 6: QM practices

QM practice Short description Potential techniques

Top manage-

ment support

Actions and behaviors of senior

management which show com-mitment to quality

Top management involvement, setting clear quality

objectives, encouragement of employee involvement into activities for quality improvement

Workforce management

Recognition of employee perfor-mance on quality and encourage-

ment team dynamics

Commitment to training, employee involvement, recognition and reward systems, quality circles

Supplier in-volvement

Establishment of long-term rela-tionships with suppliers and en-

hancement of suppliers‟ capabili-ties of meeting the purchasing company‟s requirements

Long-term relationships, application of vendor assess-ment, certification procedures

Quality infor-

mation

Adequate, accurate, and timely

visibility of defect rates, compli-ance to specifications, adherence to schedules etc.

Quality data and reporting, availability of quality data,

graphical depictions of data (e.g. flow-charts, histo-grams etc.)

Product and/or service design

Reviews of products and services before production and the design of products or services with re-spect to quality

Cross-functional project teams, Joint product develop-ment, design reviews

Customer involvement

Effective measurement and moni-toring of customers‟ needs, expec-tations and/or satisfaction

Close relationships, feedback mechanisms, customer satisfaction orientation

Process man-agement

Cross-departmental process anal-ysis and improvement

Process and role definitions, cleanliness and efficient organization of the workplace, statistical process con-trol

Another important area of research with regard to QM practices is the scrutiny, to

which extent they have an impact on a firm‟s performance (Sousa & Voss, 2002). Ad-

vocates of QM purport that QM practices can have a positive impact on a manufactur-

er‟s firm profitability either by the manufacturing or the market route (Deming, 1982;

Garvin, 1984; Garvin, 1988; Ghobadian & Gallear, 1997; Molina-Azorín et al., 2009;

Sousa & Voss, 2002; White, 1996):

In the market route, improvements of the product or service quality lead to higher rep-

utation for quality. This may result in a rise of sales and thus larger market share or

alternatively, to less elastic demand and higher prices. Increased market share, howev-

er, results in higher economies of scales, which lowers costs; decreased costs in turn

lead to higher profits. In the manufacturing route, enhanced product or service quality

leads to increased productivity and fewer defects, less rework, scrap cost, or lower

warranty and product liability costs. Increased productivity, lower rework and scrap

cost result in lower manufacturing and service cost whereas lower warranty and prod-

uct liability cost causes a decrease of service costs. Lower manufacturing and service

cost raise profits. In both cases profits can be achieved if the costs of the QM practices

are outweighed by the higher gains.



Ample amount of research in the area of operations management and particular QM

has been conducted on the relationship between QM practices and organizational per-

formance (Zakuan, Yusof, Laosirihongthong, & Shaharoun, 2010). Organizational per-

formance in such studies is often regarded as how well an organization achieves its

market-oriented or operational as well as financial goals (Lakhal, 2009). In these

works operational performance was, for example, measured by constructs such as per-

centage of defects, cost of quality, product quality, on-time delivery, productivity re-

sults whereas return-on-assets, return-on-equity, return-on-investment, market share

and stock prices were used for measuring financial business performance (for an over-

view of empirical studies on the effect of QM practices on organizational performance

please refer to Kaynak, 2003; Molina-Azorín et al., 2009; Nair, 2006; Sila & Ebrahim-

pour, 2005). Sometimes these studies provide mixed results (Das, Handfield, Calan-

tone, & Ghosh, 2000; Nair, 2006; Rönnbäck & Witell, 2008). However, most authors

agree that the use of QM practices has a positive, significant and strong effect on oper-

ational performance (Dow, Samson, & Ford, 1999; Cua, McKone, & Schroeder, 2001;

Maani, Putterill, & Sluti, 1994; Sila & Ebrahimpour, 2005; Sluti, Maani, & Putterill,

1995; Sousa & Voss, 2002; White, 1996). The impact of QM practices on financial

business performance is seen as positive and significant, but in some cases less strong

than on operational performance (Capon, Farley, & Hoenig, 1990; Hendricks &

Singhal, 1997; Nilsson et al., 2001; Powell, 1995; Rönnbäck & Witell, 2008).

The aforementioned passages provide the potential rationale for the adoption of QM

practices for BS by a buying company. First, QM practices may have positive effects

on the quality of component and semi-manufactured services. Increasing quality of

these services may result in higher customer satisfaction and ultimately in higher sales

revenues. Second, QM practices may positively impact the quality of instrumental or

consumption services and thus raise internal operational performance. In addition to

potentially higher employee satisfaction, this may also result in increased productivity,

process efficiency and thus decreased cost.

Earlier research on QM (for example, Crosby, 1979; Deming, 1986; Flynn, Schroeder,

& Sakakibara, 1995; Hendricks & Singhal, 1997; Juran & Blanton Godfrey, 2000)

suggested that QM principles and practices are universally applicable. This view is

contended, however, by other inquiries arguing that the usage and the design of QM

practices could in fact be dependent on the context (for example, Ahire & Golhar,

1996; Dean & Bowen, 1995; Ghobadian & Gallear, 1997; Sila, 2007). The environ-

ment of a company using QM may therefore render certain practices of QM inappro-


31

priate (Sila, 2007). Reports on failures in implementing QM seem to corroborate this

view (Shin, Kalinowski, & El-Enein, 1998; Sila, 2007). However, research taking the

environmental factors of companies using QM into account is still scarce (Ghobadian

& Gallear, 1997; Hendricks & Singhal, 2001; Sila, 2007). Sousa & Voss (2008) there-

fore called for more empirical research on QM which incorporates contingent factors

such as industry and organizational size as these can be considered most influential on

the adoption of QM practices.

Conversely to date, only little research has examined how the type of industry may

influence the design and application of QM (Lagrosen & Lagrosen, 2003; Powell,

1995; Rönnbäck & Witell, 2008). Most authors detected differences in the adoption of

QM practices between manufacturing and service companies with manufacturing

companies using more of the QM practices or more intensively (Beaumont, Sohal, &

Terziovski, 1997; Huq & Stolen, 1998; Lagrosen & Lagrosen, 2003; Quazi, Jemangin,

Kit, & Kian, 1998; Sharma & Gadenne, 2002; Solis, Subba, Raghu-Nathan, Chen, &

Pan, 1998).

In addition, research on whether small and large firms implement QM differently is

limited and existing studies provide distinct results (Ahire & Golhar, 1996; Chapman

& Sloan, 1999; Hendricks & Singhal, 2001; Sila, 2007). Most authors (Ahire &

Golhar, 1996; Chapman & Sloan, 1999; Davig, Brown, Friel, & Tabibzadeh, 2003;

Ghobadian & Gallear, 1997; Mohrman, Ramkrishnan, Lawler, & Ledford, 1995; Sun

& Cheng, 2002) identify differences in the adoption of QM practices between large

and small companies. However, the results presented by Sila (2007) do not provide

support for the assumption that smaller companies adopt QM practices in a different

way than large ones.3

The findings of these previous studies stress the need for an investigation of the poten-

tial impact of industry or firm size on the design of QM for BS. Both industry and firm

size may represent major determinants of the use of QM practices for BS by buying

companies. Therefore, the type of industry is integrated into the preliminary conceptu-

al model of the first paper of this thesis and the potential effects of both contextual

factors are further analyzed in its third paper.

The studies cited above all adopt the perspective of a goods or service provider. Only

recently researchers started examining the use of QM practices from a buying compa-

3 For a detailed review of the current status of research regarding QM manufacturing and services as well as in

large and small companies please refer to the third paper of this cumulative thesis.



ny‟s viewpoint (Sánchez-Rodríguez & Martínez-Lorente, 2004; Hemsworth et al.,

2005; Hemsworth et al., 2008). Sánchez-Rodríguez & Martínez-Lorente (2004) inves-

tigated the adoption of a subset of QM practices in purchasing departments of Spanish

manufacturing companies and their relationship to perceived purchasing and business

performance as well as internal customer satisfaction. They conclude that the QM

practices studied were positively and significantly related to perceived purchasing per-

formance and internal customer satisfaction, but only the practices “commitment of

purchasing management”, “coordination with other functional areas” and “employee

management” are positively correlated to perceived overall business performance

(Sánchez-Rodríguez & Martínez-Lorente, 2004). Later, Hemsworth et al. (2008) con-

firmed these findings using the same sample and data set (Hemsworth et al., 2008;

Hemsworth et al., 2005). Furthermore, they discovered that QM practices in purchas-

ing have a positive impact on purchasing performance mediated through the effect of

information systems.

These authors provide valuable first insights into the utilization of QM practices in

purchasing. However, they do not include the quality of incoming BS into their work

and their sample does not entail service companies. Furthermore, they rely on subjec-

tive perceptions of purchasing managers in the evaluation of purchasing and business

performance. This approach ignores the peculiar characteristics of services and their

potential impact on the application of QM practices as well as the differences in the

adoption of QM practices between manufacturing and service companies examined by

previous studies. In addition, the individual perceptions of just one group of respond-

ents may have led to „socially desirable‟ (Fontana & Frey, 2005: 702) answers. These

gaps underscore the need for this research project.

2.4 Summary of the current status of research

Based on the review of relevant literature in the previous sections, it is concluded that

a number of gaps remain regarding how buying companies manage the quality of ex-

ternally sourced BS.

Although there is a growing body of research related to the purchasing of services, the

literature has not yet reached an agreement on what the main components of the pur-

chasing process for services are, how the purchasing departments should be involved

in that process and which instruments can be used to evaluate the quality incoming

business services. In addition, most of the literature is conceptual in nature or based on


33

a small number of case studies (Ellram & Carr, 1994; Zhang, 2008). Thus, the litera-

ture on purchasing of services cannot contribute much to answer the question how

buying companies manage the quality of incoming services. It has to be noted, howev-

er, that many authors have stressed that the post-purchase processes and the evaluation

of service quality in particular have been largely neglected and call for more research

(Day & Barksdale, Jr., 1994; Ellram et al., 2007; van der Valk & Rozemeijer, 2009;

van der Valk, 2008).

A comparably large amount of research in the field of service quality was conducted in

a B2C rather than a B2B context. Such studies attempted to answer the question ac-

cording to which dimensions consumers evaluate service quality of service providers.

The few studies which exist in a B2B setting, however, focus on a single service rather

than a comprehensive set of BS often bought by buying companies. Regarding the ef-

fects of service quality on organizational performance, current research suggests that

there is a positive relationship between service quality and satisfaction of customers.

Thus, the literature on service quality calls for further investigation of service quality

in a B2B context from a buyer‟s perspective. Furthermore, it suggests that the the in-

terrelation between service quality and satisfaction has to be integrated into the further

investigation of this doctoral thesis.

The QM literature predominantly takes the perspective of a goods or service provider.

It aims at answering questions regarding which QM practices are used by manufactur-

ing or service companies in order to improve the quality of their outgoing products.

Furthermore, they answer the question, how their application relates to operational or

financial business performance. So far, little attention has been given, however, to the

question whether the practices of QM are also utilized by customers (i.e. buying com-

panies) to manage the quality of externally sourced BS.



3. Research methodology

The following chapter illustrates and justifies the chosen research methodology of this

doctoral thesis. It will first define the research questions based on the research gaps

identified in the previous chapter. As suggested by Dul & Hak (2008), the preliminary

research framework and its propositions on basis of a literature review are constituted

at the beginning of a research process extending existing theory. The review of litera-

ture was conducted in Chapter 2 and the resulting research framework is explicated in

the first paper of this cumulative research project (see Appendix A). Section 3.2.1 de-

scribes the philosophical stance of this thesis as well as its constituting three research

phases. Finally, Section 3.2.2 specifies the methods used for answering the research

questions and underlines the exploratory as well as confirmatory utilization of data

gathering and analysis which this thesis adopts.

3.1 Research questions

In addressing the research gaps elucidated in the previous chapter, this doctoral thesis

aims to answer the following research questions (RQ):

RQ 1: How do buying companies use QM practices to manage the quality of externally

sourced business services?

RQ 2: How is the usage of QM practices for BS by buying companies related to ser-

vice quality and business performance?

RQ 3: What are the major determinants of the design of QM practices for BS by buy-

ing companies?

The objective of this study is to contribute to the academic literature by discovering

how QM practices are implemented by buying companies for their externally sourced

BS. For buying companies this may result in valuable insights on how to adopt or ad-

just such practices in order to manage and improve the quality of incoming BS. By

doing so, the study wants to provide practical recommendations for the design and use

of QM practices in the previously mentioned context. For service providers, the project

may give insights into how their business customers manage the quality of the offered

services. Thus, this study may give recommendations for adjustment and improvement


35

of their service offerings in order to better match the quality requirements of their cus-

tomers.

3.2 Positioning and phases of the research

This thesis strives to combine the advantages of qualitative and quantitative research.

This mixed approach offers two advantages (cf. Bryman, 2006). First, it respects the

subjects‟ frame of reference as well as their definition of the phenomenon and miti-

gates biases in question-framing. Thus, it impedes a one-sided researcher-enforced

epistemology. Second, a mixed research methodology promises to close the re-

iterative cycle of describing, explaining and testing a research problem in contrast to a

research approach which only focuses on qualitative or quantitative methods (Mere-

dith, 1993). The following paragraphs will elaborate on the researcher‟s philosophical

position inspiring this work and the research methodology of the study.

3.2.1 Positioning of the research

Scientists are not free of bias or convictions since they care deeply about their work

(Daft, 1983) which therefore cannot be completely value-free (Crotty, 2003). Before

delving into the practical outline of this study, it is therefore advisable to clarify the

researcher‟s philosophical perspective in terms of ontology, epistemology, and human

nature in order to categorize his thinking.4

In terms of ontological assumptions, the present study views reality as a contextual

„[…] field of ever-changing form and activity based on the transmission of infor-

mation‟ (Morgan & Smircich, 1980: 495). Organizations and environment are under-

stood to evolve together and relationships are considered to be relative rather than

fixed and real (Morgan & Smircich, 1980).

Epistemologically, this study takes a medium stance between positivism and anti-

positivism (Burrell & Morgan, 1979). This implies the adoption of epistemologies

which are concerned with the mapping of contexts and facilitating understanding of

4 Burrell & Morgan (1979) underline the need for a clarification of a researcher‟s philosophical assumptions.

They suggest a continuum for analyzing assumptions about the nature of social science ranging from a sub-jectivist to an objectivist approach to social science. They stress, however, that social theories which perfect-

ly fit to one of the extremes are rare. This insight led to the development of several more nuanced refine-ments of the dichotomy (see, for example, Astley & Van de Ven, 1983; Guba & Lincoln, 2005; Morgan & Smircich, 1980; Schultz & Hatch, 1996).



the patterns of systemic relationships inherent in the ecological nature of such contexts

(Morgan & Smircich, 1980).

Furthermore, this study opines that humans are continuously engaged in a process of

interaction and exchange with their context. They receive, interpret and act on infor-

mation previously obtained; thereby creating a new pattern of information that effects

changes in the field as a whole (Morgan & Smircich, 1980). Thus, social entities are

conceptualized in reciprocal rather than one-sided relationships.

This doctoral thesis mirrors these assumptions by following a research methodology

suggested by Ulrich (2001) who conceptualized management studies as applied sci-

ence seeking the development of rules and models for the creation of a new reality ra-

ther than the composition of general theories explaining reality (Ulrich, 2001). Ac-

cording to Ulrich (2001), the research process commences with the identification of

problems which are relevant to business practice. Next, existing theories are selected

and interpreted according to their potential contribution to the problem solution. Based

on the theoretical background, evaluation criteria, decision rules, or conceptual models

are developed to further assess the business problem. These are then critically reflected

through generation and analysis of empirical data stemming from the practical context.

During this stage, it may be necessary to revise the initial framework which is finally

again tested consulting the professional practice in order to clarify its applicability.

3.2.2 Phases of the research

This thesis pursues the research process suggested by Ulrich (2001) by following three

phases depicted in Figure 2. The first research phase predominantly aims at describing

the research problem (Meredith, 1993) by analyzing the current state of research.

Therefore, different theoretical accesses are used to clarify the research gap and their

potential contributions to the solution of the practical phenomenon are evaluated. Fur-

thermore, the foundation for a clear formulation of the research questions is laid out.

This research phase mainly consists of Chapter 2 and the first part of the first paper of

this cumulative dissertation in Appendix A.

The second research phase mainly wants to provide first potential explanations of the

research problem (Meredith, 1993). It therefore develops a conceptual framework and

related preliminary propositions in the second part of the first article of this thesis (see

Appendix A). This conceptual framework is then refined by using data from a multiple

case study in the second article of this study which is presented in Appendix B.


37

The third research phase is concerned with testing the conceptual framework devel-

oped in the second article. It comprises the formulation of hypotheses which are based

on the findings of the previous qualitative research phase and their quantitative testing

by the development of a measurement and structural model. The third research phase

is represented by the third and fourth article of this cumulative doctoral thesis in Ap-

pendix C and D.

The research phases of description, explanation and testing should not be viewed as

clearly separated activities but as overlapping an iterative processes which eventually

develop into theories „[…] as research study builds upon research study‟ (Meredith,

1993: 3).

During all research phases, management recommendations are derived on basis of the

research results in order to provide insights for the improvement of QM for externally

sourced BS by buying companies.

After outlining the sequence of the three research phases, the following sections de-

scribe the various research methods employed and provide a detailed argumentation

for their utilization.

Figure 2: Research phases

Main objective: Description

Main method of

data collection:

Literature

review

Main method of

data analysis:

Conceptual

considerations based on

related

literature

Related paper: Paper A

First research phase Second research phase Third research phase

Main objective: Explanation

Method of

inquiry:Qualitative

Main method of

data collection:Interviews

Main method of

data analysis:

Transcribing,

data matrix, coding, data,

thematic matrix

Related paper: Paper B

Main objective: Testing

Method of

inquiry:Quantitative

Main method of

data collection:Online survey

Main method of

data analysis:

Mann-Whitney-

U test,

structural

equation

modelling

Related paper: Paper C, D

Development of

theories as

research study

builds upon

research study



3.2.2.1 First research phase: Description of the research problem using a review of

related literature

As explicated above, the first research phase provides an in-depth description of the

research problem on basis of a comprehensive literature review. As the review of the

literature, the identification of the research gaps and the formulation of research ques-

tions can already be found in the previous chapter and in the first article of this cumu-

lative doctoral thesis in Appendix A), these research activities will not be further dis-

cussed here.

3.2.2.2 Second research phase: Explanation of the research problem by using a qual-

itative approach

Qualitative research is particularly appropriate in the early stages of research when

comparably little is known about the phenomenon under study (Miles & Huberman,

1994). As shown in Chapter 2, QM practices for BS are not yet well examined from a

buying company‟s perspective and thus the propositions and conceptual framework

presented in the first research phase (see paper in Appendix A) can only be of prelimi-

nary nature. Therefore, it is inadequate to use a quantitative, experiment- or question-

naire-based methodology which neglects context and assumes all variables to be

known (Marshall, 1985) during the second phase of the examination process. Rather,

the second phase uses a qualitative approach in order to present a holistic, in-depth

picture of the adoption of QM practices for BS at buying companies in their natural

settings, based on the analysis of words and the detailed views of informants (Cre-

swell, 2007). On basis of this detailed portrait the preliminary conceptual framework

developed during the first research phase is then refined (Meredith, 1993).

Within the qualitative approach to social science, this thesis applies the method of a

case study which is considered „[…] a phenomenon of some sort occurring in a bound-

ed context‟ (Miles & Huberman, 1994: 25). In particular, it uses an exploratory, multi-

ple, embedded (Yin, 2003) and comparative (Dul & Hak, 2008; Silverman, 2002) de-

sign. It is an exploratory case in so far as this stage of the research process is less con-

cerned with testing existing theory rather than investigate little-understood phenomena

(Marshall & Rossman, 2006) and developing hypotheses for further research (Hancock

& Algozzine, 2006; Reason, 2006). However, the case study is also explanatory in na-

ture as it allows for the refinement of the conceptual framework developed on basis of

a literature review during the first research phase (Meredith, 1993). It is a multiple de-


39

sign, as it takes several buying companies as its basic unit of analysis. At the same

time, however, attention is given to informants from several departments within the

buying company so that it can be labeled an embedded design (Yin, 2003). As scores

of multiple cases are obtained and matched, it can be regarded as a comparative design

(Dul & Hak, 2008).

The usage of case studies is justified by two interrelated factors: (a) the characteristics

of the research questions and (b) the nature of the phenomenon under study.

The research questions of the thesis are first examined in an exploratory and descrip-

tive sense in order to obtain a „thick description‟ (Geertz, 1973: 16) not of the objec-

tive complexities, but the particular situation perceived by the informants (Hancock &

Algozzine, 2006; Stake, 1995). The examination of these questions thus requires a

methodological approach which allows for in-depth information on contextual factors

and their linkage to the phenomenon under study (Madureira, 2004). Yin (2003) con-

siders case studies an appropriate tool to answer both exploratory and explanatory

types of „why‟ and „how‟ questions (Yin, 2003: 5), in contrast to surveys and archival

analysis which are preferred if the research questions are about prevalence, for exam-

ple „how many‟ or „how much‟ (Yin, 2003: 6). The second reason for using a case

study approach is the nature of the phenomenon under study. First, the proposed thesis

wants to examine existing QM practices at existing buying companies. Thus, it deals

with a contemporary context and not „dead past‟ (Yin, 2003: 7). This favors the case

study over the historical method (Yin, 2003). Second, the researcher has no control

over behavioral events which bolsters the case study approach over experiments (Yin,

2003). The adoption of a case study approach therefore seems appropriate for „[…] an

empirical inquiry that investigates a contemporary phenomenon within its real-life

context […]‟ (Yin, 2003:13).

Case selection

The considerate selection of samples is crucial to ensure construct and external validity

of case studies (Eisenhardt, 1989).5 The aim of case sampling is therefore to select

cases that are suited to examine the phenomena under study (Barbour, 2008). Due to

the embedded design of case studies in the proposed thesis, two levels of case sam-

5 Construct validity comprises the establishment of correct operational measures for the concepts being studied

whereas external validity includes the definition of the domain to which a study‟s findings can be generalized (Yin, 2003).



pling have to be distinguished: (a) the level of the buying companies and (b) the level

of individual informants within the buying company.

The selection of buying companies is mainly driven by considerations in terms of

„confirming and disconfirming cases‟ (Miles & Huberman, 1994: 28) which seeks ex-

ceptions and looks for variations (Marshall & Rossman, 2006).

As elucidated in Section 2.3 differences in the adoption of QM practices may exist

between service and manufacturing companies which may be particularly valuable for

answering the research questions. The buying companies were therefore selected ac-

cording to the type of industry (services vs. manufacturing companies). This criterion

was chosen because differences in the utilization of QM practices related to the type of

industry the buying company operates in were expected. In total, eight German manu-

facturing and eight German service companies participated in our case study during

spring and summer 2010.6 This number is in line with Eisenhardt‟s recommendations

regarding the sample size for case studies (Eisenhardt, 1989).

The selection of individual informants within the chosen buying companies followed

the approach of seeking „intensity‟ (Miles & Huberman, 1994: 28) which looks for

intense but not necessarily extreme manifestations of the phenomenon under study

(Marshall & Rossman, 2006). As the design of QM involves many stakeholders within

a buying company (Pfeifer, 2001), it is advisable to include more than one business

function into the target group of the proposed study (Sánchez-Rodríguez & Martínez-

Lorente, 2004). Hence, this thesis gained insights from purchasing and QM representa-

tives as these were shown to be key informants regarding QM practices in their com-

panies in previous research (see, for example, Seth, Deshmukh, & Vrat, 2006a; Zu,

2009). Since van der Valk (2007) pointed out that the business functions actually ap-

plying the externally sourced BS are often key participants in the purchasing process,

we also included other departments responsible for the quality of specific externally

BS into the sample. These were identified during an introductory meeting with the

purchasing and/or QM informants using a „snowball or chain‟ (Marshall & Rossman,

2006: 28) type of sampling.

6 Public institutions or governmental companies are not included as purchasing processes for them are rather

specific and subject to particular legislation which may not be applicable to other companies.


41

Data collection

This thesis used „semi-structured‟ (Rubin & Rubin, 1995: 5) or „standardized open-

ended‟ (Patton, 2002: 342), „in-person‟ (Frey & Mertens Oishi, 1995: 4) interviews as

methods of data collection during the second research phase. Such type of interview

„[…] consists of a set of questions carefully worded and arranged with the intention of

[…] asking each respondent the same questions with essentially the same words.‟ (Pat-

ton, 2002: 342).7

The alleged shortcomings of the chosen type of interview related to „little flexibility‟

(Fontana & Frey, 2005: 702) and the danger of informants providing „socially desira-

ble‟ (Fontana & Frey, 2005: 702) responses were overcome by several means (see also

Collis & Hussey, 2009):

Conscious use of probes and follow-up questions (Rubin & Rubin, 1995) which

were not pre-determined in the standardized open-ended interview schedule.

These types of questions are supposed to enhance the accuracy and honesty with

which questions were answered.

Considerate use of open-ended questions which encourage respondents to fully

give their opinions and perceptions (Bradburn, Wansink, & Sudman, 2004).

Guaranteed confidentiality, which may increase respondents‟ openness. Confi-

dentiality was guaranteed in two ways: (a) by the consent form which was sent to

informants prior to the interview, (b) by mentioning confidentiality at the begin-

ning of the interview.

The familiarity of the researcher with the general topic due to his practical expe-

rience in several positions in purchasing. This basic knowledge potentially de-

creases possible power imbalances between interviewer and interviewee, allevi-

ates „balanced rapport‟ (Fontana & Frey, 2005: 702), and reduces socially desira-

ble responses because the interviewer is seen as a peer among peers.

In addition to these tactics to obtain trustworthy results, careful preparation and trian-

gulation was crucial to ensure construct validity and avoid distortions from interviews

7 Such interviews can be viewed as conversations with the purpose to elicit in-depth answers about percep-

tions, meanings, processes, and problems from informants (Lofland & Lofland, 1997). They thus represent an intermediate choice between a general interview guide or unstructured interview (Bryman, 2004) which does

not use pre-determined ordered and worded questions and the closed, fixed response interview by which in-formants must fit their answers into researcher‟s pre-defined categories (Marshall & Rossman, 2006; Patton, 2002).



being used in isolation (Rubin & Rubin, 1995).8 This thesis used several methods of

triangulation during the second phase of the research process:

First, a system of „member checking‟ (Stake, 1995: 115) was embraced for factual ver-

ification of interview data. This meant that interview transcripts were sent to the inter-

viewees by e-mail within one week after the interview had taken place. The respond-

ents were then requested to review the transcripts for accuracy and content.

Second, in addition to interviews, the thesis also relied on company documents in var-

ious forms as a technique of „data source triangulation‟ (Stake, 1995: 113). Documents

consisted of internal (for example, QM manuals, QM policies or minutes) or publicly

available documents (for example, websites, presentations) of the buying companies.

Such documents possess triangulative value as they can reveal contradictions between

their actual content and prior interview statements. If, however, their content corre-

sponds with the patterns elicited in the interviews, they strengthen confidence in the

reliability and validity of results (Stake, 1995). In cases where factual inconsistencies

occurred, respondents were consulted for clarification via telephone or e-mail as soon

as it was possible.

Data analysis

During the second research phase, this thesis followed a method of data analysis sug-

gested by (Miles & Huberman, 1994) which is outlined in Figure 3. These authors de-

fine data analysis as three interlinked processes of data reduction, data display, and

conclusion drawing and verification (Miles & Huberman, 1994: 10–12).

8 Triangulation strengthens validity by concurrently or sequentially combining methods and sources to com-

pensate for one‟s weaknesses by strengths of a complementary alternative (Bryman, 2006; Stake, 1995).


43

Figure 3: Process of data analysis during the second research phase

Data reduction starts even before data collection with the specification of research

questions, the conceptual framework for analysis, the case selection and the definition

data collection methods. During and after the data collection period, data reduction

proceeds with abstraction, coding and identification of themes. Data display is the or-

ganized assembly of reduced data that permits the drawing of conclusions. It often in-

cludes instruments like matrices, graphs, charts etc. and begins with data collection.

Finally, drawing of conclusions and verification involves the interpretation of dis-

played data. These processes are not treated as clear-cut sequential actions but as an

„interactive, cyclical process‟ (Miles & Huberman, 1994: 12).9 This thesis exploited

the approach described above as follows:

Data reduction started with the decision on which research questions (see Section 3.1),

which conceptual framework (see Appendix A), which cases and which data collection

methods to adopt. After interviews were conducted, the transcripts as the main source

of evidence were read several times to increase familiarity with the topic. Prior to and

after the interviews, the different documents and audio-visual material mentioned be-

fore were scanned. To keep track of the different sources of evidence, a data matrix

was created (Miles & Huberman, 1994).

The next step of data reduction comprised the coding of the transcribed interviews and

the other data sources. The coding „start list‟ (Miles & Huberman, 1994: 60) encom-

9 In that sense, the chosen approach constitutes an intermediate option between pure deductive or inductive

types of data analysis (Bryman, 2004).

Data collection period

Data reduction

Data displays

Conclusion drawing/verification

Anticipatory During

During

During Post

Post

Post

= Analysis



passed the concepts derived from the preliminary conceptual model developed during

the first research phase and in the first article presented in Appendix A. This repre-

sented an a priori coding frame following the view, that „[…] coding must start with a

frame that is well grounded in a theory or conceptual scheme‟ (Araujo, 1995: 97). The

coding process was repeated several times to reduce and/or refine the given infor-

mation regarding the categories considered.

The next stage was characterized by the attempt to display the coded data in order to

allow conclusions to be drawn. The coded data was transferred into a large „thematic

conceptual matrix‟ (Miles & Huberman, 1994: 131) with help of available software.

This matrix contrasted the various cases by dissecting the different interviews by

themes and their categories so that all interview statements on a specific theme or cat-

egory accumulate under a single label. It thus allowed an efficient comparison of the

cases. In the final step of data analysis, patterns of the utilization and perceptions on

the usage of QM practices were detected which allowed expounding hypotheses for

the third research phase of the proposed thesis.

3.2.2.3 Third research phase: Hypothesis testing by using a quantitative approach

The third research phase builds upon the results of preceding ones. It has the objective

of testing the propositions derived during the second stage. The following paragraphs

roughly describe how the approach looked like and what the reasons for choosing it

were. They will first sketch out the online survey as method of data collection and then

illustrate how structural equation modeling (SEM) was utilized as main method of data

analysis. For a detailed illustration of the results of this research phase, please refer to

the third and fourth article of this cumulative doctoral thesis in Appendix C and D.

Online survey

The thesis used a self-administered online survey (Fink, 2003) as method of data col-

lection for the third research phase. An online survey offers several advantages in con-

trast to mail or in-person surveys and interviews (Dillman, 2007; Wright, 2005). First,

it promises to be more efficient by reaching more people at the same time. This allows

the researcher to collect data while working on other tasks simultaneously. Second, it

may require less financial resources than a traditional survey due to savings on paper,

postage and travel. Third, it offers the opportunity to reach respondents who would

otherwise be hesitant to meet face-to-face or fill in mail-surveys as it is quicker to an-


45

swer. The danger of multiple answers from the same respondent was counteracted by

response tracking which identified multiple responses from the same e-mail address

(Wright, 2005). In an invitation e-mail containing contact data and explaining the pur-

pose of the study, respondents were offered the provision of the survey results in order

to stimulate response rate.

Before the online survey was sent out, the survey items were operationalized. Opera-

tionalization in this context is understood as development of a measurement model

(Homburg & Giering, 1996). In doing so, this thesis made extensive use of existing

literature in the areas of service quality and QM. Whenever possible, the constructs

developed in earlier research were modified and/or applied. The developed question-

naire was then pre-tested by seven purchasing managers, six quality managers and four

academics from the area of operations management in order to clarify misunderstand-

ings and add or delete items whenever required (Zhu, Sarkis, & Kee-hung, 2008). The

online survey mainly asked for the degree of agreement with predefined statements

measured on a seven-point Likert scale with end points of “not at all (=1)” to “to the

fullest extent (=7)”. This approach is most useful when the items to be asked are built

on an exploratory pre-study and thus there exists sufficient knowledge about the possi-

ble answers (Fink, 2003).

As the target population of the survey encompassed Austrian, German and Swiss com-

panies purchasing BS, cooperation with the Austrian Association Material Manage-

ment, Purchasing and Logistics (BMÖ), the German Association Materials Manage-

ment, Purchasing and Logistics (BME) and the Swiss Association Material Manage-

ment and Purchasing (SVME) to obtain contact data was established. Furthermore, a

contact list from the author‟s university was used. In total, 1,977 companies were iden-

tified and contacted by e-mail. 664 e-mails were undeliverable because contact data

were out of date. This left us with a list of 1,313 usable e-mail addresses. Following

the Tailored Design Method for web surveys (Dillman, 2007), we sent out up to three

reminders with a link to the survey to subjects which have not responded to the previ-

ous e-mails. In total, 513 responses were received. Responses with missing values for

the items relevant to the third and fourth paper of this cumulative thesis were omitted

from the related further analysis. Thus, a sample of 252 for the third article and 260

complete questionnaires for the fourth article remained. This left us with a response

rate of 19.2% for the third and 19.8% for the fourth paper respectively (see Appendix

A and D). These response rates are in line with other studies in QM (for example, Das

et al., 2000; Ravichandran & Rai, 2000) and comparable to other research works in the



wider field of organizational research (Yu & Cooper, 1983). The sample included

companies buying BS from a broad range of industries. Also, the companies ranged

from small and medium enterprises to multinational corporations. Most of the respons-

es came from Germany, followed by Switzerland and Austria. The respondents major-

ly held positions such as head of purchasing or purchasing manager followed by head

of QM, chief executive officer (CEO) and quality manager. Furthermore, many re-

spondents represented other positions such as head of SCM, head of operations, head

of marketing etc. indicating that they were intensive consumers of BS purchased by

their company. We therefore concluded that the respondents possessed the required

knowledge to answer the questions appropriately.

In order to minimize key-informant, common-method, and non-response bias, several

tactics were applied (for a more detailed description please refer to the third and fourth

paper of this thesis in Appendix A and D):

If the contact persons regarded themselves as non-experts regarding QM practic-

es for BS within their company, they were asked to forward the questionnaire to

someone within their company who is more knowledgeable. Furthermore, the

key informants were requested to fill in the questionnaire with other experts who

were responsible for the design of the QM practices in their company (Kumar,

Stern, & Anderson, 1993).

Common-method error was counteracted by protecting respondent anonymity,

explaining the usefulness of the study, offering a copy of the results (Huber &

Power, 1985), careful selection of scale items as well as conduction of the Har-

man‟s single factor test (Podsakoff, Mackenzie, Jeong-Yeon, & Podsakoff,

2003). The Harman‟s single factor test revealed that the relevant factors used in

the survey fulfilled the eigenvalue-greater-than-one criterion and that at least

three factors are needed to explain a variance of more than 50%. Therefore, we

concluded that there is no significant common-method bias (cf. Podsakoff & Or-

gan, 1986).

Non-respondent bias was measured by comparing early with late respondents us-

ing t-tests, as non-respondent bias is often congruent with late-respondent bias

(Armstrong & Overton, 1977). The t-tests did not show any significant differ-

ences between the data from early and late respondents.


47

Structural equation modeling (SEM)

After the collection of data, the research model was analyzed using the Mann-

Whitney-U test and SEM.

The Mann-Whitney-U statistic is a non-parametric test for the identification of signifi-

cant differences between independent samples (Mann & Whitney, 1947). It was used

in the third paper of this cumulative thesis to inspect potential dissimilarities in the

adoption of QM practices, their effects, potential barriers and determinants between

manufacturing and service as well as large and small companies in the sample. The

usage of the Mann-Whitney-U check was stipulated as our questionnaire consisted of

7-point ordinal Likert scales which are not normally distributed (Barnes, Cote,

Cudeck, & Malthouse, 2001). We adopted the Mann-Whitney-U test on the level of

single items and aggregated constructs in order to obtain more detailed results. The

null hypothesis stated that there is neither a statistically significant difference between

the mean scores of manufacturing and service nor between small and large companies.

SEM can be considered a hybrid between interdependence and dependence techniques

of multivariate analysis using factor and multiple regression analysis (Hair, Jr., Black,

Babin, Anderson, & Tatham, 2006). It was utilized for the data analysis in the fourth

paper of this thesis. SEM has the potential to best reflect the research context of the

proposed thesis for several reasons (cf. Hair, Jr. et al., 2006):

First, SEM can incorporate observable as well as unobservable, latent constructs (Byr-

ne, 2010), i.e. abstract entities which represent „[…] the „true‟, non-observable state or

nature of a phenomenon‟ (Bagozzi & Fornell, 1982: 24). These are measured by mul-

tiple observable indicators representing them (Homburg & Giering, 1996). In this the-

sis, multi-dimensional latent constructs, such as the QM practices and performance

constructs are major components of the research framework. Therefore, this element of

SEM is a crucial advantage. Second, SEM allows us to test the complex set of inte-

grated constructs of the research model and their relationships simultaneously. This

contrasts other types of multivariate analyses, for example, canonical correlation or

multiple regression analysis which analyze single constructs and relationships sequen-

tially (Hair, Jr. et al., 2006). As this thesis also wants to investigate the relationships

among QM practices as well as between them and performance constructs, this charac-

teristic of SEM was essential for our analysis. Third, SEM allows the simultaneous

“estimation of multiple interrelated dependence relationships” (Hair, Jr. et al., 2006:

711). This means that SEM can deal with structural models in which dependent varia-



bles become independent ones in subsequent relationships. Since this is predicted for

some constructs by the conceptual frameworks (for example, service quality, satisfac-

tion), this characteristic favors SEM over other multivariate techniques such as canon-

ical correlation where only one relationship at a time can be estimated.

Two estimation techniques for SEM are usually differentiated: Maximum likelihood

(ML) covariance structural analysis and partial least squares (PLS) variance analysis

(Chin, 1998; Wang, Po Lo, Chi, & Yang, 2004). Several characteristics of PLS fa-

voured its usage to ML techniques (Henseler, Ringle, & Sinkovics, 2009). PLS pro-

vides latent variables scores, i.e. proxies of the constructs, which are measured by mul-

ti-dimensional indicators. As it is one of the aims of this study to predict the extent to

which QM practices for externally sourced BS affect the performance of buying com-

panies, this feature of PLS became important. Furthermore, PLS can provide estima-

tions in complex models with many latent and manifest variables (Henseler et al.,

2009). As our research with 11 latent variables can be considered rather complex, this

characteristic spoke for the adoption of PLS. We applied smartPLS 2.0 M3 (Ringle,

Wende, & Will, 2005) for the analysis of our path model.

In order to develop a structural equation model, this thesis used a two-step approach

proposed by Anderson & Gerbing (1988). It consists of the development of the meas-

urement model and its validation and the actual testing of the structural model. This

approach allows for the testing of significance of all pattern coefficients. In addition, it

can be assessed whether any structural model would give acceptable fit and compari-

sons between the model of interest and next more likely alternatives are made possible.

Furthermore, it allows an independent test of the measurement and structural model

(Anderson & Gerbing, 1988). The development and the test of the measurement (scale

reliability, content validity, unidimensionality, discriminant validity, predictive validi-

ty) and the structural model (path coefficients, coefficient of determination, predictive

power and effect size) are presented in detail in the fourth article of this thesis in Ap-

pendix D.


49

4. Publication structure and key results

This chapter wants to provide a short overview of the four scientific papers which

form the cornerstones of this cumulative doctoral thesis. The main focus lies on their

content and the presentation of the major results.

4.1 Paper A: Quality Management Practices for Business Services:

A Research Agenda from a Buyer’s Perspective

The first paper (see Appendix A) was published as:

Holschbach, E. & Hofmann, E. Quality Management Practices for Business Services:

A Research Agenda from a Buyer‟s Perspective. In: Hallikas, J.; Kähkönen, A.-K.;

Lintukangas, K.; Virolainen, V. M. (Eds.): Supply Management - Missing Link in Stra-

tegic Management? Proceedings of the 19th Annual IPSERA Conference, 16th-19th

May 2010, Lappeenranta, Finland: Lappeenranta University of Technology

The main objective of the first paper of this cumulative doctoral thesis is to describe

the practical and theoretical problem of managing the quality of externally sourced BS

from the perspective of buying companies. It also wants to make a first theoretical

contribution by providing an overview of existing research regarding QM by buying

companies for incoming BS. Furthermore, it guides subsequent research by developing

a preliminary conceptual model taking potential determinants, QM practices as well as

their effects on firm performance into consideration.

The first paper clarifies the significance of BS for buying companies and expounds a

conceptual framework and related preliminary propositions as well as a potential re-

search methodology on basis of a review of relevant literature in the area of service

quality and QM. On basis of previous research findings the paper examines what the

major determinants of QM practices for externally sourced BS at buying companies

may be and how they may impact service quality and business performance. The paper

proposes that (a) service quality dimensions, (b) the application of business services by

buying companies and (c) the type of industry may be major determinants of the de-

sign of QM practices for business services by buying companies. Furthermore, it sug-

gests that QM has a positive effect on the quality of externally sourced BS and on sales

revenues or cost efficiency moderated by the application of the BS. Through increas-



ing sales revenues or decreasing cost by enhancing service quality, buying companies

may raise their profits. Thus, the benefits of QM for externally sourced business ser-

vices may outweigh the costs for its implementation and maintenance.

4.2 Paper B: Exploring quality management for business services

from a buyer’s perspective using multiple case study evidence

The second paper (see Appendix B) was published in the International Journal of Op-

erations and Production Management as:

Holschbach, E., & Hofmann, E. 2011. Exploring quality management for business ser-

vices from a buyer‟s perspective using multiple case study evidence. International

Journal of Operations and Production Management, Vol. 31, Iss. 6, pp. 648-685.

The major goal of the second paper of this cumulative doctoral thesis is to describe

how buying companies manage the quality of their externally sourced business BS and

to provide first potential explanations for their activities in this area. Furthermore, it

intends to sharpen and refine the conceptual model of the first paper which was solely

based on theoretical considerations. In addition, it expands the basis for the definition

of the hypotheses, which are then statistically tested in the subsequent two papers.

The authors investigate how buying companies manage the quality of their externally

sourced BS. The paper explores how QM for BS influences the performance of the

buying company and what the major determinants of QM in this context are. The pa-

per presents case evidence from eight manufacturing and eight service companies op-

erating in Germany. On basis of the case study, the preliminary conceptual model pre-

sented in the first article is honed in order to provide more appropriate potential expla-

nations for the research problem.

The paper suggests that buying companies do not yet utilize QM for externally sourced

BS to its full potential as they have not realized comprehensive QM systems. Rather,

they focus on single instruments within QM practices such as provider evaluation, ser-

vice level agreements, key performance indicators (KPI) etc. These were implemented

in the same way for all types of services, not reflecting the peculiar characteristics of

the particular service. Furthermore, practices such as customer involvement, process

management and service design have not yet received the attention they may deserve.


51

Overall, QM for incoming services has been associated with creating value to the

company as its benefits outweigh the costs for its implementation and maintenance. In

line with the conceptual model of the first paper, the paper proposes that there is a

strong link between QM and enhanced service quality. Improvements in service quali-

ty lead to higher satisfaction of internal and/or external customers. Thus, the concept

of satisfaction is introduced to the conceptual model. In contrast to the conceptual

model presented in the first paper, the relation between QM and the reduction of costs

was seen as direct but weak. Furthermore, the suggested effects of QM via the market

route by which improvements of the quality of goods finally result in higher sales vol-

ume could not be detected by the study presented in the second paper (cf., for example,

Deming, 1982; Garvin, 1984; Garvin, 1988; Molina-Azorín et al., 2009; Sousa &

Voss, 2002; White, 1996).

The major determinants affecting the intensity of QM are the usage of the service by

the buying company, the risk associated with quality failures, the degree of standardi-

zation and volume of the purchased service. Whereas previous research on QM puts

forward that differences in the application of these practices exist between manufactur-

ing and service companies (Benson, Saraph, & Schroeder, 1991; Quazi et al., 1998;

Singh, Feng, & Smith, 2006), the results of the second paper could not discover major

distinctions between industries. Rather, manufacturing and service companies seemed

to design the comparably few practices they do utilize for services in a similar way. In

addition, an influence of the service quality dimensions on the design of QM practices

could also not be discerned in the second paper due to the uniform adoption of QM

practices for all types of business services. It has to be stressed, however, that the case

study methodology did not allow for examining the question how widespread the us-

age of QM practices for BS is in manufacturing and service environments. Therefore,

as suggested by the literature, more companies from manufacturing might still apply

QM for incoming services than service companies. Consequently, this issue was sub-

ject of the third paper.

4.3 Paper C: Comparison of quality management for externally


The third paper (see Appendix C) was submitted to the International Journal of

Quality & Reliability Management:



Holschbach, E., Comparison of quality management for externally sourced business

services. International Journal of Quality & Reliability Management: Submitted.

The central aim of the third paper is to test the propositions regarding the adoption of

QM practices for BS services, their effects on organizational performance as well as

their implementation barriers and determinants and thus to provide statistically gener-

alizable results. Furthermore, it checks for the influence of contextual factors such as

type of industry and firm size on QM practices for incoming BS. The findings show

that significant differences exist in the application of QM practices for services and

their effects on performance between manufacturing and service as well as large and

small companies. Only minor differences could be detected, however, regarding barri-

ers to QM implementation and its determinants.

The third paper investigates to which extent buying companies use QM practices for

their externally sourced BS and if differences between manufacturing and service as

well as between large and small companies exist regarding their usage, their effects,

potential impediments for their implementation and their determinants. The study col-

lected data from a total of 252 companies mainly from Austria, Germany and Switzer-

land using an online survey. Significant differences in the data were identified using

the Mann-Whitney-U test.

The study showed that - on the level of the whole sample - the most intensively used

QM practices for externally sourced BS in descending order of their mean values are

service design, workforce management, management support, customer involvement,

quality information, process and provider management. Thus, the third paper partially

substantiates the findings of the second paper signifying that customer involvement

and process management have not yet received much attention by practitioners.

Regarding the four sub-samples, several significant differences could be identified. For

example, service firms demonstrated more support by top management for quality is-

sues for externally sourced BS and a more intensive customer involvement than manu-

facturing companies.10

Furthermore, large companies showed higher levels in the

adoption of provider involvement, quality information, service design and process

management than small ones.

10 Please note that in this section only significant differences between the sub-samples on the construct level are

discussed. For a more detailed description of results on the item level please refer to the third paper of this thesis in Appendix A.


53

The respondents experienced positive effects by using QM practices for externally

sourced BS. Overall, the strongest outcomes were the increase of service quality and

cost efficiency followed by further effects (for example, increase of productivity, en-

hancement of competitive position) and rise of customer satisfaction. However, service

companies achieved more additional effects than manufacturers and larger companies

could attain significantly higher levels of customer satisfaction and cost efficiency

than small firms.

The results relating to the obstacles faced with the implementation of QM practices for

externally sourced BS imply that, overall, the heterogeneity and the necessity to sub-

jectively evaluate the quality of services were perceived as major impediments to suc-

cessful QM implementation. Neither on the construct nor on the item level could major

discrepancies between manufacturing and service as well as large and small companies

be uncovered. The only exception was the lack of support by top management which

was more critical for large than for small companies.

Regarding the determinants of the design of QM practices for incoming BS, the study

found out that buying companies focus their QM activities on services whose quality

failure would represent a critical risk, which represent an important share of their pur-

chasing volume, are important to the production process or transferred to the buying

company‟s customers. Thus, the third paper underlines the importance of the usage of

the BS by the buying company as a major parameter of the adoption of QM practices.

This finding is in line with the first and second article. In accordance to the second

paper, the third article also identifies perceived risk and purchasing volume as major

factors influencing the design of QM practices for externally sourced BS.

No difference in the determinants could be detected between manufacturing and ser-

vice firms. However, on the level of constructs, the determinants of QM for incoming

services significantly differed between large and small companies.

4.4 Paper D: Quality management for business services

from a buyer’s perspective

The fourth paper (see Appendix D) was submitted to the International Journal of Op-

erations Management and is currently under review:

Holschbach, E., & Hofmann, E. Quality management for business services from a

buyer‟s perspective. International Journal of Operations Management: Under review.



The main purpose of the fourth paper is to explain and test the relationships between

QM practices for BS and between them and measures of organizational performance.

Furthermore, it wants to investigate the relationships between the various performance

measures. Based on the conceptual model developed in the previous papers and an

additional literature review regarding the relationships among quality management

practices, this article first develops a research model. The associated hypotheses are

then tested using cross-sectional survey data from 260 manufacturing and service

companies mainly operating in Austria, Germany and Switzerland. The data analysis

using SEM supports the proposed hypotheses.

The analysis reveals that top management support, workforce management and quality

information have positive direct links to other QM practices. They can thus be consid-

ered crucial infrastructure QM practices when regarding QM for BS from a buying

company‟s perspective. Provider involvement, process management, service design

and customer involvement, however, exert positive influence on performance directly.

Thus, they are important core practices for QM for BS. Furthermore, the results of the

fourth paper underline the crucial role of customer involvement for QM of externally

sourced BS from a buying company‟s perspective as it has a strong, positive and direct

effect on service quality as well as on customer satisfaction. Therefore, customer in-

volvement seems to be a crucial ingredient of QM for BS.

Regarding the effects of QM practices on organizational performance, the findings of

the fourth paper corroborate the ones from the previous research as they suggest that

the adoption of QM practices for BS is positively related to service quality. Service

quality is positively and strongly related to cost efficiency and the satisfaction of inter-

nal or external customers. The investigation of the relationships amongst performance

measures indicates their interrelation. It becomes apparent that a buying company can-

not only raise the satisfaction of internal and external customers by enhancing the

quality of externally sourced BS by means of QM, but it can also enlarge cost efficien-

cy, i.e. lower operating costs. Overall, these benefits of QM practices for externally

sourced BS were perceived to outweigh the sacrifices of their implementation and

maintenance which was measured by the construct of value of QM.


55

5. Overall conclusion

After having presented the publication structure and the major results of the four pa-

pers of this cumulative doctoral thesis, this chapter summarizes the objectives of this

research project and the related research questions as well as the managerial and theo-

retical contributions. Furthermore, it identifies several limitations and suggests corre-

sponding routes for future research.

5.1 Summary of the objectives and research questions

It could be shown that several gaps in the research exist regarding the management of

quality of incoming BS from a buying company‟s perspective (see Chapter 2). To a

large extent, these are originated in the fact that academic research on service quality

has focused on B2C services and research on QM has mainly adopted the perspective

of a provider of goods or services.

This doctoral thesis aspires to fill these gaps by answering the questions how buying

companies use QM practices to manage the quality of their externally sourced BS, how

the usage of these QM practices is related to service quality and business performance

of the buying company and what the major determinants of the design of these QM

practices are.

Thus, the objective of this thesis is to make a contribution to theory in the area of QM

by identifying how QM practices are implemented by buying companies for their ex-

ternally sourced business services. Furthermore, it wants to provide practitioners with

recommendations on how to design the use of these QM practices.

5.2 Theoretical implications

This thesis provides several theoretical insights into the QM for BS from a buying

company‟s perspective.

First, it analyzes QM from the perspective of a buying company, i.e. from a different

perspective than the one taken by most of the previous studies, and for BS, i.e. for a

different object of QM than of many other studies in QM. Examining research ques-

tions from a different angle is important for increasing the generalizability and exten-



sion of previous findings (Tsang & Kwan, 1999). Furthermore, an investigation from

this perspective seemed advisable due to the significance of BS for most buying com-

panies (see Section 1.1).

Second, this thesis could detect several peculiarities in the adoption of QM practices

for BS by buying companies. For example, it uncovered the crucial role of customer

involvement for QM of externally sourced BS. Earlier research did sometimes not in-

clude relationships with customers into the set of QM practices or could not discover

positive direct effects of customer involvement on firm performance when investigat-

ing QM for goods (for example, Anderson, Rungtusanatham, Schroeder, & Devaraj,

1995; Saraph et al., 1989; Flynn et al., 1995; Sila & Ebrahimpour, 2005; Kaynak &

Hartley, 2008). By contrast, this research project revealed a strong, positive and direct

relationship between customer involvement and service quality as well as customer

satisfaction. Therefore, customer involvement seems to be a crucial component of QM

for BS and should not be omitted in future research.

Third, the results suggest that QM has positive effects on organizational performance

when it is implemented for externally sourced BS. This finding transfers and substan-

tiates results of earlier studies which found positive relationships between the utiliza-

tion of QM for outgoing goods by manufacturing companies (for example, Dow et al.,

1999; Cua et al., 2001; Kaynak & Hartley, 2008; Sila & Ebrahimpour, 2005; White,

1996). This thesis shows that the adoption of QM for BS enhances the quality of the

incoming services. Higher levels of service quality then lead to an increase of satisfac-

tion of internal and external customers as well as cost efficiency. These benefits out-

weigh the sacrifices for the implementation and maintenance of QM and thus create

value for the buying company.

Fourth, this work not only investigates how buying companies use QM for their exter-

nally sourced BS and what its effects are but also what criteria determine the design of

QM. The results exhibit that perceived risk, usage of the service by the buying compa-

ny and purchasing volume are major factors according to which buying companies

align their QM for BS. These results may grant room for further analysis, which will

be discussed in Section 5.4.

Fifth, the direct and indirect relationships among QM practices, between these practic-

es and several measures of organizational performance and within the performance

measures themselves (see also previous paragraphs) were examined. We thus followed

a call by Kaynak (2003) who recommended further research regarding the direct and

indirect relationships of QM practices as the number of studies trying to identify them


57

is rather limited. The analysis of this complex network of relationships – among other

things – disclose that top management support, workforce management and quality

information have positive direct links to other QM practices. They can thus be consid-

ered crucial infrastructure QM practices when regarding QM for BS from a buying

company‟s perspective. Provider involvement, process management, service design

and customer involvement, however, exert positive influence on performance directly.

Thus, they are important core practices for QM for BS. As this classification of QM

practices contrasts some previous analyses for QM of goods (cf. Flynn et al., 1995; Zu,

2009), we suggest that future research should take the object (i.e. goods or services) of

QM into account when assigning practices to these categories.

Sixth, by identifying and analyzing differences related to QM for BS between manu-

facturing and service as well as between large and small companies, this study con-

tributed to the existing body of contingency research in operations management fol-

lowing a call by Sousa & Voss (2008). As we found several significant differences

regarding the application of QM practices, its effects and determinants, our results cast

some doubt on the universal applicability of QM suggested by earlier research on QM

for goods (for example, Crosby, 1979; Deming, 1986; Flynn et al., 1995; Hendricks &

Singhal, 1997; Juran & Blanton Godfrey, 2000). Rather, they signify that studies on

QM may not only consider the perspective of the user of QM (i.e. buying or selling

company), the object of QM (i.e. goods or services) but also contingent factors such as

industry and size of company.

5.3 Managerial implications

From a managerial perspective, key findings from our study can be summarized as

follows:

First, the thesis underlines the significance of externally sourced BS for buying com-

panies. It is estimated that their share in the total purchasing volume lies between 15

and 28% for manufacturing companies (BME, 2005a: 5; Centre for Management De-

velopment, 2005). This portion may even grow in the future due to a continuous trend

towards outsourcing (Cox et al., 2005; Ellram et al., 2007; Fuller, 1998; Miettinen et

al., 2005; Murray & Kotabe, 1999; van der Valk & Rozemeijer, 2009). Furthermore,

the share of services on many product offerings is increasing due to a risen demand for

augmented core goods (Nilsson et al., 2001; Wise & Baumgartner, 1999). This will

also call for a more systematic approach to managing the service quality delivered by



external providers. So far, however, most companies have not yet implemented com-

prehensive QM systems but mainly focused on single practices which were mostly

used in the same way for all types of services.

Second, our results show that QM for externally sourced BS is associated with positive

effects such as enhanced service quality resulting in higher customer satisfaction and

reduced costs. The positive effects of QM for BS are perceived to exceed the costs of

its implementation and maintenance. It may therefore be a profitable investment for

buying companies to expand their efforts in QM for services.

Third, this thesis ascertains that the various QM practices for BS should not be imple-

mented in isolation but in an integrated manner. The study has shown that the various

practices are highly interrelated. Therefore, implementing only a limited set of QM

practices may not lead to the expected positive results. However, the findings suggest

that a sequential launch including all the QM practices for externally sourced BS may

enable their full potential. For example, buying companies may first secure the full

support by top management and introduce the practices which were identified as infra-

structure ones in our study, i.e. workforce management and quality information. Em-

ployees who are well trained in QM for BS and an efficient system of quality data will

then alleviate the launch of the other core practices, i.e. supplier and customer in-

volvement, service design and process management. Special attention should be given

to the implementation of a thorough customer involvement as our study shows that it is

positively, strongly and directly related to service quality and customer satisfaction.

Therefore, it can be considered a key practice of QM for externally sourced BS. This

also means that functional borders, for example, between purchasing and departments

consuming BS within buying companies should be reduced when purchasing BS. Ra-

ther, purchasers and quality managers should work very closely together with their

internal or external customers in cross-functional teams in order to determine their re-

quirements and obtain regular feedback regarding the quality of externally sourced BS.

Fourth, the results regarding the determinants of QM provide valuable recommenda-

tions for their utilization. For example, it may be necessary for a buying company real-

izing QM for externally sourced BS to implement it sequentially. Our results indicate

that the perceived risk associated with quality failure, purchasing volume and usage of

the service (for example, consumption for the production process or transfer to exter-

nal customers) are suitable criteria for managers to discover the services a buying

company should focus its QM activities on. Thus, companies may apply these factors

to prioritize the services they will incorporate into a system of QM. For example, these


59

criteria can represent the axes of service portfolios according to which the QM will be

realized.

Fifth, this thesis reveals significant differences in the adoption of QM for BS between

manufacturing and service as well as large and small companies. In contrast to QM for

goods, service companies surpass manufacturers in the use of management support and

customer involvement when regarding QM for incoming services. This means that

manufacturing companies which strive to improve their QM for services can learn

from service providers. In particular, they may try to imitate the knowledge of service

providers regarding the integration of requirements and feedback of their external and

internal customers as well as the analysis of their satisfaction in order to augment the

quality of the services they purchase. Large companies outperformed small ones in the

application of QM practices for externally sourced BS and could also achieve higher

levels of positive effects on performance. For managers of small firms, this means that

it may be worthwhile extending their efforts into QM for incoming services. For in-

stance, they may invest more time and resources into improving their activities of ob-

taining quality information, thorough service design, and process or provider manage-

ment.

Sixth, our analysis showed that the barriers associated to the implementation of QM

for BS are similar among industries and companies of different sizes. They are mostly

related to the peculiar characteristics of services such as heterogeneity and intangibil-

ity rather than more specific organizational factors such as degree of specification,

software support etc. For purchasing managers this means that they should attempt to

reduce the impact of service characteristics before taking further QM activities. As an

example, they may try to reduce heterogeneity by standardizing externally sourced BS.

Furthermore, they may establish systems of receiving customer feedback and analyz-

ing their satisfaction with the purchased services in order to systematically monitor

subjective evaluations of service quality.

Seventh, from the perspective of a service provider, our findings suggest that compa-

nies offering a business service can support buying companies in QM for BS and may

thus be able to distinguish themselves from their competitors. In particular, service

providers should thoroughly involve the service consumer (for example, the internal

department of the buying company consuming the service or the external customer of

the buying company) into the service production and delivery process as customer in-

volvement has proven to be a key QM practice. Moreover, processes for quality ap-

proval and evaluation should be made as easy as possible for the buying company.



Service providers could, for instance, regularly survey the satisfaction of customers

and report these data to the purchasing responsibles or they could offer easy-to-use

electronic systems for the approval of delivered services by the buying company.

5.4 Limitations and future research

We are confident that this thesis represents some valuable first insights to the question

how buying companies manage the quality of their externally sourced BS. Neverthe-

less, it also has some limitations which may, however, provide some useful inspiration

for future research. They can be subsumed as follows:

We useed cross-sectional data to test our hypotheses which captured the situation

at buying companies at one point in time (Fink, 1995). QM practices and their ef-

fects may, however, be constructs which are dynamic in nature. Thus, their de-

velopment may change over time and might be better examined over an extended

period (Lakhal, 2009). In order to observe the realization of QM for externally

sourced BS and its complexities or barriers, future research may therefore use

longitudinal studies.

Furthermore, our results are based on perceptional, self-reported rather than ob-

jective, publicly available archival information. We decided to use perceptional

data on basis of three grounds: First, the case studies performed before the survey

showed that buying companies do not yet regularly collect data regarding their

QM for externally sourced BS or the performance measures used in this study.

Second, objective or archival data are often at the wrong level of aggregation,

out-of-date or unavailable for small and medium companies (Boyd, Dess, &

Rasheed, 1993). We thus opted to use perceptional data in order to maintain a

comparably large sample. Third, in order to make more definite statements about

QM and its effect on organizational performance, we refused to use archival data

on global organizational outcomes, such as market share, profitability, stock

price etc. According to Hackman & Wageman (1995), these can be the result of

various influential factors and may therefore not directly relate to QM practices

alone. Future research should nevertheless attempt to include more objective data

into the examination of QM practices for externally sourced BS.

The study examines the QM for all BS which were externally purchased by the

participating companies. No differentiation between, for example, services which


61

represent a high or a low portion of a company‟s purchasing volume or whose

quality failure represents a critical or non-critical risk to the buying company

were made. Future research may examine how such factors affect the adoption of

QM in more detail, for example, by conducting case studies.

Furthermore, our data collection only relates to one side of the buyer-supplier

dyad. However, our study shows that service quality is to a significant part de-

fined during the service design for which the provider was seen as more knowl-

edgeable. Therefore, future studies should incorporate information from the sup-

plier in order to examine how the service provider contributes to successful QM.



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Appendices



A Quality Management Practices for Business Services:

A Research Agenda from a Buyer’s Perspective

Publication information

The first paper was published as:

Holschbach, E. & Hofmann, E. Quality Management Practices for Business Services:

A Research Agenda from a Buyer‟s Perspective. In: Hallikas, J.; Kähkönen, A.-K.;

Lintukangas, K.; Virolainen, V. M. (Eds.): Supply Management - Missing Link in Stra-

tegic Management? Proceedings of the 19th Annual IPSERA Conference, 16th-19th

May 2010, Lappeenranta, Finland: Lappeenranta University of Technology

Summary

This paper is part of a larger research project investigating how buying companies ap-

ply practices of quality management for their externally sourced business services.

Based upon a literature review in the areas of service quality and quality management,

the paper will present a research framework, preliminary propositions and a potential

research methodology. The insights obtained can assist purchasers to decide on quality

management practices to best suit certain types of business services. Service providers

will benefit by better understanding which practices of quality management buying

companies use and thus become able to adjust their service offerings to better match

requirements.

Keywords: Services purchasing, quality management, service quality

A.1 Introduction



2000; Schneider & White, 2004). However, despite their significance, most purchasing

departments have focused on the optimization of the supply of goods during the last

years (Axelsson & Wynstra, 2002; Ellram, Tate, & Billington, 2007; van der Valk,

2008; van der Valk, 2007). Similarly, the academic literature predominantly has been

focusing on the supply of goods (Bals, Hartmann, & Ritter, 2009; Cox, Chicksand,


81

Ireland, & Davies, 2005; Ellram et al., 2007; Smeltzer & Ogden, 2002; van der Valk &

Rozemeijer, 2009; van der Valk, 2008; Wynstra, Axelsson, & van der Valk, 2006) and

on the purchasing activities before the actual purchase is completed Day & Barksdale,

Jr., 1994; van der Valk, 2008; van der Valk & Rozemeijer, 2009).

In particular, the activities after the actual purchase and thus quality management of

externally purchased business services from the perspective of a buying company have

received little attention so far by academics (Hemsworth, Sánchez-Rodríguez, & Bid-

good, 2008; Hemsworth, Sánchez-Rodríguez, & Bidgood, 2005; Sánchez-Rodríguez &

Martínez-Lorente, 2004). Rather, the literature on service quality in most cases has

been written from a business-to-consumer (B2C) perspective (Bienstock, Mentzer, &

Bird, 1997; Fitzsimmons, Noh, & Thies, 1998; Hernon, 2002; Jackson et al., 1995;

Kong & Mayo, 1993; Niranjan & Metri, 2008; Patterson & Spreng, 1997; Woo & En-

new, 2005). The few existing studies on service quality in a business-to-business

(B2B) setting mostly set an objective to analyze the dimensions according to which

customers evaluate service quality for distinct types of services but not which practices

they use for this evaluation (see, for example, Bienstock et al., 1997; Fehl, 2006; Pat-

terson & Spreng, 1997).

In addition, the literature on quality management predominantly has been adopting the

viewpoint of a provider of goods or services, and tried to answer the question how they

can improve the quality of the products or services offered to their consumers (Flynn,

Schroeder, & Sakakibara, 1994; Rönnbäck & Witell, 2008). However research on the

question, how companies receiving goods or services manage the quality of them is

scarce (Fynes, 1999; Fynes & Voss, 2002; Molina-Azorín, Tarí, Claver-Cortés, &

López-Gamero, 2009; Stanley & Wisner, 2001). In general, the relative disregard of

quality management from a buyer‟s perspective is surprising as it is estimated that ap-

proximately 50% of quality problems result from defects in the materials purchased

(Crosby, 1984; Dowst, 1987). Thus, the quality of a company‟s output is highly de-

pendent on the quality of its input (Forker, Mendez, & Hershauer, 1997). Therefore,

this paper presents an approach for further research on the following basic questions:

How do buying companies manage the quality of externally sourced business services?

and

How is the usage of quality management practices for business services by buying

companies related to service quality and business performance?



In doing so, it is divided into five sections: The first part defines business services, the

scope of work and introduces a service classification proposed by Wynstra et al.

(2006) to handle the heterogeneity of business services. In the second section, it draws

upon relevant literature in two areas of research: service quality and quality manage-

ment. On basis of the service classification and the literature review, the authors for-

mulate the problem in the fourth part. The fifth section introduces some preliminary

propositions and a conceptual framework for the further examination of the design of

quality management practices and their impact on performance for different types of

business services. Finally, the authors introduce a potential methodology for the re-

search project.

This paper is part of a larger research project with the objective to contribute to the

development of theory in the area of quality management by examining its applicabil-

ity from a purchasing perspective focusing on externally sourced business services.

For purchasing practitioners the study wants to provide recommendations for the de-

sign and utilization of quality management practices in the previously mentioned con-

text. For service providers, the project may give insights into how their business cus-

tomers manage the quality of their services offered. Thus, it may offer them an oppor-

tunity to better adjust their services to their customers‟ needs.

A.2 Background

A.2.1 Services, business services and scope of work

Although the discussion about what services actually are had started already in the

1960s (Fisk, Brown, & Bitner, 1993) until today no agreement on a universal defini-

tion has been achieved (Seth, Deshmukh, & Vrat, 2006b). Authors agree, nonetheless

that services possess several characteristics which differentiate them from goods

(Schneider & White, 2004; Svensson, 2006). Among these are their heterogeneity, in-

tangibility and inseparability of production and consumption (Parasuraman, Zeithaml,

& Berry, 1985) as well as the fact that service production normally, but not necessarily

always, involves some interaction between customer and provider (Grönroos, 2007;

Meffert & Bruhn, 2000). These characteristics can all be considered continua on which

different service types vary (Jackson & Cooper, 1988; Schneider & White, 2004).

Business or B2B services in this context are understood as services which are deliv-


83

ered by firms or organizations and bought by other firms or organizations (Axelsson &

Wynstra, 2002; van der Valk & Rozemeijer, 2009).

It is important to note that the characteristics of services have some implications on the

design of quality management for business services from a buying company‟s perspec-

tive which may differentiate it from quality management for goods (cf. Ellram et al.,

2007; Jackson et al., 1995; Rönnbäck & Witell, 2008; Schneider & White, 2004; van

der Valk & Rozemeijer, 2009):

Heterogeneity of services makes it difficult to design a quality management that

fits to all types of business services. In contrast, it may be necessary for a buying

company to decide which combinations of quality management practices are best

suited for a specific type of business service. Intangibility results in difficulties in

the evaluation and comparison of business services as a customer cannot see,

hear, feel, smell or taste them (Haller, 2002; Jackson & Cooper, 1988). As a re-

sult, business customers may put greater emphasis on personal (and thus subjec-

tive) information sources to substitute more objective measurements and/or in-

clude criteria to measure the results and outcomes of services into their quality

management (Schneider & Bowen, 1995).

The inseparability of production and consumption of services implies that the

services do not yet exist when the buying company purchases it. This stresses the

need for clarifying the content of the service as requested by the customer and

suggests that quality management of business services may already start before

the purchase contract is signed. Furthermore, it means that business services can-

not be stored. Consequently, a buying company may put particular emphasis on

the availability of business services.

As service production often involves interaction between service provider and

customer, this interaction is an essential ingredient to the service experience.

Therefore, buying organizations may include an assessment of the interaction

process into their quality management of business services. Furthermore, the var-

iability of (internal or external) customers of a buying company as input may re-

sult in different demands. Thus, it may be necessary for a buying company to ad-

just their quality management practices to the usage of the business service by

their customers in order to meet their expectations.

Due to the heterogeneity of business services it is vital to define which business ser-

vices are in scope of this paper and which ones are not. To achieve this, the business



services examined by two benchmarking studies on indirect spend management

(CAPS Research, 2003; BME, 2005) and a service classification proposed by the Or-

ganisation for Economic Co-operation and Development (OECD, 2000) were com-

pared with regard to their classification of business services. The business services

used by these three studies as well as those in scope of this paper are depicted in Table

A- 1 in the appendix.

A.2.2 Classification of business services

In order to handle the heterogeneity of the business services in scope, the research pro-

ject will use a classification. The services management and marketing literature offers

various examples of service classifications for consumer services (see, for example,

Grönroos, 2007; Lovelock, 1983; Schneider & White, 2004). However, Boyt & Har-

vey (1997) and Smeltzer & Ogden (2002) emphasize that less attention has been given

to the classification of business services. Furthermore, most of the systematizations of

business services hinge on the characteristics of the provider rather than on the ones of

the buyer (van der Valk & Rozemeijer, 2009). These classifications may not be suffi-

cient in the attempt to understand how professional procurement manages the quality

of purchased business services. Jackson et al. (1995) suggest that usage of a business

service affects the classification. Wynstra et al. (2006) share this view and conclude

that the application of a business service by a buying organization affects the buyer-

supplier interaction patterns. They suggest a classification consisting of four different

types of services (Wynstra et al., 2006; van der Valk, Wynstra, & Axelsson, 2009):

Component services become a rather unaltered part of the offer to the end cus-

tomer

Semi-manufactured services are offered to the end customer as well but only af-

ter being changed by the buying company


order to produce their own product or service

Consumption services are completely used within the buying organization and

not part of the final offer to the end customer

This classification scheme is used for the research project as it is rather independent

from the characteristics of the service and may thus allow industry specific answers

regarding quality management. Furthermore, this classification will still allow compa-


85

nies to provide information even if they have not implemented quality management

practices for the full range of their externally sourced business services as is suggested

by the focus on purchasing of goods of many companies (BME, 2007).

A.3 Literature review

The following chapter will present two areas of literature which promise to have the

potential of providing further insights into the question how buying companies manage

the quality of externally sourced business services: a) service quality which is part of

the wider domain of service marketing and b) quality management which constitutes a

section of operations management. These streams of literature are presented and short-

ly discussed regarding their contribution to the aforementioned questions.

A.3.1 Relevant literature on service quality

Within the field of service quality, research on service quality models and dimensions

predominantly debates what, i.e. which dimensions, are evaluated when quality of a

service is assessed by customers (Lehtinen & Lehtinen, 1991). Two schools have

emerged from this literature (Brady & Cronin, Jr., 2001; Woo & Ennew, 2005):

a) the “Nordic” school which is based upon ideas of Grönroos (1984; 2007) who

suggested that a technical (i.e. the “what”) and a functional (i.e. the “how”)

dimension determine what customers perceive as service quality;

b) the “American” school with its widely used model of service quality proposed

by Parasuraman et al. (1985; 1988; 1991) which uses dimensions that concep-

tualize service quality in terms of characteristics as to how the service is deliv-

ered (i.e., reliability, responsiveness, empathy, assurances, and tangibles)

(Shonk, 2006).

The Nordic school as well as the early conceptualizations of the American school are

both based on the disconfirmation paradigm which posits that perceived quality is a

result of a comparison between customer service expectations and perceived service

performance (Brady & Cronin, Jr., 2001; Churchill & Surprenant, 1982; Oliver, 1980;



Oliver, 1981; Rust & Oliver, 1994b).1 In Table A- 2 in the appendix, major models of

both camps are shortly described in terms of the quality dimensions used. The aim is to

illustrate which dimensions of service quality should be covered by a buying compa-

ny‟s quality management practices. Although this review of service quality models

does not pretend to be a comprehensive scrutiny, we argue that – in spite of some con-

ceptual differences – the dimensions used in the various models represent the potential

service quality dimensions of business services. Moreover, we propose that they can

be assigned to three overall categories of service quality dimensions (see also Chella-

durai & Chang, 2000; Shonk, 2006): Physical appearance (appearance of facilities,

uniforms, documents etc. of the service provider), interaction (process of service de-

livery, interpersonal relations etc. between service provider and customer) and out-

come quality (the result of the service). Table A- 2 in the appendix assigns the service

quality dimensions of the models to these three categories to visualize this notion.

As noted before, comparably little research exists, which examines the service quality

dimensions of business services. Some of the available studies are depicted in Table

A- 3 in the appendix. The heterogeneity of the dimensions identified for B2B services

led some authors to suggest that they have to be defined for each B2B service individ-

ually (see, for example, Bienstock et al., 1997; Durvasula, Lysonski, & Mehta, 1999;

Van Dyke, Kappelman, & Prybutok, 1997). This may be true and will be an interesting

question to answer by the future research method proposed later in this paper. For the

purposes of this paper, however, we also regard the dimensions depicted in Table A- 2

as belonging to the physical appearance, interaction, and outcome quality since this

granularity may be sufficient for our study. The results of Lehtinen and Lehtinen‟s

(1991) empirical findings suggest that customers use these dimensions for their service

quality assessment but assign them different weights.

Although the studies described above provide valuable insights into the dimensionality

of service quality in a B2B environment, they do not examine which quality manage-

ment practices buying companies use for managing the quality of their purchased

business services.

Nevertheless, for quality management practices for business services from a buyer‟s

perspective the literature on service quality models and dimensions elucidated above

has several ramifications. First, the practices used should be able to establish the eval-

1 It has to be noted, however, that the disconfirmation paradigm has been subject to debate as, for example, it

may be difficult for customers to clearly define expectations and for providers to interpret these expectations (cf. Laesser, 2008; Tian-Cole & Cromption, 2003; Schneider & White, 2004).


87

uation of quality along the axes of physical appearance, interaction and outcome quali-

ty. Second, they should be flexible enough to define the dimensions within these axes

according to the business service in focus and to assign different weights to different

dimensions in alignment with the subjective estimation of significance of a single di-

mension by the buying company. It follows that quality management practices cannot

be used for all business services in the same way. Rather their design is subject to the

quality dimensions and must be adjustable to them. Thus, the service quality dimen-

sions may represent an important determinant of the usage of quality management

practices for business services by buying companies.

A.3.2 Relevant literature on quality management

Two streams within the research on quality management may provide insights for the

questions asked in this paper and are presented and discussed shortly below: a) litera-

ture on quality management practices, and b) literature on the relationship between

quality management practices and firm performance.

Regarding research on quality management (2002; Sousa & Voss recommend that it

should deal with the level of practices – in contrast to more general principles and too

detailed techniques – since „principles are too general for empirical research and tech-

niques are too detailed to obtain reliable results‟ (Sousa & Voss, 2002: 92). This paper

concedes their view.


quality management practices. Later, Flynn et al. (1994) categorized quality manage-

ment practices into seven dimensions: top management support, quality information,

process management, product (or service) design, workforce management, supplier

involvement and customer involvement. According to Fynes (1999), these practices

mirror the dimensions used in quality award schemes such as the Baldrige and the Eu-

ropean Foundation for Quality Management (EFQM) Award and are therefore the

ones most commonly examined (see also Molina-Azorín et al., 2009; Zu, 2009). Thus,

they will form the constructs, along which quality management for business services

by buying companies is to be examined. Their definitions and examples for potential

techniques are shortly illustrated in Table A- 4 in the appendix.

Another important area of research with regard to quality management practices is the

examination to which extent they have an impact on firm performance (Sousa & Voss,

2002). Advocates of quality management propose quality management practices can



have a positive impact on a manufacturer‟s firm profitability either by the manufactur-

ing or the market route (Deming, 1982; Garvin, 1984; Garvin, 1988; Molina-Azorín et

al., 2009; Sousa & Voss, 2002; White, 1996).

In the market route, improvements of the product or service quality lead to higher rep-

utation for quality. This may result in more sales and thus larger market share or alter-

natively, to less elastic demand and higher prices. Increased market share, however,

results in higher economies of scales which lowers costs. Decreased cost result in

higher profits. In the manufacturing route, enhanced product or service quality leads to

increased productivity and fewer defects, less rework, scrap cost, or lower warranty

and product liability costs. Increased productivity and lower rework and scrap cost

result in lower manufacturing and service cost whereas lower warranty and product

liability cost causes a decrease of service costs. Lower manufacturing and service cost

raise profits. In both cases profits can be achieved if the costs of the quality manage-

ment practices are outweighed by the higher gains.

Ample amount of research has been conducted on the relationship between quality

management practices and operational, as well as (financial) business performance.

Sometimes these studies provide mixed results (Nair, 2006; Rönnbäck & Witell,

2008). However, most authors now agree that the use of quality management practices

has a positive, significant and strong effect on operational performance (Dow, Samson,

& Ford, 1999; Maani, Putterill, & Sluti, 1994; Sluti, Maani, & Putterill, 1995; Sousa &

Voss, 2002; White, 1996). The impact of quality management practices on financial

business performance is seen as positive and significant, but in some cases less strong

than on operational performance (Capon, Farley, & Hoenig, 1990; Hendricks &

Singhal, 1997; Nilsson, Johnson, & Gustafsson, 2001; Powell, 1995; Rönnbäck &

Witell, 2008).

The aforementioned passages provide the potential rationale for the adoption of quality

management practices for business services by a buying company. First, quality man-

agement practices may have positive effects on the quality of component and semi-

manufactured services. Increasing quality of these services may result in higher cus-

tomer satisfaction and ultimately in higher sales revenues. Second, quality manage-

ment practices may positively impact the quality of instrumental or consumption ser-

vices and thus raise internal operational performance. In addition to potentially higher

employee satisfaction, this may also result in increased productivity, process efficiency

and thus decreased cost.


89

Some studies compared the utilization of quality management practices in different

industries. The mostly discovered that differences between service and manufacturing

companies regarding the adoption of quality management practices exist (Benson, Sar-

aph, & Schroeder, 1991; Powell, 1995; Rönnbäck & Witell, 2008; Singh, Feng, &

Smith, 2006) and that the level of quality management practice is not as high in service

as in manufacturing companies (Benson et al., 1991; Quazi, Jemangin, Kit, & Kian,

1998; Woon, 2000). These findings underline the impact of the industry on the design

of quality management. Therefore, the type of industry may be a major determinant of

the use of quality management practices for business services by buying companies.

The studies cited above all adopted the perspective of a goods or service provider. On-

ly recently, researchers examined the use of quality management practices from a buy-

ing company‟s viewpoint (Sánchez-Rodríguez & Martínez-Lorente, 2004; Hemsworth

et al., 2005; Hemsworth et al., 2008). Sánchez-Rodríguez & Martínez-Lorente (2004)

investigated the usage of a subset of quality management practices in purchasing de-

partments of Spanish manufacturing companies and their relationship to perceived

purchasing and business performance as well as internal customer satisfaction. They

concluded that the quality management practices studied were positively and signifi-

cantly related to perceived purchasing performance and internal customer satisfaction

but only the practices “commitment of purchasing management”, “coordination with

other functional areas” and “employee management” were positively correlated to per-

ceived overall business performance (Sánchez-Rodríguez & Martínez-Lorente, 2004).

Later, Hemsworth et al. (2008) confirmed these findings using the same sample and

data set (Hemsworth et al., 2008; Hemsworth et al., 2005). Furthermore, they discov-

ered that quality management practices in purchasing have a positive impact on pur-

chasing performance mediated through the effect of information systems.

These authors provide valuable first insights into the utilization of quality management

practices in purchasing. However, they do not include the quality of incoming business

services into their work and their sample does not entail service companies. Further-

more, they rely completely on subjective perceptions of purchasing managers in the

evaluation of purchasing and business performance. This approach ignores the peculiar

characteristics of services and their potential impact on the usage of quality manage-

ment practices as well as the differences in the adoption of quality management prac-

tices between manufacturing and service companies examined by previous studies. In

addition, the individual perceptions of just one group of respondents may have led to



„socially desirable‟ (Fontana & Frey, 2005: 702) answers. These gaps underscore the

need for the proposed research project.

A.4 Problem formulation

Following the literature review above, we conclude that a number of gaps remain re-

garding how buying companies manage the quality of business services. Researchers

in the field of service quality pointed out that studies on service quality were predomi-

nantly conducted in a B2C rather than a B2B context. They attempted to answer the

question, according to which dimensions consumers evaluate service quality of service

providers. The studies which exist in a B2B setting, however, focus on a single service

rather than a comprehensive set of business services often bought by buying compa-

nies. Therefore, the literature on service quality does not answer the question how buy-

ing companies manage the service quality of their externally sourced business services.

The quality management literature predominantly takes the perspective of a goods or

service provider. It aims at answering questions regarding which quality management

principles are used by manufacturing or service companies in order to improve the

quality of their offerings. Furthermore, they answer the question how the utilization of

these relates to operational or financial business performance. So far, little attention

has been given, however, to the question whether the practices of quality management

are also used by customers (i.e. buying companies) to manage the quality of externally

sourced business services.

Hence, the objective of this paper is to identify – while using Wynstra et al.‟s (2006)

classification of business services – patterns in the usage of quality management prac-

tices of buying companies. Thus, it wants to make a contribution to the academic liter-

ature by discovering how quality management practices are implemented by buying

companies for their externally sourced business services.

A.5 Initial propositions and preliminary research framework

As elucidated before, the dimensions according to which a service customer evaluates

service quality as well as the weights assigned to them may vary (see section on ser-

vice quality). Thus, we argue that the service quality dimensions may influence the

design and adoption of quality management practices for business services by buying

companies. This means that the intensity of practice utilization may alternate regarding


91

to the quality dimensions to better evaluate the required service quality. This consider-

ation leads us to our first proposition:

PP 1: The service quality dimensions are one major determinant of the design and

adoption of quality management practices for business services by buying

companies.

For example, a buying company may regard the “outcome” dimension of a technical

maintenance and repairs service more crucial than the physical context or interaction

quality. For professional services, by contrast, “physical context” and “interaction”

quality may play a far more important role for the buying company. This varying em-

phasis of certain dimensions for certain business services may impact the quality man-

agement practices used as some quality management practices may better represent

particular dimensions than others.

As shown before, Wynstra et al. (2006) argue that the usage of a business service by

the buying company influences the buyer-seller interaction. It may also be true that the

usage of an externally sourced business service by the buying company influences the

design and adoption of its quality management practices. Therefore, we propose:

PP 2: The usage of a business service by the buying company is one major determi-

nant of the design and adoption of quality management practices for business

services by buying companies.

This means that a buying company may either use different quality management prac-

tices for component, semi-manufactured, instrumental or consumption business ser-

vices or that the intensity of their adoption may vary. For example, a real estate agent

lending managed apartments to its customers and therefore purchasing facility services

and passing them unaltered through to its customers may use either more practices to

manage their quality or more intensively. By contrast, a real estate agent purchasing

facility services only for maintaining its own offices may use quality management

practices only sporadically, for example, by checking cleanliness irregularly.

Some research has shown that the utilization of quality management practices of goods

or service providers varies according to industry (see, for example, Rönnbäck &

Witell, 2008; Singh et al., 2006; Woon, 2000). This may also be the case for quality

management practices for business services. Therefore, we bring forward the follow-

ing proposition:



PP 3: The industry of which a buying company is part is one major determinant of

the design and adoption of quality management practices for business services

by buying companies.

This means that buying companies in some industries may just use more or more ad-

vanced quality management practices for business services than others. In line with

some previous studies among providers in manufacturing and service industries (see,

for example, Benson et al., 1991; Quazi et al., 1998; Singh et al., 2006; Woon, 2000),

we expect manufacturing companies to score higher in terms of number and sophisti-

cation of quality management practices applied for their business services.

The major goal of the implementation of quality management in companies is to im-

prove the quality of the goods or services bought or offered. The utilization of quality

management practices for externally sourced business services may result in an im-

proved level of quality of these services delivered by the providers. We therefore sug-

gest:

PP 4: The design and adoption of quality management practices for business ser-

vices by buying companies is positively related to the perceived service quality

of externally sourced business services.

Such a relationship may result from various effects of quality management. For exam-

ple, the utilization of quality information may provide the responsible purchaser with

the required data to better evaluate a provider‟s long-term service quality. This may

allow him to add efficient quality incentives complementing existing price stipulations

into contractual agreements.

Ample amount of research indicates that quality management is positively related to

business performance (see, for example, Molina-Azorín et al., 2009; Nair, 2006; Sousa

& Voss, 2002). These studies show that quality management can have positive effects

on either sales revenues (i.e., the market route) or cost (i.e., the manufacturing route)

(cf. Deming, 1982; Garvin, 1984; Garvin, 1988; Molina-Azorín et al., 2009; Sousa &

Voss, 2002; White, 1996). Consequently, we presume that such a positive relationship

also exists between service quality enhanced by quality management practices for

business services and business performance. However, the strength of this relationship

may vary according to the application of the business service by the buying company.

These considerations yield our next proposition:


93

PP 5: There is a perceived positive relationship between service quality of externally

sourced business services and sales revenues and/or cost mediated by the us-

age of the business service by the buying company.

For example, ameliorated service quality of component and semi-manufactured busi-

ness services may have a stronger positive effect on sales revenues than on cost as they

are passed-through to the final consumer. Improved service quality of instrumental and

consumption services, by contrast, may positively influence (internal) cost more than

sales revenues by raising internal efficiency as these are partially or completely con-

sumed by the buying company.

Some authors emphasize that quality management can only have positive effects on a

firm‟s profitability if the cost of implementing and maintaining quality management is

outweighed by its performance contributions (Crosby, 1984; Deming, 1982; Garvin,

1984; Garvin, 1988). Hence, a buying company may only utilize quality management

practices for externally sourced business services if the benefits exceed the cost. We

would like to reflect this implication by the following proposition:

PP 6: The sales revenues raised or cost decreased by improved service quality of

externally sourced business services outweigh the cost for implementation and

maintenance of the quality management practices used and thus increase the

company‟s profits.

These initial propositions outline the preliminary research framework depicted in Fig-

ure A- 1. We are aware that these propositions need further development. Potential

variations within the four groups of business services should be better defined as the

intensity of the usage of quality management practices may vary within the two groups

of business services.



Figure A- 1: Preliminary conceptual model

A.6 Methodology

The research project can be divided into a first phase which aims to develop theory

from case studies and a second during which hypotheses will be tested by using a

quantitative approach. It thus follows the methodological recommendations given by

Meredith (1993).

During the first phase, the initial propositions will be further developed into hypothe-

ses by means of additional literature research and exploratory, multiple, embedded

case studies (Yin, 2003). Semi-structured interviews (Rubin & Rubin, 1995) and doc-

ument research (Stake, 1995) will be used in the case studies.

We propose to study one to two services in each of the four categories according to

Wynstra et al.‟s classification of business services (Wynstra et al., 2006). The number

of cases should lie between four and ten. This number is in line with Eisenhardt‟s rec-

ommendations regarding the sample size for case studies (Eisenhardt, 1989). The

number of business services under examination will therefore vary between a mini-

mum of 16 to a maximum of 80. During an introductory meeting the services to be

studied and the employees to be interviewed will be defined. The target group of re-

spondents is based in purchasing, quality management and/or other departments re-

sponsible for the quality of specific externally business services.

In line with an approach chosen by van der Valk (2007) to examine buyer-seller inter-

action patterns during service exchange, we also aim to study buying companies from

a wide range of industries. This may allow for some degree of external validity. The

buying companies will be selected according to the type of industry (services vs. man-

ufacturing companies) and the type of their customers (B2B vs. B2C). We choose the

first criterion because we expect differences in the adoption of quality management


95

practices related to the type of industry the buying company operates in. Regarding the

second criterion we also follow van der Valk‟s (2007) argument that in B2B settings,

customers of the buying company may be more involved in the specification and defi-

nition of requirements of the service than in more anonymous B2C markets. We there-

fore propose to select at least one B2B, and B2C service company as well as one B2B,

and B2C manufacturing company. Public institutions or governmental companies are

not included as purchasing processes for them are rather specific and subject to partic-

ular legislation which may not be applicable to other companies (cf. Schiele & McCue,

2006).

The second research phase comprises testing the propositions derived from the case

studies by means of a quantitative method which is still to be defined. This phase is

supposed to achieve some degree of statistical generalizability. This phase will strive

to develop a structural equation model following a two-step approach consisting of the

development of a measurement model and then testing the structural model (cf. Hair,

Jr., Black, Babin, Anderson, & Tatham, 2006; Homburg & Giering, 1996).

A.7 Conclusion

Business services represent a significant portion of a buying company‟s expenditures.

However, research on purchasing of business services in general and on quality man-

agement for business services in particular is relatively scarce. The research project

proposed in this paper wants to shed more light on the question how buying companies

use quality management practices for managing the quality of their externally sourced

business services.

In doing so, it analyzes literature on service quality and quality management. Based on

the literature review it formulates the problem and develops initial propositions regard-

ing the determinants of the design and adoption of quality management practices for

business services by buying companies as well as their impact on service quality and

business performance. Afterwards, the paper suggests a preliminary conceptual

framework. Finally, it presents a research methodology entailing case studies for the

further elaboration of propositions and some constructs and a subsequent quantitative

analysis.

The research project wants to contribute to the development of theory in the area of

quality management by taking a purchasing perspective and adding externally sourced

business services into the existing knowledge base. This may also support purchasing



managers in their attempts to design efficient quality management practices in this

context. Service providers may benefit from better understanding how their profes-

sional customers evaluate their services offered.


97

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105

Appendices of paper A

Table A- 1: Overview of business services in scope

Study: OECD (2000) CAPS (2003) BME (2005) Business services in scope of

paper

Examples of business services in

scope of paper

Bu

sin

ess

serv

ices

in s

co

pe

(alp

hab

eti

call

y s

ort

ed

)

Accomodation and food services

Computer hardware Construction Computer implementation and maintenance services

Hardware and software implementation, customization, maintenance on single

user level, telecommunication services Administrative and support, and waste management

Consulting Consulting Facility services Cleaning, catering, security, real estate maintenance

Arts, entertainment and recreation

Employee benefits Facility management Financial services Banking, finance, insurance

Education Engineering and manufac-turing equipment

Financial services Professional services Management consultancy, software development and implementation on company or unit level, accounting and auditing, legal, architects

Finance and insurance Facilities maintenance Fleet management Research and development service

Development, engineering

Health care and social assis-tance

Fleet (executive, non-executive)

Human resource servi-ces

Technical maintenance and repairs

Maintenance and repair of production equipment

Information Industrial supply IT services Transportation and distribu-tion services

Warehousing, value-added logistics, transport

Management of companies and enterprises

Insurance Logistics services Fleet management Provision of vehicles for transportation of staff or goods

Other Logistics freight Marketing services Human resource services Training, recruitment Professional, scientific and

technical

Marketing Industrial maintenance Marketing services Campaign development, production,

print services Public administration Printing Patent and legal services Travel management Organisation and booking of business

travels

Real estate, rental and leas-ing

Software Purchasing services

Transportation and ware-housing

Total Travel Research and develop-ment

Wholesale and retail trade Travel management


106

Table A- 2: Description of service quality dimensions in B2C contexts and their assignment to physical context, interaction, and outcome quality

Model Dimension Short description Assignment to conceptual

dimension

Grönroos (1984) Functional quality Outcome, i.e. what a customer actually receives Interaction quality Technical quality Perceived interaction, i.e. how the customer obtains the service Outcome quality

Parasuraman et al. (1988)

Assurance Knowledge and courtesy of employees and their ability to inspire trust and confi-dence

Interaction quality

Empathy The caring, individualized attention the service provider offers its customers Interaction quality

Reliability The ability of a service provider to perform the promised service dependably and accurately

Interaction quality

Responsiveness The willingness of the service provider to help customers and provide prompt service

Interaction quality

Tangibles Physical facilities, equipment, and appearance of service providers‟ personnel Physical context quality Lehtinen & Lehtinen (1991) – first model

Corporate quality Customers‟ view of the provider‟s reputation and image Interaction quality

Interactive quality Interaction processes between customer and service provider and/or their equip-ment

Interaction quality

Physical quality Materials and facilities of a service provider Physical context quality

Lehtinen & Lehtinen (1991) – second model

Output quality Customers‟ evaluation concerning the result of a service production Outcome quality

Process quality Customers‟ perception of the service production process and his/her participation Interaction quality Rust & Oliver (1994a) Service environment Internal environment of the service provider in regard to its organizational culture

and philosophy towards service provision (e.g. organizational culture and philoso-

phy) and external environment, i.e. physical appearance of the service provider‟s location


Service delivery Perceived quality of the interaction process between customer and service provider Interaction quality

Service product Design of the service including the specifications and service targets to offer Outcome quality Dabholkar, Thorpe, &

Rentz (1996)

Personal interaction Way the customer perceives being treated by the retail store staff Interaction quality

Physical aspects Appearance and the layout of the retail store Physical context quality

Reliability Ability of a service provider to perform the promised service accurately Interaction quality Brady & Cronin, Jr. (2001)

Interaction quality Customers‟ interpersonal actions that ensue during service delivery Interaction quality

Outcome quality Customers‟ perceptions as what he is left with when the service has been rendered Outcome quality Physical environment

quality

Surrounding environment or physical facilities of a service provider Physical context quality


107

Table A- 3: Summary of publications examining the dimensions of service quality in a B2B environment


respondents

Service examined Model used Findings regarding service quality dimen-

sions

Brensinger & Lam-bert (1990)

Empirical 170 purchasers Less-than-truckload (LTL) motor carrier service

SERVQUAL The predictive quality of SERVQUAL in this context was low.

Harte & Dale (1995) Conceptual n/a Professional services SERVQUAL and literature research

Tangibles, empathy, assurance, reliability, timeliness are requested most by clients of

professional services. Bienstock et al. (1997)

Empirical 462 purchasers Physical distribution service Revised SERV-QUAL

Timeliness, availability, condition have most significant impact on service quality perception

of professional buyers. Patterson & Spreng (1997)

Empirical 128 users of consul-tancy services

Professional business services Dimensions based on Grönroos (1984)

The technical/outcome factor was more signif-icant than the five process dimensions (methodology, service, relationships, global

and problem identification). Durvasula et al. (1999)

Empirical 114 shipping manag-ers

Ocean freight services SERVQUAL Tangibles, reliability and a third factor combin-ing responsiveness, assurance, and empathy

best fit for measuring service quality. Gounaris (2005) Empirical 515 senior managers

from service custom-ers

Training and recruiting con-sultancies, corporate banking, software development and

maintenance, freight ship-ping.

SERVQUAL vs. alternative model INDSERV

INDSERV comprising the dimensions poten-tial quality, hard quality, soft quality, and out-come quality outperforms SERVQUAL.

Woo & Ennew

(2005)

Empirical 185 senior govern-

ment engineers and professional archi-tects

Consulting engineering ser-

vices

International/ Indus-

trial Marketing and Purchasing Group (IMP) interaction model (Håkansson, 1982; Ford, 1997)

The quality criteria social exchange and coop-

eration are relatively more important than financial exchange, product/service exchange, information exchange, and adaptation in cus-tomer‟s evaluation of quality for professional services.

Seth, Deshmukh, & Vrat (2006a)

Empirical 117 professionals Transport services Revised SERV-QUAL

Service reliability, credibility, service compe-tence, intra-organisational communication, service flexibility, financial trust and pleasant environment have most significant impact on service quality perception of professional buy-

ers.


108

Table A- 4: Quality Management Practices

Quality management

practice

Description Potential techniques Selected literature

Management support Actions and behaviors of senior management which show commitment to quality

Setting clear quality objec-tives, encouragement of em-ployee involvement into ac-tivities for quality improve-ment

Ahire, Landeros, & Golhar (1995); Dean, Jr. & Bowen (1995); Flynn et al. (1994); Fynes (1999); Hemsworth et al. (2008); Molina-Azorín et al. (2009); Powell (1995); Sánchez-Rodríguez & Martínez-Lorente (2004); Saraph et al. (1989); Zu (2009)

Quality information Adequate, accurate, and time-ly visibility of defect rates, compliance to specifications, adherence to schedules etc.

Histograms, Pareto charts, cause-and-effect diagrams, check sheets, scatter dia-grams, flowcharts, and control charts

Ahire et al. (1995); Dean, Jr. & Bowen (1995); Evans & Lindsay (2002); Flynn et al. (1994); Fynes (1999); Molina-Azorín et al. (2009); Powell (1995); Sánchez-Rodríguez & Martínez-Lorente (2004); Saraph et al. (1989); Zu (2009)

Process management Cross-departmental process analysis and improvement

Process and role definitions, cleanliness and efficient or-ganization of the workplace,

statistical process control

Ahire et al. (1995); Dean, Jr. & Bowen (1995); Flynn et al. (1994); Molina-Azorín et al. (2009); Powell (1995); Saraph et al. (1989); Zu (2009)


Reviews of products and services before production and the design of products or

services with respect to quali-ty

Cross-functional project teams, design reviews, value analysis, and the systematic

identification of customer requirements

Ahire et al. (1995); Flynn et al. (1994); Fynes (1999); Saraph et al. (1989); Zu (2009)

Workforce management Recognition of employee

performance on quality and encouragement team dynam-ics

Quality circles, careful re-

cruitment approaches, team-work, reward systems, and commitment to training

Ahire et al. (1995); Dean, Jr. & Bowen (1995); Flynn et al. (1994); Fynes

(1999); Hemsworth et al. (2008); Molina-Azorín et al. (2009); Powell (1995); Sánchez-Rodríguez & Martínez-Lorente (2004); Saraph et al. (1989); Tawfik Madi (2009); Zu (2009)

Supplier involvement Establishment of long-term

relationships with suppliers and enhancement of suppli-ers‟ capabilities of meeting the purchasing company‟s requirements

Joint product development,

emphasis on quality as a crite-rion in supplier selection and the application of vendor assessment or certification procedures

Ahire et al. (1995); Flynn et al. (1994); Fynes (1999); Hemsworth et al.

(2008); Molina-Azorín et al. (2009); Sánchez-Rodríguez & Martínez-Lorente (2004); Saraph et al. (1989); Zu (2009)

Customer involvement Effective measurement and monitoring of customers‟ needs, expectations and/or satisfaction

Field visits, customer feed-back mechanisms, round-tables with customers regard-ing quality

Ahire et al. (1995); Dean, Jr. & Bowen (1995); Flynn et al. (1994); Fynes (1999); Molina-Azorín et al. (2009); Powell (1995); Zu (2009)


109

B Exploring quality management for business services

from a buyer’s perspective using multiple case study ev-

idence


The second paper was published in the International Journal of Operations and Produc-

tion Management as:

Holschbach, E., & Hofmann, E. 2011. Exploring quality management for business ser-

vices from a buyer‟s perspective using multiple case study evidence. International

Journal of Operations and Production Management, Vol. 31, Iss. 6, pp. 648-685.

Abstract

Purpose: This paper investigates how buying companies manage the quality for their

externally sourced business services. It explores how quality management for business

services influences the performance of the buying company and what the major deter-

minants of quality management are. The paper presents case evidence on which a con-

ceptual model with preliminary propositions is built upon.

Design/methodology/approach: The paper uses case study evidence from eight man-

ufacturing and eight service companies. Drawing on the findings of these case studies,

a conceptual model with propositions is presented.

Findings: The paper suggests that buying companies do not yet use quality manage-

ment for externally sourced business services to its full potential. However, buying

companies using quality management practices for business services report positive

effects on service quality and satisfaction of internal or external customers. The major

determinants affecting the intensity of quality management are the usage of the service

by the buying company, the risk associated with quality failures, the degree of stand-

ardization, and volume of the purchased service.

Research limitations/implications: The research is based on information from 16

companies located in Germany and the conducted study is exploratory in nature. The

collection of statistical data will be subject to future research as suggested in this pa-

per.



Practical implications: The insights obtained from this paper can assist purchasers in

their decision on how to design quality management practices. By understanding what

determines the quality management practices of buying companies, service providers

may better adjust their service offerings to customers‟ requirements.

Originality/value: Quality management for business services in professional pro-

curement has not attracted much academic attention so far, as literature on quality

management mainly adopted the perspective of a goods or service provider. Literature

on purchasing of services concentrated on differences between purchasing of goods

and services and literature on service quality focused on consumer services. This paper

fills this gap conceptually with a multiple case study and offers guidance for further

research.

Keywords: Quality management, Purchasing, Services, Supplier management

B.1 Introduction



2000; Schneider & White, 2004). For example, the share of services of the gross value

added in Germany increased from 48.4% in 1970 to 68.9% in 2007 (Statistisches Bun-

desamt, 2009: 10). Some authors estimate that externally purchased services on a

weighted average account for more than half of a company‟s total spend (Fearon &

Bales, 1995). More recent studies suggest that the ratio of business services to total

purchasing volume lies between 15 and 28% for manufacturing companies (BME,

2005a: 5; Centre for Management Development, 2005). The share of these business-

to-business services may increase in the future due to a continuous trend towards out-

sourcing and concentration on core competencies (Cox, Chicksand, Ireland, & Davies,

2005; Ellram, Tate, & Billington, 2007; Fuller, 1998; Miettinen, Ventovuori, & Hyt-

tinen, 2005; Murray & Kotabe, 1999; van der Valk & Rozemeijer, 2009).

Despite the significance of business services for purchasing, most buying departments

have focused on the optimization of the supply of goods during the last years (Axels-

son & Wynstra, 2002; Ellram et al., 2007; van der Valk, 2008; van der Valk, 2007).

Similarly, the academic literature on purchasing has predominantly concentrated on

the supply of goods (Bals, Hartmann, & Ritter, 2009; Cox et al., 2005; Ellram et al.,

2007; Smeltzer & Ogden, 2002; van der Valk & Rozemeijer, 2009; van der Valk,

2008; Wynstra, Axelsson, & van der Valk, 2006). In particular, quality management of


111

externally purchased business services from the perspective of a buying company has

received little attention so far by academics (Hemsworth, Sánchez-Rodríguez, & Bid-

good, 2008; Hemsworth, Sánchez-Rodríguez, & Bidgood, 2005; Sánchez-Rodríguez &

Martínez-Lorente, 2004). Accordingly, the literature on quality management predomi-

nantly has adopted the viewpoint of a provider of goods or services, and tried to an-

swer the question how sellers can improve the quality of the products or services of-

fered to their consumers (Flynn, Schroeder, & Sakakibara, 1994; Rönnbäck & Witell,

2008). However research on the question, how companies receiving goods or services

manage the quality of them is scarce (Fynes, 1999; Fynes & Voss, 2002; Molina-

Azorín, Tarí, Claver-Cortés, & López-Gamero, 2009; Stanley & Wisner, 2001). The

relative disregard of quality management from a buyer‟s perspective is surprising as it

is estimated that approximately 50% of quality problems result from defects in the ma-

terials purchased (Crosby, 1984; Dowst, 1987). Thus, the quality of a company‟s out-

put is highly dependent on the quality of its input (Forker, Mendez, & Hershauer,

1997).

So far, only little research has examined the quality management practices used by

purchasing departments. Sánchez-Rodríguez & Martínez-Lorente (2004) recently pre-

sented a study in the International Journal of Operations and Production Management

(Sánchez-Rodríguez & Martínez-Lorente, 2004). Later Hemsworth et al. (2005) and

Hemsworth et al. (2008) verified their results using the same data set. However, these

contributions regard manufacturing companies receiving goods as unit of analysis and

are limited to perceptions of purchasers and certain quality management practices only

(Hemsworth et al., 2008; Hemsworth et al., 2005; Sánchez-Rodríguez & Martínez-

Lorente, 2004). They may thus neglect the particular characteristics of services as well

as type of industry and their impact on the adoption of quality management practices

by buying companies. Therefore, the paper at hand wants to expand and extend the

knowledge developed in these previous works.

Due to the comparably high degree of novelty and the exploratory character of the top-

ic, this paper presents multiple case study evidence to answer the following research

questions (RQ):

RQ 1: How do buying companies use quality management practices to manage the

quality of externally sourced business services?

RQ 2: How is the usage of quality management practices for business services by

buying companies related to service quality and firm performance?



and

RQ 3: What are the major determinants of the design of quality management practic-

es for business services by buying companies?

The methodology applied to answer the research questions is congruent with the con-

ceptual research approach developed by Meredith (1993). In such a pre-empirical

stage, the topic is studied exploratively. Therefore, we use the literature on quality

management and purchasing of services as well as evidence from multiple case studies

to formulate a conceptual model (Marshall & Rossman, 2006) which is then trans-

ferred into propositions (Dul & Hak, 2008). This process contributes to the develop-

ment or refinement of theory (Eisenhardt, 1989).

The paper is divided into six sections: After these introductory remarks, the second

section reviews the literature resulting in a preliminary research model as basis of data

collection during the case studies. The third section explains the methodology used

followed by the fourth section presenting the results from case studies. The fifth sec-

tion discusses and introduces the resulting conceptual model which can be used for

further research in this area. Finally, we summarize the results from a managerial and

theoretical perspective and propose future areas of further research in the sixth section.

B.2 Theoretical foundation

The following chapter will shortly investigate the literature on quality management

and purchasing of services. In particular, it presents and discusses their contribution

regarding potential practices for the management of externally sourced business ser-

vices, the performance effects of their usage as well as factors determining their de-

sign. After exploring the academic literature, a preliminary research model will then be

introduced as basis for data collection by multiple case studies.

B.2.1 Quality management practices

The literature on quality management and purchasing of services provide first insights

into how buying companies may manage quality of their externally sourced products.

Literature on quality management: Saraph, Benson, & Schroeder (1989) were one of

the first authors who identified a core set of eight quality management practices. Later,

Flynn et al. (1994) categorized quality management practices into seven dimensions:

quality information, supplier involvement, customer involvement, process manage-


113

ment, workforce management, product (or service) design, and top management sup-

port. According to Fynes (1999), these practices mirror the dimensions used in quality

award schemes such as the Baldrige and the European Foundation for Quality Man-

agement (EFQM) Award and are therefore the ones most commonly examined (see

also Molina-Azorín et al., 2009; Zu, 2009). Thus, they will form the constructs, along

which quality management for business services by buying companies is to be exam-

ined. Their definitions and examples for potential techniques are shortly illustrated in

Table B- 1 in the appendix.

Literature on service purchasing: Some authors stress that certain aspects of the pur-

chasing process for business services are more important than or just different to the

purchase process for goods (Axelsson & Wynstra, 2002). Thus, existing purchasing

practices for goods may not be directly applicable to services (van der Valk & Ro-

zemeijer, 2009; Wittreich, 1966). Most authors agree that such differences between

purchasing of services and goods have their origin in the specific characteristics of

services (Jackson et al., 1995). The intangibility and heterogeneity of business services

exacerbates, for example, their examination by organisational purchasers before or

even after the purchase and thus resulting in a strong reliance on personal information

during these phases (Jackson et al., 1995; van der Valk & Rozemeijer, 2009). The in-

separability of production and consumption of services implies that the buying compa-

ny is both consumer and co-producer and cannot store services (Grönroos, 2007;

Ellram et al., 2007). This makes a clear specification of the service before the purchase

more crucial but also complex and highlights how closely connected the selection of a

service provider is to the post-purchase quality evaluation (Jackson et al., 1995; Lind-

berg & Nordin, 2008). Finally, services are delivered in interactions between human

representatives of the service provider and buying company and thus difficult to pro-

duce with consistent characteristics and quality (Jackson et al., 1995; van der Valk &

Rozemeijer, 2009). This again complicates to standardize, count and value them

(Lindberg & Nordin, 2008) and requires an assessment of the interaction process by

various stakeholders (Axelsson & Wynstra, 2002). Taken together the peculiarities of

services imply that they entail greater performance ambiguity (Bowen & Jones, 1986)

which a quality management for externally sourced business services should take ac-

count of.



B.2.2 Effects of quality management on performance

The literature on quality management and purchasing of services all in part deal with

the question what the effects of quality management on performance may be. In par-

ticular, authors in the area of quality management identified positive effects of quality

management practices on firm performance.

Literature on quality management: Ample amount of research has been conducted on

the relationship between quality management practices and operational, as well as (fi-

nancial) business performance. In these studies operational performance was measured

by constructs such as percentage of defects, cost of quality, product quality, on-time

delivery, productivity results whereas return-on-assets, return-on-equity, return-on-

investment, market share and stock prices were used for measuring financial business

performance (Molina-Azorín et al., 2009; Nair, 2006). Sometimes these studies pro-

vide mixed results (Nair, 2006; Rönnbäck & Witell, 2008). However, most authors

agree that the use of quality management practices has a positive, significant and

strong effect on operational performance (Dow, Samson, & Ford, 1999; Maani, Putt-

erill, & Sluti, 1994; Sluti, Maani, & Putterill, 1995; Sousa & Voss, 2002; White,

1996). The impact of quality management practices on financial business performance

is seen as positive and significant, but in some cases less strong than on operational

performance (Capon, Farley, & Hoenig, 1990; Hendricks & Singhal, 1997; Nilsson,

Johnson, & Gustafsson, 2001; Powell, 1995; Rönnbäck & Witell, 2008).

These findings are also corroborated by authors in the area of service marketing who

conclude that there is a causal relationship between service quality and customer satis-

faction and that service quality is an antecedent of customer satisfaction (Churchill &

Surprenant, 1982; Cronin, Jr. & Taylor, 1992; Cronin, Jr., Brady, & Hult, 2000;

Schneider & White, 2004; Storbacka, Strandvik, & Grönroos, 1994; Woodside, Frey,

& Daly, 1989). Moreover, many authors also posit that customer satisfaction is posi-

tively – although not always perfectly – related to customer‟s repurchase intentions

and thus to a firm‟s sales volume (Cronin, Jr. et al., 2000; Patterson & Spreng, 1997;

Schneider & White, 2004; Shonk, 2006; Ying-Feng, Chi-Ming, & Wei-Jaw, 2009).

These relationships are conceptually reflected in the service profit chain, a theoretical

framework developed by Heskett, Jones, Loveman, Sasser, Jr., & Schlesinger (2008).

The model proposes that „[…] profit and growth are stimulated primarily by customer

loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influ-

enced by the value of services provided to customers. Value is created by satisfied,

loyal, and productive employees. Employee satisfaction, in turn, results primarily from


115

high-quality support services and policies that enable employees to deliver results to

customers‟ (Heskett et al., 2008: 120). Consequently, higher service quality may result

in higher satisfaction of internal or external customers and finally in higher sales reve-

nues.

Literature on service purchasing: Many authors assume a positive relationship be-

tween higher levels of purchasing involvement in the procurement process for services

and performance of the buying company. For example, higher involvement of a firm‟s

purchasing department can add value by ensuring that funds are spent properly (i.e. in

accordance with corporate and functional goals), by saving time (either by reducing

the time invested by the client department during the purchasing process or time which

is lost when the service purchase fails) and money (i.e. reducing acquisition costs), but

also by improving the quality of the good or service purchased (see, for example, Bals

& Hartmann, 2007; González-Benito, 2007; Lonsdale & Watson, 2005; Schiele &

McCue, 2006; Young & Varble, 1997; West, 1997). Furthermore, purchasing can con-

tribute to a company‟s level of innovativeness (Krause, Pagell, & Curkovic, 2001) and

access to supplier markets (Walter, Ritter, & Gemünden, 2001). In addition, Mitchell

(1994) pointed out that it could have most hazardous effects on a company if certain

services, such as management consultancy services, are not bought professionally

(Mitchell, 1994). It may thus be concluded, that quality management for externally

sourced business services will mainly be driven by purchasing departments.

B.2.3 Determinants of quality management

Literature on quality management and service purchasing provide initial insights in the

question what may determine the design of quality management for business services.

Literature on quality management: Some studies compared quality management prac-

tices in different industries. Most authors reason that service companies have lower

levels of quality management implementation than manufacturing companies (see, for

example, Benson, Saraph, & Schroeder, 1991; Powell, 1995; Quazi, Jemangin, Kit, &

Kian, 1998; Singh, Feng, & Smith, 2006; Woon, 2000). Rönnbäck & Witell (2008)

argued that the differences between service and manufacturing companies in their us-

age of quality management decrease. However, they stress that single practices, such

as process orientation and employee management, are more important in service than

manufacturing industries. These findings underline the impact the type of industry may

have on the design of quality management for business services.



Literature on service purchasing: The literature on service purchasing does not explic-

itly deal with the design of quality management. However, several authors identified

perceived differences between the purchasing of goods and services. These differences

may be an indication of the peculiar requirements for quality management for business

services. For example, several authors posit that risk is perceived higher in purchasing

of services than of goods as poorly supplied services can cause greater problems than

low-quality goods as they can remain undetected longer (Jackson et al., 1995; West,

1997; Mitchell, 1994). Smeltzer & Ogden (2002) found out that the process activity

which is seen as most complex in purchasing of services is the definition of service

specifications (Smeltzer & Ogden, 2002: 60). Similar results are reported by Ellram et

al. (2007) pointing out that service quality and performance are not as easy to measure

and specify objectively as product quality. Additionally, more recent research on pur-

chasing of services suggests that usage of a business service by a buying company may

affect the buyer-seller interaction (Wynstra et al., 2006; van der Valk, Wynstra, & Ax-

elsson, 2009). Interactions are more intense for services which are bought by the buy-

ing company and then directly transferred to the end customer than for services which

are consumed internally within the buying company Wynstra et al., 2006. On basis of

these findings, van der Valk et al. (2009) propose a classification of business services

consisting of four different types of services:

Consumption services are completely used within the buying organization and

not part of the final offer to the end customer.


order to produce their own product or service.

Semi-manufactured services are offered to the end customer but only after being

changed by the buying company.

Component services become a rather unaltered part of the offer to the end cus-

tomer.

In sum, the literature on purchasing of services suggests that perceived risk, degree of

specification and usage of the service by the buying company may influence the pur-

chasing process and thus the quality management for business services.


117

B.2.4 Initial research model

The short review of relevant literature on quality management and purchasing of ser-

vices provides us with an initial research model as a basis for further investigation of

the research questions through case studies. Both fields of literature suggest that the

design of quality management may be determined by factors such as type of industry,

perceived risk, degree of specification, the usage of the service by the buying company

etc. These determinants affect the adoption of the seven quality management practices

defined by authors in the area of quality management. The design and adoption of the-

se quality management practices for externally sourced business services by buying

companies may, however, have positive effects (for example, the enhancement of ser-

vice quality, raise of satisfaction, reduction of cost, increase of sales revenues) on the

buying company‟s firm performance. The initial model is depicted in Figure B- 1.

Figure B- 1: Initial research model

B.3 Case study methodology

It was shown in the literature review that the phenomenon of quality management for

externally sourced business services from a buying company‟s perspective is relatively

under-researched. We aim at a profound understanding of the status quo of quality

management for business services and the development of a research model which can

be used for future testing purposes. Miles & Huberman (1994) argues that qualitative

research is particularly appropriate in the early stages of theory building when compa-

rably little is known about the phenomenon under study. More particularly, Siggelkow

(2007) stresses that case studies are valuable in making conceptual contributions.

Therefore, this research adopted an exploratory, multiple, embedded (Yin, 2003) and

comparative (Dul & Hak, 2008; Silverman, 2002) case study design. It is an explorato-

ry case in that this stage of the research process is less concerned with testing existing

Determinants of quality management practices

- Type of industry- Usage of business service- Perceived risk- Degree of specification- Purchasing volume

Design of quality management practices for business services by buying companies

- Quality information- Supplier involvement- Customer involvement - Process management- workforce management- Service design- Top management support

Potential effects of quality management

- Enhancement of servicequality

- Raise of satisfaction- Reduction of cost- Increase of sales revenues



theory rather than investigate little-understood phenomena (Marshall & Rossman,

2006) and developing hypotheses for further research (Hancock & Algozzine, 2006;

Reason, 2006). It is a multiple design as it takes several buying companies as its basic

unit of analysis. At the same time, however, attention is given to informants from sev-

eral departments within the buying companies so that it can be labeled and embedded

design (Yin, 2003). As scores of multiple cases are obtained and matched, it can be

regarded as comparative (Dul & Hak, 2008).

Case selection

Due to the embedded design of case studies in this piece of research, two levels of case

sampling have to be distinguished: (a) the level of the buying companies, and (b) the

level of individual informants within the buying company.

The selection of buying companies is mainly driven by considerations in terms of

„confirming and disconfirming cases‟ (Miles & Huberman, 1994: 28) which seeks ex-

ceptions and looks for variations (Marshall & Rossman, 2006). As elucidated before

differences in the adoption of quality management practices may exist between service

and manufacturing companies which may be particularly valuable for answering the

research questions. The buying companies were therefore selected according to the

type of industry (services as well as manufacturing companies). The diversification of

business type enabled the researchers to discover potential differences in implementa-

tion issues in manufacturing or service companies regarding their quality management

for services. The research was undertaken in spring and summer 2010 in Germany us-

ing eight manufacturing and eight service companies.

The selection of individual informants within the chosen buying companies follows

the approach of seeking „intensity‟ (Miles & Huberman, 1994: 28) which looks for

intense but not necessarily extreme manifestations of the phenomenon under study

(Marshall & Rossman, 2006). As the design of quality management involves many

stakeholders within a buying company (Pfeifer, 2001), it is advisable to include more

than one business function into the target group of the proposed study (Sánchez-

Rodríguez & Martínez-Lorente, 2004). Hence, this research strives to gain insights

from representatives from purchasing, quality management and the departments actu-

ally using the purchased service as these were shown to be key informants regarding

quality management practices in their companies (see, for example, Hemsworth et al.,

2008; Seth, Deshmukh, & Vrat, 2006; van der Valk et al., 2009; Zu, 2009). Individuals

from the latter two groups of informants were identified during an introductory meet-


119

ing with a purchasing informant using a „snowball or chain‟ type of sampling (Mar-

shall & Rossman, 2006: 28).

During the meeting, the purchasing informant was asked to select the services for

which the most comprehensive quality management existed from a list of eleven busi-

ness services. Business or B2B services in this context are understood as services

which are delivered by firms or organizations and bought by other firms or organiza-

tions (Axelsson & Wynstra, 2002; van der Valk & Rozemeijer, 2009). The selection of

business services (see Table B- 2 in the appendix) was developed on basis of two

benchmarking studies on indirect spend management (CAPS Research, 2003; BME,

2005b) and a service classification proposed by Axelsson & Wynstra (2002) in order

to cover as many business services which might be part of a company‟s spend as pos-

sible. Table B- 3 in the appendix presents a summary of the selected companies and

their key characteristics. Table B- 4 in the appendix shows the business services cho-

sen in each company and the function of the interviewees. Each company was labeled

using a reference code to retain anonymity.

Data collection

The key data collection method employed was „semi-structured‟ (Rubin & Rubin,

1995: 5) or „standardized open-ended‟ (Patton, 2002: 342) interviews. This allowed

respondents to express their comments and perceptions freely and thus in-depth data

and a „thick description‟ (Geertz, 1973: 16) of the phenomenon under study could be

obtained. The interview protocol consisted of five main sections: The first section

aimed at obtaining general company and demographic data and selecting the business

services, its purchasing volume etc. The second section contained questions regarding

the actual design of quality management practices at the specific company for the par-

ticular service. The third section comprised questions focusing on the effects of quality

management practices for business services. The final section comprised questions

about the determinants of the design of quality management for business services. A

shortened version of the interview protocol can be seen in the appendix.

In addition, this study used several other components of data collection to triangulate

the interview information and avoid distortions from interviews being used in isolation

(Rubin & Rubin, 1995). First, company archival data were reviewed wherever possi-

ble. Documents included internal (for example, quality management manuals, and

quality management policies, minutes) and official (for example, websites and presen-



tations regarding quality management of the buying company) ones. Second, respond-

ents were requested to review the interview transcripts for accuracy and content. Thus,

„member checking‟ (Stake, 1995: 115) was adopted for factual verification of inter-

view data. In both cases, interviewees were consulted for clarification via telephone or

e-mail where factual inconsistencies occurred.

In total, 32 interviews with 29 respondents from purchasing, quality management or

the internal department requesting and using the selected business service were con-

ducted by one researcher. In seven companies we spoke to more than one informant. In

several instances the same respondent was interviewed regarding different services

separately. The interviews were carried out on a face-to-face basis and tape-recorded

wherever the respondent agreed to it.

Data analysis

Interview information were transcribed and analyzed in a three step process of data

reduction, data display and conclusion drawing suggested by Miles & Huberman

(1994).

Data reduction started with the decision which research questions and which initial

research framework, which cases and which data collection methods to adopt. After

interviews were conducted, the transcripts as the main source of evidence were read

several times to increase familiarity with the topic. After the interviews, the different

documents and audio-visual material mentioned before was scanned. To keep track of

the different sources of evidence, a data matrix was created (Miles & Huberman,

1994).

The next step of data reduction comprised the coding of the transcribed interviews and

the other data sources. The coding „start list‟ (Miles & Huberman, 1994: 60) encom-

passes the concepts derived from the initial research model presented in Section B.2.

This represents an a priori coding frame following the view that „[…] coding must

start with a frame that is well grounded in a theory or conceptual scheme‟ (Araujo,

1995: 97). The coding process was repeated two times to reduce or refine the given

information regarding the categories considered. The next stage was characterized by

the attempt to display the coded data in order to allow conclusions to be drawn. The

coded data was transferred into a large „thematic conceptual matrix‟ (Miles & Huber-

man, 1994: 131) with help of available software. This matrix contrasts the various cas-

es by dissecting the various interviews by themes and their categories so that all inter-


121

view statements on a specific theme or category accumulate under a single label. It

thus allows an efficient comparison of the cases.

In the final step of data analysis, patterns of the utilization and perceptions on the us-

age of quality management practices were detected which allowed the refinement of

the conceptual model and the development of propositions.

B.4 Key findings from the empirical study

In the following chapter the key findings from the empirical study are summarized by

taking each research question and presenting the empirical evidence (see also

Table B- 6 in the appendix).

B.4.1 Design of quality management practices for business services

The results of the case studies regarding the first research question are organized along

the seven quality management practices identified in Section B.2, i.e. quality infor-

mation, supplier and customer involvement, process and workforce management, ser-

vice design as well as management support.

Quality information: Many authors in the area of quality management underline the

need for quality data which is available to all major stakeholders and their regular re-

porting as one key component of quality management for goods manufacturers (see,

for example, Fynes, 1999; Sila & Ebrahimpour, 2003). However, most of the inter-

viewees regarded the extraction and analysis of quality information for externally

sourced business services as more difficult than for goods. The major reason was the

difficulties in specifying the demanded service. The statement of the head of purchas-

ing of S6 is indicative of others:

“Of course, we try to define the demanded service in words clearly written down, sure,

but that is never enough. You cannot define a service as precisely as a product. It is

far more difficult.”

Due to the relative lack of specification, the most prevalent quality information used

for business services was occasional complaints by internal or external service users in

case of quality failures. The relative reliance on such irregular snap-shot information

was considered unfortunate as it was perceived as highly subjective and not necessari-



ly representative of a provider‟s overall performance. As the head of purchasing of M1

depicted:

“Unfortunately, an individual opinion [about the quality of a business service] is ra-

ther situational and sometimes opportunistic. If someone, for example, has just re-

ceived his company car and got a bunch of flowers with it, he will be completely en-

thusiastic. His judgement about the overall service may than be too positive. Or the

company car was delivered long time ago, and he cannot remember, and his judgment

may then be too negative. On basis of such judgements it is difficult for a purchaser to

separate the good service providers from the bad ones.”

Previously defined Key Performance Indicators (KPIs) for externally sourced business

services were therefore not used for all services. Only companies M1 for professional

services, M3 for fleet management, M5 and S3 for facility services, M8 and S7 for

technical maintenance and repairs, S1 for human resource services, and S7 also for

transportation and distribution services implemented a system of KPIs to better man-

age service quality. In cases where no clear KPIs for the service were defined, most

respondents justified it with the difficulties in specifying the service demand precisely.

In the case of M8, S1, and S7 the services were purchased by the focal firm but deliv-

ered to their end customers. It was the end customer who purported these KPIs in their

tender offers. The buying company then adopted these KPIs for their service providers.

In the case of companies M1, M3, M5, and S3 the services were consumed internally

within the buying company. Interestingly, in all cases the service provider was respon-

sible for collecting the KPI data and implemented the systems for data collection and

reporting at the buying company.

The recipients of the KPI results at the buying company included the responsible pur-

chasers and in case of companies M1, M5, M8, S3, and S7 the operating department

which also requested the business service. Purchasers actively used this information

for their negotiations with the service provider. However, only in case of the internally

consumed business services at companies M1 for professional services, M3, and S3

the KPI results were transparently tied to the payment of the supplier. Several heads of

purchasing argued that setting up a direct relation between KPIs and payment might be

too complex and might be detrimental to the relationship to the supplier. As the head

of purchasing of S7 stated:


123

“I once tried to tie the results of these KPIs to payment. It would entail a slew of effort

so that it doesn‟t make sense. […] If you set up something like this, the supplier usual-

ly starts haggling. If you have a long-time partnership, this only causes bad blood.”

In no case, the available quality information was regularly depicted graphically and

displayed at the point of consumption as it is suggested for goods (Flynn et al., 1994;

Saraph et al., 1989).

Supplier involvement: The literature on quality management suggests that reliance on

reasonably few suppliers, long-term supplier relationships, vendor assessments and

certifications support the improvement of the quality of goods (Saraph et al., 1989;

Flynn et al., 1994). Interview data revealed that buying companies strive for long-term

relationships with service providers, and that evaluations of service providers are a

common tool of quality management. However, in most cases supplier evaluation does

not result in systematic measures to improve service quality. Furthermore, audits are

only in a few cases used by buying companies.

The clear majority of heads of purchasing and purchasers underlined that they not only

pursuit long-term relationships with their suppliers of goods but also with service pro-

viders. Long-term relationships with service providers were regarded as an important

way of improving service quality as they were associated with higher degrees of trust

on both sides, better understanding of requirements and lower transaction costs. A

change of a service provider, by contrast, created relatively high costs. The head of

purchasing of company M2 made a statement representative of others:

“I think the most important reason why we try to maintain long-term relationships

with our service suppliers is trust. The nearly blind trust that develops if you know

each other for years. […] Sometimes my colleagues say: They [the service provider]

exactly know what makes us tick. And you should not forget that each new supplier

means more work. That is often what the colleagues try to avoid.”

All heads of purchasing followed the objective to further reduce the number of service

providers managed by purchasing. This was seen as a necessary prerequisite for more

strategic and long-term relationships. However, only the head of purchasing at compa-

ny M5 regarded this target already being reached for computer implementation and

maintenance services. One cause for the non-achievement of service provider reduc-

tion targets was the lack of reliable information to distinguish suppliers performing

high on quality from those performing low.



The companies M1, M4, M6, M7, S1, S2, S4, and S5 have implemented a system to

evaluate their service providers to mitigate this challenge. Companies M1, M4, M6,

M7, S2 and S4 adopted supplier evaluation for all kinds of their service providers.

Thus, these organizations evaluated providers of all services according to the same

criteria. Company S1, however, only used the supplier evaluation for human resource

services and S5 only for fleet management services. These companies had adjusted the

evaluation criteria to these particular services. Only company M6 used supplier eval-

uation for all kinds of its service providers but at the same time had adjusted the evalu-

ation sub-criteria to the service. It has to be noted that the purchasers of company M1

and the head of purchasing of company S2 strongly suggested adjusting their supplier

evaluation towards a system which better considers peculiar characteristics of the par-

ticular service, for example, by adjusting sub-criteria of the evaluation for each busi-

ness service. This was also recommended by the quality manager at company M1 who

stated:

“You do not have to use the same criteria for each and every service. This is anyway

difficult because services are so different. […] In production material, we have 18 dif-

ferent commodity groups and therefore, we also have a lot of different standards for

quality, for suppliers, there, too. I don‟t see any problem for services there.”

Companies M4, M6, M7, S2, and S4 coupled the results of the service provider eval-

uation with standardized actions. For example, in company M7, the supplier had to

give a written statement, define counter measures with deadlines, discuss the results

with senior management in personal meetings, and face a new audit if the evaluation

results undercut a certain level. Only at company M4, however, the outcomes of the

provider assessment were directly linked to the suppliers‟ payment. In this case, the

supplier had to grant an additional discount if the evaluation results dropped below a

pre-defined level.

Audits were only used during the selection process of any service provider by compa-

nies M6, M7, S2, and S4. However, according to all respondents from these compa-

nies, the maturity of these audits did not yet reach the level of audits for suppliers of

goods. Rather, audits for service providers were regarded as unstructured visits of ser-

vice suppliers‟ sites. The head of purchasing of M7 felt a strong pressure to conduct

such provider assessments and audits in order to obtain quality certifications for the

buying company (for example, International Food Standard, SA 8000).


125

Customer involvement: Most authors in quality management agree that customer in-

volvement entailing, for instance, close cooperation with customers, receiving regular

feedback from them, measuring their satisfaction, and field visits are integral parts of a

system managing the quality of goods delivered by the buying company (see, for ex-

ample, Flynn et al., 1994; Zu, 2009). The case data showed, however, that purchasing

is usually not in contact with the actual internal or external service user. Only in very

few cases, purchasing managers receive feedback from service end-users regarding

their satisfaction.

The interviews revealed that all heads of purchasing regarded the internal operating

department requesting the business services as their main customer. This view resulted

in regular interactions between purchasing and the operating department. By contrast,

contacts between purchasing and the internal users of the business services had an ir-

regular and more occasional character if at all existing. In case of M5 for computer

implementation and maintenance services the lack of direct contact between purchas-

ing and internal service users was deliberately chosen as the head of purchasing stated:

“In this area I really don‟t want to have contacts to our internal users. I also resist

accepting advice from them. It would otherwise be information overkill. Because in

that area everyone is a know-it-all.”

An exception to this was found at company S4 where the final internal service users

were part of regular meetings between purchasing and the operating department.

Although in case of M1 (transportation and distribution services), M2 (marketing ser-

vices), M8 (technical maintenance and repairs), S1 (human resource services), S2

(marketing services), and S7 (transportation and distribution services, technical

maintenance and repairs) externally sourced business services were transferred to the

end customer of the buying company, the purchasing department in none of these cas-

es had regular contact with them. Only in S5 (fleet management services) where the

operating department was also responsible for the purchasing of the service, regular

phone contacts between the operating department and end customers were established.

In addition, purchasing in no case undertook regular field visits at end customers‟ sites

in order to obtain an insight into their requirements regarding the business service.

In companies M1, M6, M7, S1, S2, and S4, which all implemented a supplier evalua-

tion, the responsible purchaser also invited the operating departments demanding the

business services to participate in the provider assessment. In M4, by contrast, the

supplier was only evaluated by the responsible purchaser and in S5 the specialist de-



partment is the only department involved in the evaluation for fleet management ser-

vices.

In addition to supplier evaluations, the operating departments or internal users of the

business service were in no company surveyed regarding their satisfaction with the

business service in a structured manner. The only exception was found at S3 for an

internally consumed service (facility services) where a satisfaction survey was yearly

carried out by the service provider as part of its service offering.

Such satisfaction surveys were more common in cases where externally sourced busi-

ness services were transferred to the end customer of the buying company. For the ser-

vices discussed at M8, S1, and S7 as well as for fleet management services at S5, regu-

lar satisfaction surveys of external service users were conducted.

Process management: Authors in the area of quality management subsume factors

such as „quality inspection‟, „process control‟, „process and role definitions‟ and „sta-

tistical process control‟ (see, for example, Molina-Azorín et al., 2009; Saraph et al.,

1989; ) under process management. The interview data indicate that services are in

most companies checked in terms of their general provision but not regarding quality.

Process definitions and the control of process by use of statistical techniques are not

common tools for quality management for externally sourced business services.

The predominant method of inspection of the quality of the business service was to

obtain service receipt notes after the business service had been delivered. Service re-

ceipt notes were used by M1, M4, M5, M6, M7, S1, S2, and S4 for services which are

consumed internally. In these cases the operating departments requesting the service

issued the service receipt notes in an electronic purchasing system or – in case of M4 –

by paper. M1 also used service receipt notes for transportation and distribution ser-

vices delivered to their end customers. In this case, the end customer had to

acknowledge the receipt of the delivered product on a paper note. In all cases, the ser-

vice receipt notes were used to confirm or disconfirm the service delivery in general.

For example, at M4, M6 and M7 the operating department requesting internally con-

sumed technical maintenance and repair services had to approve that the working

hours specified by the purchase order had actually been accomplished. The payment of

the service provider in these cases was reduced if the requested working hours had not

or only partially been executed. A link between payment and the evaluation of other

quality criteria did not exist on the level of single services in any of the companies us-

ing service receipt notes.


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Only company S1 combined issuing the service receipt note with a small satisfaction

survey of the requesting department on the level of the single service which was then

transferred to the end customer. Only in this case, the average results of the service

receipt notes were an integral part of the supplier evaluation system and provided a

regular data basis for it. It has to be noted, however, that several companies planned to

combine a short satisfaction survey regarding service quality with the confirmation of

the service receipt notes. These companies wanted to use more regular and real-time

data on the level of single services to obtain a more accurate judgement of the satisfac-

tion with the service quality. As the head of purchasing at company M2 explained:

“We think it would be a good idea to introduce a short satisfaction survey that will be

completed with every service receipt note. Because – if you only ask for a supplier as-

sessment at the beginning of the year the judgment of the operating department is

mostly influenced by experiences of the last couple of days or weeks. These impres-

sions might be wrong as they cannot be representative for the whole year.”

In no case sampling techniques were used to select the single services for which a ser-

vice receipt note had to be approved. Rather, these companies decided to demand a

service receipt note for each service delivered.

Process manuals as an instrument of quality management for business services were

only mentioned to exist at company S7. They were developed by the service provider

for both services discussed. However, the head of purchasing considered them not de-

tailed and explicit enough as he

„[…] cannot ask another service supplier to make an offer on basis of the process doc-

umentation. This is practically still not possible without the current provider. It would

need far more information from him.‟

Workforce management: In the literature, factors such as „training‟, „employee in-

volvement‟, „recognition and reward‟, and „quality circles‟ are – among others – re-

garded as important components of a successful quality management (see, for exam-

ple, Sánchez-Rodríguez & Martínez-Lorente, 2004; Powell, 1995; Zu, 2009). The case

study results suggest that training regarding quality management of services is not

used by buying companies and employees are not measured according to service quali-

ty results. Quality circles are only used at companies where these were implemented

during improvement programs for production processes.

With the exception of S5, all companies which had implemented a system for the

evaluation of their service providers (i.e. companies M1, M4, M6, M7, S1, S2, and S4)



provided special trainings about it to employees involved in supplier assessment. In

most of these companies, the employee who was supposed to participate in provider

assessment received a manual explaining its major functionalities by the purchasing

department. Only in S4, in-person trainings were held by purchasers regarding the

supplier evaluation. In none of the companies, however, trainings focussing on other

related aspects of quality management for services (for example, regarding potential

instruments for management of service quality, trainings on statistical methods etc.)

were organized.

No company set targets for its quality managers, purchasers, or members of operating

departments regarding the development of quality of externally sourced business ser-

vices. The difficulties in measuring service quality were mentioned as one of the rea-

sons for this relative lack of target setting by heads of purchasing at several companies

and the quality managers at companies M1 and M3. As the head of purchasing of

company M8 stated:

“For production material, we definitely have such targets for purchasers and quality

managers. In the area of non-production material and services we are not as far yet.

We just can‟t measure it precisely right now. As purchasing, we are now happy that

we are involved in these things at all.”

Solely in M7, S2, S4 purchasers were among other targets measured according to the

number of completed service provider evaluations. In S5 employees of the operating

department requesting fleet management services was measured according the number

of suppliers they assessed.

Only companies M4 and M6 used officially dedicated quality circles, i.e. voluntary

and regular workgroup meetings to discuss, analyze and solve quality problems com-

mon to the group (Drago, 1988) for their technical maintenance and repair services.

These services were used for upholding their production facilities. In both cases, the

quality circles were set up as part of an existing continuous improvement programme

in production.

S7 was the only company where the head of purchasing undertook an attempt to better

involve the service personnel of the provider and connect them with the purchasers of

his department. He considered it essential to motivate them to deliver excellent service

quality. The requested budget for the team event was not granted as the advantage of

such an activity for increasing the satisfaction of service personnel was not seen by top

management.


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Service design: We investigated how buying companies design their externally

sourced services with regard to „cross-functional project teams‟, „joint product devel-

opment‟ and „design reviews‟ (see, for example, Ahire, Landeros, & Golhar, 1995;

Fynes & Voss, 2002). The information given by interviewees displayed that services

are in most companies purchased by cross-functional teams consisting of purchasers

and representatives from the requesting department but no internal or external service

users. Service vendors are considered having a broader knowledge about service de-

velopment than internal resources. Their impact during service design is, however,

limited.

Nearly all interviewees from all functions stressed the importance of a thorough ser-

vice design during tendering as it was seen as crucial for the service quality later de-

livered. One statement of the head of purchasing of M5 is indicative of others:

“You would quickly notice if someone did a sloppy job during tendering and supplier

selection and who did it. […] You‟ll see that you should have asked this or that ques-

tion more or that the definition of services wasn‟t clear enough.”

Almost all respondents emphasized the need for working cross-functionally during the

service design phase. This was particularly true in cases, where the tendering process

was led by purchasing. In these cases, cross-functional teams consisted of purchasing

and the operational department requesting the business service. Additional depart-

ments, for example, the legal or finance department, were consulted for particular

technical questions. An exception was M3, S1, and S7 for transportation and distribu-

tion services where purchasing alone was responsible for tendering and no cross-

functional team was set up for it. By contrast, purchasing was not involved in the de-

sign of services where the operating department not only requested the service but also

purchased it. This was the case in company S5 for fleet management.

Although several heads of purchasing (M1, M2, S2, S5, and S7) considered the service

provider as more proficient in service design than the buying company, the supplier‟s

influence on service specifications varied according to the degree of service definition

reached by the buying company. In cases where the buying company was in the posi-

tion to base their tendering documents on reportedly well-defined services (for exam-

ple, at M1 for human resource and transportation and distribution services, M3, M4,

M5, M6, M7, M8, S1, and S3) suggestions by the service provider on service specifi-

cations were not particularly credited during the tendering process. Rather, they were



viewed with skepticism. For example, the head of the operating department requesting

facility services at company M5 stated:

“The definition of the service has to come from us although it is not our core business

[…], but that of the service provider. But we only appreciate if he makes suggestions

that are not only advantageous to him. Otherwise, such suggestions are giving him a

big, big minus.”

This attitude was particularly prominent for technical maintenance and repair services

which were considered purported by technical standards or legislation.

However, in cases where the purchasing or requesting departments stated not being

able to revert to clearly pre-defined service specifications (for example, at M2, S2 and

S6 for marketing services, S4, and S7 for transportation and distribution services), the

service provider was asked to actively provide suggestions for service definitions and

specifications. For example, the head of purchasing at M2 stated:

“In this case, the marketing department provided the information on corporate identi-

ty, official colours and things like that. But the provider was pretty free to specify how

he wanted to offer the service. We didn‟t have enough details and didn‟t want to limit

his creativity.”

The head of purchasing at S7 similarly stated for transportation and distribution ser-

vices:

“In that area we didn‟t have pre-defined service specifications. So, we asked the pro-

vider: What is the best you can give us?”

None of the companies had introduced a structured design review process for the ser-

vices discussed. Rather, companies M1 and S5 for professional services, M5, M7, and

S3 concluded contracts with the service provider which allowed terminating the con-

tract after a short testing phase of three to six months.

Management support: We examined the quality management practice management

support along the lines of „top management involvement‟ and „setting clear quality

objectives‟. These factors are mentioned by several authors as important for effective

quality management (Ahire et al., 1995; Dean, Jr. & Bowen, 1995). The interviewees

disclosed that top management‟s participation in the management of quality of busi-

ness services is rather limited. In some cases top management set targets on the num-

ber of supplier evaluations but not regarding the development of service quality.


131

Only at M5, top management above the head of purchasing regularly discussed the

quality of externally sourced technical maintenance and repair services which were

directly transferred to M5‟s end customer. In this case, top management received regu-

lar reports on specific aspects of service quality such as in-time delivery and the end

customer contacted top management in case of quality failures. The head of purchas-

ing elucidated:

“If this service is not working well, even top management will get a chewing out by the

customer. I mean it depends on the size of the customer but usually there is highest

management attention on quality. They regularly discuss it. That is a big difference to

services which are consumed internally by us.”

At some companies (M1, M6, M7, and S4) where a system of provider assessment was

established, top management was regularly informed about the results on an aggregat-

ed level. However, a reaction of top management to the results was sparse. The state-

ment of the head of purchasing at S4 was indicative of others:

“Top management gets a yearly report on the evaluation of our top 10 service provid-

ers. But they usually don‟t ask back.”

Some respondents stressed that top management occasionally cares about the quality

of externally sourced business services. This was the case when there were changes to

the service or “[…] there is something to complain about” (head of operating depart-

ment, S3). This was frequently seen as an additional risk which had to be addressed by

particularly intensive, personal quality inspections. As the head of operating depart-

ment at M5 explained:

“When we talk about facility services there is a special risk if you change the service.

For example, we tried to involve top management when we changed the supplier. […]

The same is true for representative areas inside or outside. Top management is strong-

ly interested in these areas. […] And, of course, we strive to adjust to these attitudes

and control quality in such areas even more intensively.”

At companies M7, S2, S4, and S5 for fleet management services, top management set

objectives for heads of purchasing regarding the number of service providers to be

evaluated. Other targets defined by top management regarding the quality of externally

sourced business services were not reported.

The major findings regarding the design of quality management practices for business

services on a company level are summarized in Table B- 6.



B.4.2 Relationship between quality management, service quality and firm per-

formance

Regarding the second research question, interview data revealed that interviewees

from all functional backgrounds perceived positive effects of quality management for

externally sourced business services.

The strongest and most positive relationship was experienced between the usage of

quality management practices and service quality by nearly all interviewees. This rela-

tionship appeared to be most evident at companies M1, M4, M6, M7, S1, S2, S4, and

S5 which had also implemented a system of provider evaluation. Furthermore, some of

the companies which utilized pre-defined KPIs for the management of quality (for ex-

ample, M1 for professional services, M8, S3, and S7) reported on particularly strong

improvements of service quality after their implementation.

Quality management was concealed as affecting service quality by regularly confront-

ing the service provider with its quality issues and causing the supplier to improve its

quality continuously. Numerous examples were given for this connection between

quality management and service quality. The following statement by the head of pur-

chasing at M1 is indicative of other comments:

“I discussed many assessment results with service providers […] and they almost al-

ways take it very serious. They discuss it internally in their teams. […] And usually –

after one or two months – they come back to us with their CEO and present their activ-

ity lists and what they have already done. And I can remember a lot of cases where

they definitely improved the quality of their services. […] For example, by giving bet-

ter advice, bringing more or other employees to us, more transparent price structures,

or even establishing a small subsidiary near our plant to be in closer contact with us.”

Companies M1, M6, M7, S1, S2, and S5 for fleet management also regarded supplier

evaluation as an instrument to identify low-performing service providers. These pro-

viders were then phased out over time which led to a higher overall level of quality for

that specific service. Thus, they represent examples of the second way of quality man-

agement influencing service quality. As the head of purchasing of M6 stated:

“The supplier evaluation showed us how bad some service providers really are. It

gave us a more objective basis to switch them. […] And most of the new suppliers def-

initely provide a far better quality.”


133

The increased service quality resulted in increased satisfaction of internal or external

customers. In case of business services internally consumed by the buying company, a

rise of satisfaction of internal service customers was perceived after measures of quali-

ty management were established. The increase of satisfaction was mainly noticed as a

decrease of complaints or active accolade related to service quality by heads of pur-

chasing, purchasers and heads of operating departments (for example, at M1 for pro-

fessional and human resource services, M5, M6, M7, S3, S4). However, in most of

these cases this change of satisfaction of internal customers was not measured and was

thus based on the individual perceptions of interviewees. An exception was S3, where

the satisfaction of internal customers was measured yearly and had considerably im-

proved over the last four years since quality management practices were adopted for

facility services.

A similar picture was drawn for externally sourced business services which were trans-

ferred to the end customer. Again, heads of purchasing at M1 (for transportation and

distribution services), M8, S1, and S7 provided anecdotal records for a positive rela-

tionship between service quality and end customer satisfaction. The statement of the

head of purchasing at M1 is exemplary for others:

“We were rather surprised that the optimized quality of these services [transportation

and distribution services] had such an effect on public image. There were customers

who called us and said: „Wow, your company has an optimized logistics service.

That‟s good for me as a customer.‟ […] And our CEO gave us the feedback that she

herself didn‟t expect that this would have such an impact.”

At M8, S1, S7, and S5 such perceptions could also be supported by results of customer

surveys. The positive effects of the quality of the particular service on end customer

satisfaction were recorded at M8 and S5 where the surveys were specifically imple-

mented to measure the satisfaction of end customers with the specific service.

The effects of using quality management for services on cost reduction were mostly

considered as weaker but still existing. In cases where interviewees reported on cost

reductions, they were mostly achieved by improved provider selection based on in-

creased transparency due to more comprehensive quality information.

Heads of purchasing and purchasers at M1, M7, S1, and S2 used quality data to sort

out low-performing providers and switch to suppliers which offered a higher-quality

service at lower prices. The improved conditions of contracts led to a reduction of cost.

As the head of purchasing at M7 pointed out:



“Our new quality management gave us more information about a provider‟s quality. It

gave us a more objective basis for switching bad suppliers. With the new supplier the

quality is much better. […] And costs could be changed positively by switching the

supplier, too.”

At M1, M7, S1, and S2 the heads of purchasing also referred to examples, where cost

reductions could be achieved by using improved quality information and service de-

sign without switching suppliers or by avoiding additional costs. In such cases, the

information was used to pinpoint quality deficiencies which made the provider, for

example, deploy more of its staff on a project at the same costs. Furthermore, during

an intensified service definition during tendering, parts of services which were not re-

quired by the buying company could be identified and deleted from the contract.

Interestingly, in no case a direct relationship between quality management or increased

service quality and sales revenues could be detected. As could be expected this was

particularly true for services which were consumed by the buying company as these

were not transferred to the end customers. The head of purchasing at M5 significantly

expressed:

“I clearly see that our employees are more satisfied with computer maintenance now.

But if I would say, we sold one product more because of the high quality of that ser-

vice that would be too far-fetched.”

At companies, where also services which were transferred to the end customer were

discussed, the connection between quality management or increased service quality

and sales was considered hypothetically existing but not verifiable. As the head of op-

erating department at S5 stated:

“We saw a significant increase of the sales number of our service during the last years

and we think that the increased service quality had a positive effect on the satisfaction

of our customers with the product. But whether it also had an effect on sales numbers?

Well, I don‟t know. I can definitely say that we don‟t measure it. And probably there

will be lots of other factors that influence sales numbers, too.”

As could be shown in the previous section, the activities companies undertook in the

area of quality management for business services varied significantly in terms of prac-

tices used and the intensity of their adoption. Overall, however, there seemed to be a

consensus among interviewees that the benefits of quality management outweigh its

costs of implementation and maintenance by far. The heads of purchasing, purchasers


135

of M1, M5, M6, M8, S1, S2, S3, S4, and S7 as well as the heads of operating depart-

ments at M1, M5, M6, and S3 thus stated that quality management for business ser-

vices created additional value.

B.4.3 Major determinants of the design of quality management practices

Three major factors have been identified which were regarded as major determinants

of the design of quality management practices for externally sourced business services:

(a) the usage of the service by the buying company, (b) the perceived risk associated

with quality failures, and (c) the degree of standardization of the specific service.

Usage: The way, the buying company used the service, was seen as the most important

dimension according to which the buying company designed or should design its

quality management. Heads of purchasing and purchasers of companies M1, M2, M3,

M5, M8, S1, S6, S7 as well as quality managers from M1, M3, and M4 and the head

of the operating department at S5 acclaimed to this interrelation. Most interviewees

recommended putting more effort into quality management for services transferred to

end customers than into services which are internally consumed. As the head of pur-

chasing at M8 stated:

“If we look at services that we consume internally here at M8, you will see that some-

thing like a quality management does not exist. […] We only regularly check the quali-

ty for this service [technical maintenance and repair] because it is delivered to our

end customer.”

It has to be noted, however, that the same service, for example, technical maintenance

and repairs was used in different ways by the companies. At M4, M6, and M7 it was

consumed internally for upholding the production facilities of the buying companies.

At M8, by contrast, it was transferred to end customers for installing, maintaining and

repairing previously delivered end products at the end customers‟ sites. The buying

companies therefore adjusted their quality management to the distinct usage of these

services. For instance, M8 set priorities in adopting techniques from quality infor-

mation (for example, KPIs), and customer involvement (for example, end customer

satisfaction surveys), whereas at M4, M6, and M7 more emphasis was put on instru-

ments from the practices supplier involvement and process management (for example,

supplier evaluation, service receipt).



At M4, M6, and M7 some interviewees also made a distinction in their efforts for

quality management between internally consumed services. They stated that their ef-

forts of quality management are more intense for services which affect the production

process than for services which do not. Therefore, they considered the quality man-

agement for technical maintenance and repair services as more mature than for inter-

nally consumed services such as office cleaning. The intensity with which these com-

panies particularly implemented process management for these services corroborates

this impression.

Degree of specification: The degree of service specification was also viewed as having

a major impact on how quality management for services is or should be designed. The

heads of purchasing at M2, M5, and M7 as well as the purchaser and the head of the

operating department at M6 advanced the opinion that certain quality management

practices can be easier and more comprehensively implemented when the degree of

service specification is high. As the head of purchasing at M5 stated:

“If we talk about a highly specified and well-defined service, of course, you can con-

trol the delivered quality far easier. […] Take facility management as an example.

There, you can define that the provider has to empty the bins once a week. And if he

doesn‟t do it you can prove it.”

At companies M4, M6, and M7 where technical maintenance and repair services were

used to uphold the buying company‟s production facilities, the interviewees pointed

out that the service is also specified by norms, for example, for the maintenance of air

conditioning. In these cases, such norms and legal regulations also prescribed how to

use certain practices of quality management. For example, it was stipulated which

quality information to gather and how to conduct process management.

Risk: Another recurring theme was that perceived risk influences the design of the

quality management for business services. This determinant was particularly regarded

important by the quality managers at M1 and M4 but also by heads of purchasing at

M2, M7, S1, S4, S5 and S7. The quality manager at M1 strongly recommended adjust-

ing the efforts for quality management of business services according to the risk of

quality failures. He commented:

“If I would like to improve the quality management for services, I wouldn‟t focus so

much on volume but more on the leverage a failure would have. […] For example,

according to the risk if a failure can shut down the production lines.”


137

Risk was perceived as being different from usage of the business service. For example,

services which were transferred to the customer were not automatically associated

with higher risk. As the head of purchasing at M8 explained the downtime of a produc-

tion line due to low-quality maintenance, for example, might have a more detrimental

effect than loosing a customer due to bad service. Previously described interview data

also bolster the notion of perceived risk as an important determinant of quality man-

agement practices for business services. For example, in case of M5 for facility ser-

vices, varying management attention to particular aspects of the service were regarded

as a risk and personal inspections of the service provider were adjusted to this.

Volume: Surprisingly, the purchasing volume of the business service was not per-

ceived as a significant influential factor to which buying companies adapted their qual-

ity management for services by all interviewees. It was mentioned by the heads of pur-

chasing at S2, S6, the purchaser at S4, and the quality managers at M1 and M4. How-

ever, volume in none of these cases was used to determine the design of quality man-

agement per se but the sequence of services for which practices of quality management

were introduced. For example, at S2 and S4, the purchasing volume of the business

service served as a basis of the decision for which services quality management should

be implemented first. However, the design of quality management practices in these

companies remained the same for each service regardless their purchasing volume. As

the head of purchasing at S2 pointed out:

“The sequence, in which we started quality management for the different services, was

mainly determined by the volume. At first, we started with professional services as they

at that time had the biggest volume.”

Industry: Despite the opinion of the head of purchasing of S5 who posited that the lev-

el of professionalization of purchasing was higher in manufacturing than in service

companies, significant distinctions in the design of quality management between man-

ufacturing and service companies could not be detected in this case study. For exam-

ple, we could not find systematic variation in the way supplier selection was utilized in

manufacturing and service companies. It has to be stressed, however, that there may be

differences in the frequency quality management practices are adopted between indus-

tries. This question cannot be answered by case studies, however, and is thus suggest-

ed to be subject to additional research.



B.5 Discussion and conceptual model

The following section summarizes and discusses the results of the empirical findings.

Based on these results a conceptual model and seven propositions (PP) will be pre-

sented for further research.

As elucidated above, the usage of the externally sourced business service by the buy-

ing company influences the design of its quality management practices. Therefore, we

propose:

PP 1: The usage of a business service by the buying company is perceived as one

major determinant of the design of quality management practices for business

services by buying companies.

Interview data revealed that usage was seen as the most influential factor of quality

management for services. Some companies designed certain practices of quality man-

agement according to usage of the service. For example, where services were trans-

ferred to end customers of the buying company, customer involvement was more in-

tense and quality information in terms of KPIs was more often available than for most

services consumed internally. The emphasis of service usage as an important compo-

nent of service purchasing is in line with previous work by Wynstra et al. (2006). They

argue that the usage of a business service by the buying company influences the buyer-

seller interaction and suggest a classification consisting of the four different types of

services (Wynstra et al., 2006; van der Valk et al., 2009).

It has to be noted, however, that the case study results presented earlier do not support

a distinction between semi-manufactured and component services as no interviewee

made a differentiation between them. As the head of purchasing at S7 stated when

asked to comment on that:

“Actually I do not think that we have any service which is given to our customers

without being changed in at least some way. I think as a buying company you always

do something with the service before you give it to your customers, don‟t you?”

By contrast, the distinction between services transferred to the end customer, instru-

mental, and consumption services was drawn by many interviewees and had an impact

on their quality management.


139

In addition to usage, the degree of specification of the service externally purchased

was regarded as a major factor determining quality management practices by several

interviewees. Hence, we posit:

PP 2: The degree of specification of a business service is perceived as one major

determinant of the design of quality management practices for business ser-

vices by buying companies.

The degree of service specification was particularly considered as influencing the

practices of quality information and service design. Some interviewees posited that the

higher the degree of specification, the easier it is to obtain quality information and

control the delivered service quality. In addition, the service provider was less in-

volved in service design where the degree of specification was considered high.

Some previous research has shown that purchasing of services is associated with high-

er risk than purchasing of goods (Jackson et al., 1995; West, 1997; Mitchell, 1994).

Accordingly, case data of this study revealed that purchasers and quality managers

consider perceived risk as one major influencing factor of quality management design

for services. Therefore, we suggest:

PP 3: Risk of a quality failure is perceived as one major determinant of the design of

quality management practices for business services by buying companies.

Risk was mainly understood by the case companies as the potential damage a service

failure could cause. It was perceived different from volume and usage as failures of

low-value internally consumed business services could still have a major impact on the

buying company. For example, a supplier delivering low-quality technical mainte-

nance could cause breakdowns of production machines. This could have detrimental

effects on the buying company although the purchasing value of the actual service is

comparably low and it is consumed internally.

As could be shown in the previous chapter, purchasing volume and industry were not

considered major determinants of the design of quality management by the interview-

ees. This is surprising as literature on supply management suggests that volume pro-

vides a major decision support in strategic purchasing decisions (see, for example,

Kraljic, 1983). The case evidence, however, showed that the volume of the purchased

service only influences the sequence for which quality management practices were

introduced. A relationship between volume and the design of quality management

practices could however not be observed.



Literature on quality management posits that manufacturing companies use more so-

phisticated quality management practices than service companies. Also this relation

between industry (manufacturing vs. service) and design of quality management prac-

tices for externally sourced business services could not be replicated in the case stud-

ies. However, more research has to be done to confirm this insight.

The major goal of the implementation of quality management in companies is to im-

prove the quality of the goods or services bought or offered. As the interviewee data

confirmed, the utilization of quality management practices for externally sourced busi-

ness services results in an improved level of quality of these services delivered by the

providers. We therefore suggest:

PP 4: The adoption of quality management practices for business services by buying

companies is positively related to the perceived service quality of externally

sourced business services.

As already shown in the previous chapter, a positive relationship between quality

management and service quality had various sources. For example, the utilization of

quality information provided the responsible purchaser with the required data to better

evaluate a provider‟s service quality. This led to higher motivation of the providers to

deliver services at the required quality level.

Ample amount of research indicates that service quality is positively related to satis-

faction of end customers (Churchill & Surprenant, 1982; Cronin, Jr. & Taylor, 1992;

Cronin, Jr. et al., 2000; Schneider & White, 2004; Storbacka et al., 1994; Woodside et

al., 1989). The available case data reveals that representatives of most companies also

experienced this relationship. Enhanced service quality of internally consumed ser-

vices improved satisfaction of internal customers whereas improved service quality of

services transferred to end customers positively affected satisfaction of end customers.

Thus, we suggest:

PP 5: There is a perceived positive relationship between service quality and satisfac-

tion of internal or external service consumers.

As elucidated in the previous chapter, the effect of quality management on cost was

considered weaker but still existing. A positive relationship between quality manage-

ment and cost reduction is predicted by literature in the area of quality management

(cf. Deming, 1982; Garvin, 1984; Garvin, 1988; Molina-Azorín et al., 2009; Sousa &

Voss, 2002; White, 1996). Accordingly, we propose:


141

PP 6: There is a perceived positive relationship between quality management prac-

tices for externally sourced business services cost reduction.

It has to be stressed, however, that neither the effects of quality management on costs

nor on service quality or satisfaction were clearly measured in any of the companies.

In no case, any of these constructs was quantified before and after quality management

practices were implemented. Consequently, it is difficult for researchers to find quanti-

tative proof of the effects of quality management or to separate the effects of quality

management from other measures the company implemented simultaneously.

Some authors emphasize that quality management can only have positive effects on a

firm‟s profitability if the cost of implementing and maintaining quality management is

outweighed by its performance contributions (Crosby, 1984; Deming, 1982; Garvin,

1984; Garvin, 1988). Hence, a buying company may only utilize quality management

practices for externally sourced business services if the benefits exceed the cost and

thus value is created. We would like to reflect this implication by the following propo-

sition:

PP 7: The raised satisfaction of internal or external service consumers and the cost

decreased by quality management outweigh the cost for implementation and

maintenance of the quality management practices.

These initial propositions outline the preliminary research framework depicted in Fig-

ure B- 2.



Figure B- 2: The conceptual model

B.6 Conclusion

Business services represent a significant portion of a buying company‟s expenditures.

However, research on purchasing of business services in general and on quality man-

agement for business services in particular is relatively scarce. This paper wants to

shed more light on the questions what determines the design of quality management

for business services, how buying companies use quality management practices for

managing the quality of their externally sourced business services and what the effects

of their quality management for services are.

In doing so, we analyze literature on quality management, service quality and purchas-

ing of services related to the research questions. Based on the literature review we ap-

proached the research questions by an exploratory, multiple, embedded and compara-

tive case study design (Yin, 2003; Dul & Hak, 2008; Silverman, 2002). In total, 32

practitioners from purchasing, quality management and/or the internal department re-

questing the selected business service from 16 manufacturing and service companies

were interviewed.

This paper contributes to the development of theory in the area of quality management

by taking a purchasing perspective and adding externally sourced business services

into the existing knowledge base. It thus expands and extends academic knowledge

developed by previous studies (see, for example, Hemsworth et al., 2008; Hemsworth

et al., 2005; Sánchez-Rodríguez & Martínez-Lorente, 2004) which were in part pre-


143

sented in this journal. Furthermore, it provides managerial insights for the manage-

ment of externally sourced business services.

B.6.1 Managerial implications

From a managerial perspective, key findings from our exploratory study can be sum-

marized as follows:

The share of externally sourced business services on a buying company‟s spend

volume may even rise in the future due to a continuous trend towards outsourcing

(Cox et al., 2005; Ellram et al., 2007; Fuller, 1998; Miettinen et al., 2005; Murray

& Kotabe, 1999; van der Valk & Rozemeijer, 2009). This will also call for a

more systematic approach to managing the service quality delivered by external

providers.

So far, however, the companies selected for this study have not yet implemented

comprehensive quality management systems but mainly focused on single prac-

tices which were mostly used in the same way for all types of services. This may

not reflect the complexity and heterogeneity of business services. Furthermore,

practices such as customer involvement, process management and service design

have not yet received the attention they may deserve. In addition, a more strate-

gic approach on the selection of practices for specific business services may bet-

ter tap the potential of quality management.

This study shows that quality management for business services is associated

with positive effects such as enhanced service quality resulting in higher custom-

er satisfaction and reduced costs. The positive effects of quality management for

business services seem to exceed the costs of its implementation and mainte-

nance. Buying companies should therefore expand their efforts in quality man-

agement for services.

Buying companies can use our exploratory findings to inform the design of their

quality management for business services. For example, the combination of us-

age, perceived risk, and degree of specification seem to offer a good basis for the

decision on how quality management for services should be designed and how

intense their usage should be. Accordingly, the quality of services transferred to

the end customer, with high risk and a low degree of specification should receive

the highest attention.



The case study also suggests that some buying companies expect their service

providers to actively contribute to quality management, for example, by being re-

sponsible for the collection of quality information or the execution of customer

surveys. This suggests that service providers which regard quality management

of their services as an integral part of their offering may have better chances of

being selected by buying companies.

B.6.2 Theoretical implications

Our analysis provides several theoretical insights into the quality management for

business services from a buying company‟s perspective.

First, it supports earlier research in the area of purchasing of services concluding that

purchasers perceive services more difficult to buy than goods (Axelsson & Wynstra,

2002; Jackson et al., 1995). Thus, existing purchasing practices for goods may not be

directly applicable to services (van der Valk & Rozemeijer, 2009; Wittreich, 1966).

This is particularly true for quality management for business services as our empirical

findings show that purchasers regard the relative low degree of service specification

and the resulting subjective evaluations of service quality as especially difficult to

handle. These complexities exacerbate the transfer of perspectives on goods quality

directly to service quality. In particular, the product-based view which regards quality

as a measurable existence of a product attribute and the manufacturing-based perspec-

tive which defines quality as conformance to specifications (Garvin, 1984; Hardie &

Walsh, 1994) is more problematic to establish in buying companies. Rather, it may be

more appropriate to evaluate service quality along the lines of the transcendental per-

spective which puts quality on a level with excellence and highest standards, the user-

based point of view which equalizes quality with satisfying the wants of a customers,

or the value-based stance in which quality is the result of an evaluation process by the

customer on basis of value considerations (Garvin, 1984; Hardie & Walsh, 1994).

Second, the study supports previous research establishing positive relationships be-

tween the usage of quality management practices for goods and firm performance. The

link between quality management and enhanced service quality resulting in increased

satisfaction of internal or external customers was perceived as strong. The relation be-

tween quality management and the reduction of costs was seen as weaker but still ex-

isting. Overall, quality management for services was associated with creating value to

the company. By contrast, the suggested effects of quality management via the market


145

route by which improvements of the quality of goods finally lead to higher sales could

not be detected by the study (see, for example, Deming, 1982; Garvin, 1984; Garvin,

1988; Molina-Azorín et al., 2009; Sousa & Voss, 2002; White, 1996). However, it has

to be stressed that only few companies undertook efforts to actually measure these ef-

fects. In most cases these results were perceived by interviewees. Further research may

address the issue of measurability of such effects in more detail.

Third, the study shed light on the question what determines the design of quality man-

agement for business services by buying companies. Whereas previous research on

quality management suggests that differences in the adoption of these practices exist

between manufacturing and service companies (Benson et al., 1991; Quazi et al., 1998;

Singh et al., 2006), this study could not discover major distinctions between industries.

Rather, manufacturing and service companies seemed to design the comparably few

practices they used for services in a similar way. It has to be stressed, however, that

the case study methodology did not allow examining the question how widespread the

usage of quality management practices for business services is in manufacturing and

service environments. Therefore, as suggested by the literature, more companies from

manufacturing might still use quality management for externally sourced services than

service companies. Again, this issue should be subject to further research.

The study could, however, identify some other major determinants of quality man-

agement. Most notably, the usage of the service by the buying company, perceived risk

of quality failures, and degree of specification were regarded as major influencers. The

determinant „usage‟ is in line with recent research on purchasing of services (Wynstra

et al., 2006; van der Valk et al., 2009). Previous research on service purchasing also

suggests that risk and degree of specification are major perceived differences between

purchasing of goods and services (Jackson et al., 1995; West, 1997; Mitchell, 1994).

B.6.3 Future research

Many of our findings make a first contribution to a better understanding of quality

management for business services by buying companies while other would benefit

from further research. For example, the question how widespread the usage of quality

management practices in different industries is could be further investigated by survey

research. Quantitative methods could also help to achieve some degree of generaliza-

bility regarding our results on the effects of quality management. So far, for example,

no connection between quality management or service quality and increased sales



numbers for services which are transferred to the end customer could be identified.

This may change if the sample contains more services which are transferred to the end

customer.

Furthermore, our data collection only relates to one side of the buyer-supplier dyad.

We tried to include the supplier‟s position by collecting data on the supplier rather

than from the provider. However, our study shows that service quality is to a signifi-

cant part defined during the service design for which the provider was seen as more

knowledgeable. Therefore, future studies should include data from the supplier in or-

der to examine how the service provider contributes to successful quality management.

We are confident that our study presents a useful starting point for further research into

quality management for business services from a buying company‟s perspective.

Acknowledgements

The authors thank the anonymous reviewers for their helpful comments, which were a

great support in our attempts to significantly enhance previous versions of the manu-

script.


147

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155

Appendices of paper B

Table B- 1: Quality management practices

Quality man-

agement prac-

tice

Description Potential techniques Selected literature

Quality infor-

mation

Adequate, accurate, and timely

visibility of defect rates, compli-ance to specifications, adherence to schedules etc.

Quality data and reporting,

availability of quality data, graphical depictions of data (e.g. flow-charts, histograms etc.)

Ahire et al. (1995); Dean & Bowen (1995); Evans & Lindsay (2002); Flynn

et al. (1994); Fynes (1999); Molina-Azorín et al. (2009); Powell (1995); Sánchez-Rodríguez & Martínez-Lorente (2004); Saraph et al. (1989); Sila & Ebrahimpour (2003); Zu (2009)

Supplier in-volvement

Establishment of long-term rela-tionships with suppliers and en-hancement of suppliers‟ capabili-ties of meeting the purchasing company‟s requirements

Long-term relationships, applica-tion of vendor assessment, certifi-cation procedures

Ahire et al. (1995); Flynn et al. (1994); Fynes (1999); Hemsworth et al. (2008); Molina-Azorín et al. (2009); Sánchez-Rodríguez & Martínez-Lorente (2004); Saraph et al. (1989); Sila & Ebrahimpour (2003); Zu (2009)

Customer in-volvement

Effective measurement and moni-toring of customers‟ needs, expec-tations and/or satisfaction

Close relationships, feedback mechanisms, customer satisfaction orientation

Ahire et al. (1995); Dean & Bowen (1995); Flynn et al. (1994); Fynes (1999); Molina-Azorín et al. (2009); Powell (1995); Sila & Ebrahimpour (2003); Zu (2009)

Process man-agement

Cross-departmental process analy-sis and improvement

Process and role definitions, clean-liness and efficient organization of the workplace, statistical process control

Ahire et al. (1995); Dean & Bowen (1995); Flynn et al. (1994); Molina-Azorín et al. (2009); Powell (1995); Saraph et al. (1989); Sila & Ebrahim-pour (2003); Zu (2009)


Recognition of employee perfor-mance on quality and encourage-ment team dynamics

Commitment to training, employee involvement, recognition and re-ward systems, quality circles

Ahire et al. (1995); Dean & Bowen (1995); Flynn et al. (1994); Fynes (1999); Hemsworth et al. (2008); Molina-Azorín et al. (2009); Powell (1995); Sánchez-Rodríguez & Martínez-Lorente (2004); Saraph et al. (1989); Sila & Ebrahimpour (2003); Tawfik Madi (2009); Zu (2009)


Reviews of products and services before production and the design of products or services with respect to quality

Cross-functional project teams, Joint product development, design reviews

Ahire et al. (1995); Flynn et al. (1994); Fynes (1999); Saraph et al. (1989); Sila & Ebrahimpour (2003); Zu (2009)

Top manage-ment support

Actions and behaviors of senior management which show com-mitment to quality

Top management involvement, setting clear quality objectives, encouragement of employee in-volvement into activities for quality

improvement

Ahire et al. (1995); Dean & Bowen (1995); Flynn et al. (1994); Fynes (1999); Hemsworth et al. (2008); Molina-Azorín et al. (2009); Powell (1995); Sánchez-Rodríguez & Martínez-Lorente (2004); Saraph et al. (1989); Sila & Ebrahimpour (2003); Zu (2009)


156

Table B- 2: Overview of business services in scope

No. Business services in scope of

paper (in alphabetical order)

Examples of business services in scope of

this paper

Axelsson & Wynstra

(2002)

CAPS Research (2003) BME (2005b)

1 Computer installation and maintenance services

Hardware and software implementation, cus-tomization, maintenance on single user level, telecommunication services

Information Computer hardware, software

IT services

2 Facility services Cleaning, catering, security, real estate mainte-

nance

Real estate, rental and

leasing

Facilities maintenance Facility management

3 Financial services Banking, finance, insurance Finance and insurance Insurance Financial services

4 Professional services Management consultancy, software develop-ment and implementation on company or unit level, accounting and auditing, legal, architects

Professional, scientific and technical; management of compa-nies and enterprises

Consulting Consulting; patent and legal services; purchasing services

5 Research and development services

Development, engineering Professional, scientific and technical

Engineering and manu-facturing equipment

Research and develop-ment

6 Technical maintenance and repair services

Maintenance and repair of production equip-ment

Administrative, support, and waste management

Industrial supply Industrial maintenance

7 Transportation and distribution

services

Warehousing, value-added logistics, transport Transportation and wa-

rehousing

Logistics freight Logistics services

8 Fleet management services Provision of vehicles for transportation of staff or goods

Not included Fleet (executive, non-executive)

Fleet management

9 Human resource services Training, recruitment Not included Employee benefits Human resource services 10 Marketing services Campaign development, production, print ser-

vices

Not included Marketing; printing Marketing services

11 Travel management services Organisation and booking of business travels Accomodation and food services

Total Travel Travel management


157

Table B- 3: Selected companies and their key characteristics

Company

label

Type of

industry

Main product or

service

Turnover category

in m Euro1

Number of employees2 Purchasing volume

in m Euro3

Share of services on

purchasing volume in %3

M1 Manufacturing Agricultural machinery

1,000 – 4,999 ≥5,000 1,000 – 4,999 18

M2 Manufacturing Food ≥5,000 ≥5,000 250 – 999 19

M3 Manufacturing Machine tools 1,000 – 4,999 1,000 – 4,999 250 – 999 20 M4 Manufacturing Electronics 1,000 – 4,999 ≥5,000 Not provided Not provided

M5 Manufacturing Home appliances 1,000 – 4,999 ≥5,000 1,000 – 999 38

M6 Manufacturing Bearings ≥5,000 ≥5,000 Not provided Not provided M7 Manufacturing Food 1,000 – 4,999 1,000 – 4,999 Not provided Not provided

M8 Manufacturing Electronics 1,000 – 4,999 ≥5,000 1,000 – 4,999 27 S1 Services Consultancy ≥5,000 ≥5,000 50 – 249 76

S2 Services Banking ≥5,000 1,000 – 4,999 250 - 999 80

S3 Services Insurance 1,000 – 4,999 ≥5,000 50 – 249 66 S4 Services Banking ≥5,000 ≥5,000 Not provided Not provided

S5 Services Insurance 1,000 – 4,999 1,000 – 4,999 50 – 249 Not provided S6 Services Insurance 1,000 – 4,999 1,000 – 4,999 10 – 49 Not provided

S7 Services Telecommunication 250 – 999 250 – 999 Not provided Not provided S8 Services Insurance ≥5,000 ≥5,000 50 – 249 Not provided

Key:

1 = The turnover category is given in order to guarantee anonymity. For banks the yearly balance sheet total and for insurances the net premiums earned are indicated.

2 = The category for the number of employees is given in order to guarantee anonymity.

3 = Estimated by head of purchasing


158

Table B- 4: Selected services and list of interviewees

Company

label

Selected service Interviewees

Head of

purchasing Purchaser

Quality

manager

Head of operating

department

M1 Human resource services 1 Professional services 1 1

Transportation and distribution services 1 1 M2 Marketing services 1

M3 Fleet management 1 1

M4 Technical maintenance and repair 1

M5 Computer installation and maintenance services 1

Facility services 1 1 M6 Technical maintenance and repair 1 1

M7 Technical maintenance and repair 1

M8 Technical maintenance and repair 1 S1 Human resource services 1

S2 Marketing services 1 S3 Facility services 1 1

S4 Professional services 1

S5 Fleet management 1

Professional services 1 1

S6 Fleet management 1 Marketing services

S7 Transportation and distribution services 1 Technical maintenance and repair 1

S8 Transportation and distribution services 1 1

Marketing services 1 1


159

Table B- 5: Interview protocol (shortened version)

Interview

section

Question module Examples of questions

1 General company and demographic data and selection of business service

How much turnover does your company achieve?

How many employees does your company employ?

What is your current position within your company?

How long do you occupy this position already?

How many years of work experience do you have in total?

Does your company mainly provide products or services?

Please choose a service from the list for which you think you have some sort of quality management in place?

What is the purchasing volume of this service in your company?

… 2 Design of quality

management Which quality information is available for this service?

Please describe if a supplier and service evaluation system exists and how it works?

How do you involve customers into the quality management for

this service?

… 3 Effects of quality

management How do you think did the above mentioned practices of quality

management affect the quality of the selected service?

How do you think the service quality would have developed without you taking the above mentioned quality management

practices?

How do you think did the changed quality of this service affect operating costs, productivity, employee satisfaction, customer complaints

… 4 Determinants of quality

management How do you think does the usage of the service by your company

affect the quality management?

In what way would the quality management differ if the selected service would be used differently by your company?

Which major determinant factors have caused you to design the

quality management for this service as you did

…



Table B- 6: Major findings regarding the design of quality management practices for externally


Quality

management

practice

Major findings

Quality information

Occasional complaints by internal or external service users are a major source of quality information.

Pre-defined KPIs are used as quality information (at M1 for professional services, M3

for fleet management service, M5 for facility services, M8 for technical maintenance and repair services, S1 for human resource services, S3 for facility services, S7 for transportation and distribution services).

Results of KPIs are only seldomly tied to payment (at M1, M3, S3).

Purchasing and operating department are the main recipients of quality information (at M1, M5, M8, S3, S7).

Supplier involvement

All case companies strive for long-term relationships with service providers. The reduction of the number of providers is seen as a necessary prerequisite.

A system of provider evaluation is used at M1, M4, M6, M7, S1, S2, S4, S5.

Differences exist between companies regarding the adjustment of the evaluation to the

service specifics.

Some case companies couple the results of provider evaluation to standardized actions (M4, M6, M7, S2, S4).

Results of provider evaluation only tied to payment at M4.

Audits are only used during provider selection and do not reach the same degree of sophistication as audits for goods suppliers.


Purchasing regards the internal operating department as main customer. Regular and structured interactions between purchasing and internal or external service users are rare (exceptions: S4 and S5).

Internal service users are not surveyed regarding their satisfaction with the quality of the

externally sourced service (exception: S3).

External service users are surveyed regarding their satisfaction with service quality at M8, S1, S7 (for fleet management services), S5 as part of a larger customer satisfaction

survey. Process management

Service receipt notes confirming the general service provision are used as main method of inspection (at M1, M4, M5, M6, M7, S1, S2, S4).

No sampling techniques are used. Workforce

management No trainings focusing on aspects of service quality are offered.

No targets are set regarding the quality of externally sourced business services.

Quality circles are only used at companies where these were implemented during improvement programs for production processes (at M4, M6).

Service design Services are in most companies purchased by cross-functional teams consisting of purchasers and representatives from the requesting department but no internal or

external service users.

Integration of service providers into the service design phase is dependent on the degree of service specification.

No structured design review process is in place but several companies use testing phases

for externally sourced business services (M1, S5, M5, M7, S3) Management support

With the exception of M5, discussion of quality of externally sourced business services

is limited to complaints.

No targets are set regarding quality of externally sourced business services by top management.


161

C Comparison of quality management for externally



The third paper was submitted to the International Journal of

Quality & Reliability Management:

Holschbach, E., Comparison of quality management for externally sourced business

services. International Journal of Quality & Reliability Management: Submitted.

Abstract

Purpose: The aim of this paper is to investigate to which extent buying companies use

quality management (QM) practices for their externally sourced business services (BS)

and if differences between manufacturing and service as well as between large and

small companies exist regarding their usage and effects.

Design/methodology/approach: The researchers collected data from a total of 252

companies using an online survey. Significant differences in the data were identified

using the Mann-Whitney-U test.

Findings: The results show that significant differences exist in the adoption of QM

practices for services and their effects on performance between manufacturing and

service as well as large and small companies. Only minor differences could be detect-

ed, however, regarding barriers to QM implementation and its determinants.

Research limitations/implications: The findings cast doubt on the notion of universal

applicability of QM and suggest taking contextual factors into account when examin-

ing QM.

Practical implications: The study indicates that QM for externally sourced BSs can

have positive effects on the performance of the buying company. In contrast to QM for

goods, manufacturers can learn from service providers in order to improve their QM

for services.

Originality/value: This study fills a theoretical gap as previous literature has predom-

inantly adopted the perspective of a goods or service provider and did not specifically

address quality management for externally sourced services. The findings provide

more insights into how manufacturing, service, large and small companies implement



QM for externally purchased services. The results imply that the implementation of

QM for these services without adjusting to contingent factors is fraught with risk.

Keywords: Quality management; services; contingency theory; manufacturing indus-

try; service industry

Paper type: Research paper

C.1 Introduction

Nowadays, services represent a significant share of the purchasing volume of most

companies (Axelsson and Wynstra, 2002; Jackson et al., 1995; OECD, 2000; Schnei-

der and White, 2004). Some authors estimate that externally purchased services on a

weighted average account for more than half of a company‟s total spend (Fearon and

Bales, 1995). More recent studies suggest that the ratio of business services (BS) to

total purchasing volume lies between 15 and 28% for manufacturing companies

(BME, 2005: 5; Centre for Management Development, 2005). The share of these busi-

ness-to-business (B2B) services on the total purchasing volume may even increase in

the future due to a continuous trend towards concentration on core competencies and

resulting outsourcing (Cox et al., 2005; Ellram et al., 2007; Fuller, 1998; Krause et al.,

2000; Miettinen et al., 2005; Murray and Kotabe, 1999; Smeltzer and Ogden, 2002;

van der Valk and Rozemeijer, 2009). Furthermore, the share of services on many

product offerings is increasing due to a risen demand for augmented core goods

(Gebauer et al., 2010; Grönroos and Helle, 2010; Neu and Brown, 2005; Nilsson et al.,

2001; Wise and Baumgartner, 1999).

Despite the growing significance of BS for industrial customers, quality management

(QM) of externally purchased BS from the perspective of a buying company, i.e. the

professional customer of BS, has received little attention so far by academics (Hems-

worth et al., 2008; Hemsworth et al., 2005; Sánchez-Rodríguez and Martínez-Lorente,

2004). Accordingly, the literature on QM predominantly has adopted the viewpoint of

a provider of goods or services, and tried to answer the question how sellers can im-

prove the quality of the products or services offered to their consumers (Forker, 1997;

Fynes and Voss, 2002; Flynn et al., 1994; Haynes and DuVall, 1993; Rönnbäck and

Witell, 2008). However, research on the question how companies receiving goods or

services manage their quality is scarce (Forker et al., 1997; Fynes, 1999; Fynes and

Voss, 2002; Molina-Azorín et al., 2009; Stanley and Wisner, 2001). The relative dis-

regard of QM from a buyer‟s perspective is surprising as the quality of a company‟s


163

output is highly dependent on the quality of its input (Forker, 1997; Forker et al.,

1997; Krause et al., 2001; Yang et al., 2009).

Therefore, this study wants to shed more light on the overall research questions to

which extent buying companies use QM practices for their externally sourced BS as

well as what the effects, barriers and determinants of QM for these services are. Fol-

lowing a call by Sousa and Voss (2008) this research also intends to analyze if differ-

ences between manufacturing and service as well as between large and small compa-

nies exist regarding their QM for externally sourced BS. In doing so, it examines the

effect of contingent factors on the adoption of QM practices.

This paper wants to contribute to service management research by taking the perspec-

tive of buying companies. In particular, it strives to contribute to theory in the area of

QM by examining QM practices from the perspective of a customer in a B2B envi-

ronment instead of a vendor and by focussing on QM practices for externally sourced

BS. Furthermore, it wants to test for differences in their usage caused by contingent

factors such as industry and organizational size.

The remainder of this article is divided into five sections: After these introductory re-

marks, the second section provides the theoretical background by reviewing related

literature. The third section introduces the hypotheses, the data collection procedure,

the sample and data analysis methods. Afterwards, the results are presented and dis-

cussed in the fourth section. Finally, the managerial and theoretical implications are

outlined and future areas of further research are proposed in the fifth section.

C.2 Theoretical background

This section shortly introduces the cornerstones of contingency theory and the status of

its application in research on QM. Furthermore, it briefly presents results of empirical

studies on the effects of the type of industry and organizational size on the adoption of

QM practices.

C.2.1 Contingency theory and research on QM

Contingency theory posits that an organization must be aligned with the degree of un-

certainty in its environment to achieve optimal performance (Lawrence and Lorsch,

1969; Neu and Brown, 2005; Patterson, 2000; Thomson, 1967). This concept of “fit”

underlies the contingency perspective (Das et al., 2000) and can be understood as a



functional relationship between environmental, management and performance varia-

bles (Luthans and Steward, 1977; Venkatraman, 1989). The theory suggests that or-

ganizations which can establish a fit between organizational structure and environmen-

tal factors will achieve higher organizational performance, while a misfit would have

detrimental effects on it (Donaldson, 2001; Sila, 2007). However, there is not one uni-

versal way of establishing organizational fit (Storey and Hulland, 2010). By contrast,

the best way to organize depends on the nature of the environment to which the organ-

ization relates (Galbraith, 1973; Scott, 2003).

Earlier research on QM (for example, Crosby, 1979; Deming, 1986; Flynn et al., 1995;

Hendricks and Singhal, 1997; Juran and Blanton Godfrey, 2000) suggested that QM

principles and practices are universally applicable. This view was contended, however,

by other researchers arguing that the usage and the design of QM practices could in

fact be dependent on the context (for example, Ahire and Golhar, 1996; Dean and

Bowen, 1995; Ghobadian and Gallear, 1997; Sila, 2007). The environment of a com-

pany using QM may therefore render certain practices of QM inappropriate (Sila,

2007). Reports on failures in implementing QM seem to corroborate this view (Shin et

al., 1998; Sila, 2007). Many of the disappointments with the implementation of QM

seem to be related to the neglect of organizational context, in particular, the firm‟s

size, the nature of its products and industry characteristics (Ahire and Golhar, 1996).

However, research taking the environmental factors of companies using QM into ac-

count is still scarce (Ghobadian and Gallear, 1997; Gustafsson et al., 2003; Hendricks

and Singhal, 2001; Sila, 2007). Thus, Sousa and Voss (2008) called for more empirical

research on QM which incorporates contingent factors such as organizational size and

industry as these can be considered most influential on the usage of QM practices. Ex-

isting research examining the effects of industry and company size on QM is shortly

reviewed in the following.

C.2.2 QM in manufacturing and service companies

Most empirical research on QM has been conducted in the manufacturing sector

whereas studies on service firms have been sparse (Gustafsson et al., 2003; Haynes

and DuVall, 1993; Nilsson et al., 2001; Prajogo, 2005; Raju and Lonial, 2001;

Rönnbäck and Witell, 2008; Sharma and Gadenne, 2002; Singh et al., 2006). Although

more recently this view is contested (Lovelock and Gummesson, 2004; Vargo and

Lusch, 2004), many authors agree that services possess several characteristics which

differentiate them from goods (Schneider and White, 2004; Prajogo, 2005; Svensson,


165

2006). Among these are their heterogeneity, intangibility and inseparability of produc-

tion and consumption (Parasuraman and Varadarajan, 1988; Parasuraman et al., 1985)

as well as the fact that service production normally, but not necessarily always, in-

volves some interaction between customer and provider (Grönroos, 2007; Prajogo,

2005). These differences may cause variations in the adoption of QM between manu-

facturing and service companies (Rönnbäck and Witell, 2008; Woon, 2000). For ex-

ample, intangibility hampers the evaluation and comparison of BS as a customer can-

not see, hear, feel, smell or taste them (Jackson and Cooper, 1988). In addition, insepa-

rability means that the services do not yet exist when the buying company purchases it.

This stresses the need for clarifying the content of the service as requested by the cus-

tomer and suggests that QM of externally sourced BS may already start before the pur-

chase contract is signed (Schneider and Bowen, 1995).

So far, only little research has examined how the type of industry may influence the

design and adoption of QM (Lagrosen and Lagrosen, 2003; Powell, 1995; Rönnbäck

and Witell, 2008). Some of the existing empirical studies are depicted in Table C- 1

(for a comprehensive review please refer to Rönnbäck and Witell, 2008). As can be

seen from Table C- 1, most authors detected differences in the adoption of QM prac-

tices between manufacturing and service companies with manufacturing companies

using more of the QM practices or more intensively (Beaumont et al., 1997; Huq and

Stolen, 1998; Lagrosen and Lagrosen, 2003; Quazi et al., 1998; Sharma and Gadenne,

2002; Solis et al., 1998). By contrast, Woon (2000) and Singh et al. (2006) in the In-

ternational Journal of Quality & Reliability Management did not identify significant

variation in the overall total quality management (TQM) and ISO 9000 implementa-

tion levels in manufacturing and service organizations. Regarding the effects of QM

on organizational performance, some studies suggest that manufacturing companies

can achieve higher levels of improvements by implementing QM than service compa-

nies (Lagrosen and Lagrosen, 2003; Solis et al., 1998). However, other studies did not

detect significant differences in the level of effects achieved by QM in manufacturing

and service companies (Prajogo, 2005) or present a more diverse picture by indicating

that manufacturing and service companies can reach similar levels of performance

gains but on different performance categories (Nilsson et al., 2001; Powell, 1995;

Sharma and Gadenne, 2002; Singh et al., 2006). For example, Powell (1995) points

out that the performance gains of manufacturers did not exceed those of service com-

panies in his study as they did not surpass them in the more intangible practices of

QM. Furthermore, Beaumont et al. (1997) and Singh et al. (2006) found out that the



barriers for the implementation of QM are the same for manufacturing and service

companies with employee resistance, lack of management commitment and under-

standing being the most prevalent ones.

Based on the results presented above, one can assume that differences in the adoption

of QM for externally sourced BS may exist between buying companies in manufactur-

ing and service industries. Most of the existing research suggests that manufacturing

companies implemented more comprehensive sets of QM practices. However, this

finding may not be replicated in our study due to its focus on BS. Service companies

might be more adept in using QM practices for purchased services than manufacturers

as they may possess more experience in managing the quality of the services they de-

liver to their customers.

C.2.3 QM in small and large companies

Concepts of QM were first developed and implemented by large Japanese and subse-

quently adopted by large US organizations (Powell, 1995; Sila, 2007). Much of the

academic literature has therefore examined the usage of QM practices in large corpora-

tions (Ghobadian and Gallear, 1997). Similarly, most research on purchasing is “from

and for large companies” (Mudambi and Schründer, 1996: 122) and does not provide

much insight onto which purchasing practices small companies may use (Ellegaard,

2009). However, most researchers acknowledge that there are fundamental differences

between small and large firms (Coviello et al., 2006; Mintzberg, 1980). On the one

hand, small companies are, for example, considered to possess the advantage of being

more flexible, closer to customers, less formalized and specialized than large firms

(Ghobadian and Gallear, 1997; Haksever, 1996; Hewitt, 1997; Sila, 2007; Sun and

Cheng, 2002). On the other hand, they face severe disadvantages in comparison to

large firms such as lack of capital and skilled staff, little bargaining power towards

suppliers and customers, insufficient budgets for training and the pressure to follow

short-term objectives (Davig et al., 2003; Ghobadian and Gallear, 1997; Fening et al.,

2008; Haksever, 1996; Hewitt, 1997). These discrepancies suggest that the implemen-

tation of QM practices varies between large and small firms. However, research on

whether small and large firms implement QM differently is scarce and existing studies

provide distinct results (Ahire and Golhar, 1996; Gustafsson et al., 2003; Chapman

and Sloan, 1999; Hendricks and Singhal, 2001; Sila, 2007).


167

Table C- 2 provides an overview of selected empirical studies investigating QM adop-

tion in large and small companies. The research presented provides varying results on

the question what motivates small and large companies to implement QM practices.

While Sun and Cheng (2002) discovered that large companies mainly implement QM

practices due to corporate decision, company survival, and to reduce costs the main

goal of small companies in the realization of QM is to meet customer requirements

(Sun and Cheng, 2002). By contrast, Chapman and Sloan (1999) did not detect vari-

ances in the motivation for implementing continuous improvement practices between

large and small firms. Furthermore, most authors (Ahire and Golhar, 1996; Chapman

and Sloan, 1999; Davig et al., 2003; Ghobadian and Gallear, 1997; Mohrman et al.,

1995; Sun and Cheng, 2002) identified differences in the adoption of QM practices

between large and small companies. However, the results presented by Sila (2007) and

Gustafsson et al. (2003) do not provide support for the assumption that smaller com-

panies adopt QM practices in a different way than large ones. Finally, Sila (2007) did

not identify varying effects of QM on organizational performance in large and small

companies, while other authors posit that outcomes differ (Hendricks and Singhal,

2001; Sun and Cheng, 2002). It has to be noted, however, that the latter ones provide

contradicting study results. While Hendricks and Singhal (2001) concluded that the

positive change of operating income after implementing QM is higher for small com-

panies, Sun and Cheng (2002) inferred that QM contributes less to business results in

small than in large firms.

The results of previous research thus draw a diverse picture regarding the motivation

for as well as the adoption and effect of QM in small and large companies. The present

study will therefore include an investigation of potential differences between small and

large firms regarding their QM for externally sourced BS.


168

Table C- 1: Selected empirical studies comparing QM in manufacturing and service companies

Study Sample Method of

analysis /

level of analysis /

origin of sample /

subjective or

objective data

Definition of

manufacturing

and service

companies

Major results regarding

adoption of QM


effects of QM


motivation, barriers and

future plans related to QM

Beaumont et al. (1997)

261 manufacturing

companies, 105 service companies

Chi-square, non-parametric tests /

companies / Australia / subjective

Not mentioned Manufacturing companies score significantly higher than

service companies on an aggregate measure of TQM.

No relationship between QM and business performance for

manufacturing or service companies.

Barriers to QM: No significant difference

between manufacturing and service companies. Lack of understanding by managers, resistance by managers/ supervisors and employees are the three main

impediments to the adoption of quality practices.

Huq & Stolen

(1998)

18 manufacturing

companies, 18 service companies

Chi-square / Companies /

US / subjective

Manufacturing = producing

tangible products / service = producing intangible products

Manufacturing companies score significantly higher than

service companies on the adoption of ten out of 19 QM practices. Manufacturers favor scientific, structured QM practices while service companies focus on human

interactions and processes for QM implementation.

- -

Lagrosen &

Lagrosen (2003)

197

manufacturing companies, 54 private service companies, 26 public

service organizations

ANOVA, t-tests /

companies / Sweden / subjective

Assignment to

manufacturing or service sector by respondents

Manufacturing companies

score significantly higher than service companies on an aggregate measure of QM.

Manufacturing companies

experienced improvements in their processes after implementing QM while service companies have not detected positive effects.

-

Nilsson et al. 360 Structural equation According to - Process orientation has a -


169


analysis /

level of analysis /

origin of sample /

subjective or

objective data

Definition of

manufacturing

and service

companies


adoption of QM


effects of QM




(2001) manufacturing companies, 122 service

companies

modelling, t-tests / companies / Sweden /

subjective and objective

NACE classification

greater positive impact on customer satisfaction for service companies than for

manufacturing companies. Employee management has a greater positive impact on business results for service companies than for manufacturing companies.

However, customer orientation has a greater positive impact on customer satisfaction for manufacturing companies than for service organizations.

Prajogo (2005)

103 manufacturing companies,

91 service companies

Structural equation modeling and MANOVA /

plants / Australia / subjective

Manufacturing includes sectors such as food and

beverage, textiles, chemical, basic and fabricated metal products etc. Service

sectors include construction, consulting, health care etc.

With the exception of people management (for which service companies score

significantly higher) no significant difference between manufacturing and service companies.

No significant difference in terms of the relationship between QM practices and

quality performance between manufacturing and service companies.

-

Parasuraman & Varadarajan (1988)

35 manufacturing companies, 39 service companies

t-tests / companies / US / subjective

Manufacturers = tangible dominant / service = intangible

- - Future plans: Service companies want to put more effort on human resource strategies than manufacturing ones.


170


analysis /

level of analysis /

origin of sample /

subjective or

objective data

Definition of

manufacturing

and service

companies


adoption of QM


effects of QM




dominant

Powell (1995)

24 manufacturing, 15 service companies

Correlation analysis / companies / US / subjective

Not mentioned Supplier relationships are stronger correlated with performance for manufacturing companies whereas process

improvements are more important for service companies.

No significant difference in the level of benefits achieved by implementing QM between manufacturing and service companies. The

performance gains by manufacturers did not exceed those of service firms because the manufacturers did not surpass them in the intangible areas most responsible for

TQM performance.

-

Quazi et al. (1998)

13 manufacturing companies,

20 service companies

Correlation and multiple regression analysis /

companies / Singapore / subjective

Not mentioned Manufacturing companies score significantly higher than service companies on all QM

practices except on specificity of quality goals within the division.

- -

Sharma & Gadenne (2002)

62 manufacturing companies, 58 service companies, 20

construction companies

Factor analysis, MANOVA / companies / Australia / subjective and objective

Not mentioned Manufacturing companies make more use of customer liaison and open organisation QM practices than service or construction companies. Value chain integration is,

however, employed by all industries to the same level.

Adoption of QM leads to higher (subjective) firm performance in manufacturing companies but does not have effects on (the objective measure of) return

on total assets (ROA). In service companies, the adoption of QM has positive effects on both types of measures whereas in construction companies no

effect could be detected.

-

Singh et al. 160 Wilcoxon rank- According to No significant differences in Manufacturing and service Motivation for QM:


171


analysis /

level of analysis /

origin of sample /

subjective or

objective data

Definition of

manufacturing

and service

companies


adoption of QM


effects of QM




(2006) manufacturing companies, 149 service

companies / companies / Australia / subjective

sum test ANZSIC classification

the adoption of ISO 9000 between manufacturing and service companies on the

aggregated level.

companies significantly differ regarding the types of benefits achieved from the

adoption of ISO 9000.

Manufacturing and service companies have similar motivations for implementing

the ISO 9000 standard. Barriers to QM: Manufacturing and service companies face similar difficulties with

implementation of the ISO 9000 standard.

Solis et al. (1998)

131 manufacturing companies, 109 service companies

t-tests / companies / Taiwan / subjective

Not mentioned Manufacturing companies score significantly higher than service companies on six out of eight QM practices.

Manufacturing companies achieved higher benefits from TQM than service companies.

-

Woon (2000) 129 manufacturing companies, 111 service companies

Correlation analysis, ANOVA, ANCOVA / companies / Singapore /

subjective

According to SIC classification

No significant differences in the adoption of TQM between manufacturing and service companies on the aggregated level.

- -


172

Table C- 2: Selected empirical studies comparing QM in small and large companies


analysis /

level of analysis /

origin of sample /

subjective or

objective data

Definition of

small company


adoption of QM


effects of QM


motivation for QM

Ahire & Golhar

(1996)

275 small companies,

224 large companies

One-tailed t-tests / companies /

US / subjective

Number of employees

< 250

Small companies make more use of customer focus and

statistical process control. Small companies producing high-quality products make more use of employee involvement. Large companies producing

high-quality products are more effective in design QM and statistical process control.

- -

Chapman &

Sloan (1999)

15 small

companies, 78 large companies

Comparison of

means / companies / Australia / subjective

Number of

employees < 200

Differences in the adoption of

CI support mechanisms. Small companies make more use of incentive systems and suggestions schemes whereas large companies make more use of training to support CI.

- No differences in motivation

for implementation of continuous improvement (CI).

Davig et al. (2003)

75 small companies

Frequency distributions / small companies /

US / subjective

Number of employees < 250

Small companies make less use of QM practices than large ones due to the lack of

understanding of TQM by top managers and perceived cost of implementation.

- -

Fening et al.

(2008)

116 small

companies

Regression

analysis / small companies /

Number of

employees < 50

- QM practices have a positive

effect on business results of small companies in Ghana.

-


173


analysis /

level of analysis /

origin of sample /

subjective or

objective data

Definition of

small company


adoption of QM


effects of QM


motivation for QM

Ghana / subjective

Ghobadian & Gallear (1997)

2 small companies, 2 large companies

Case studies / companies / UK / subjective

Micro companies: Number of employees < 10;

Small companies: Number of employees between 10 and 99;

Medium-sized companies: Number of employees between 100 and 499;

Large companies: Number of employees ≥ 500

Small companies make more use of cross-functional integration, management leadership and

communication methods but do not implement recognition schemes. Large companies make more use of training.

- -

Gustafsson et al. (2003)

159 small service companies, 122 large service

companies

Structural equation modelling / companies / Sweden / subjective

Small companies: Number of employees < 50

No difference in the adoption of QM practices between small and large companies.

Customer orientation has a stronger effect on business results in small than in large service companies. Process orientation has a stronger

effect on customer satisfaction in large than in small service companies.

-

Hendricks & Singhal

205 small companies,

ANOVA, ANCOVA, t-

Annual sales below 917

- Small companies obtain better performance results

-


174


analysis /

level of analysis /

origin of sample /

subjective or

objective data

Definition of

small company


adoption of QM


effects of QM


motivation for QM

(2001) 206 large companies

values / companies / US /

objective

million USD (median of sample)

(measured as change of operating income) than large companies when

implementing QM. Martinez-Lorente,

Gallego-Rodriguez, & Dale (1998)

223 companies Correlation analysis /

Companies / Spain / subjective

Companies with more than 700

employees were deleted for analysis

Larger companies adopt QM to a higher degree than small

ones.

- -

Mohrman et

al. (1995)

290 large

companies

Correlation and

regression analysis / companies / US / subjective

Not mentioned Large companies make more

use of only one practice of QM, just-in time deliveries. Otherwise, no effect of company size on adoption of QM practices.

- -

Sila (2007) 102 small companies, 102 medium-

sized companies, 82 large companies

Structural equation modelling / companies /

US / subjective

Small companies: Number of

employees < 100; Medium-sized: Number of employees between 101

and 500; Large: Number of employees > 500

No difference in the adoption of QM practices between small and large companies.

No difference regarding the effects of QM on organizational performance

between small and large companies.

-

Sun & Cheng (2002)

180 small and large companies

Discriminant and canonical correlation

Number of employees < 150

Small companies make more use of leadership, human resource development and

QM contributes less to organizational performance in small than in large

Small companies mainly implement QM due to customer requirement or


175


analysis /

level of analysis /

origin of sample /

subjective or

objective data

Definition of

small company


adoption of QM


effects of QM


motivation for QM

analysis / companies / Norway /

subjective

quality information. QM is more people-oriented and informal. Large companies

make more use of training, customer feedback, social responsibility and citizenship as well as cooperation with suppliers. QM is more structural and process-

oriented.

companies. external market conditions. Large companies mainly implement QM because of

procedural and marketing benefits.



C.3 Research hypotheses and methodology

This section briefly develops the hypotheses based on the literature review and de-

scribes the research methodology.

C.3.1 Research hypotheses

The empirical results of previous research presented above underline the need for this

study. They call for a thorough investigation of differences in the adoption of QM

practices for externally sourced BS by buying companies regarding industry and firm

size. I will investigate these by bringing forward the following hypotheses in their null

form:

H 1: There are no differences in the adoption of QM practices for externally

sourced BS between manufacturing and service as well as between small and

large companies.

H 2: There are no differences in the effects of using QM practices for externally

sourced BS between manufacturing and service as well as between small and

large companies.

H 3: There are no differences regarding the barriers to the implementation of QM

practices for externally sourced BS between manufacturing and service as

well as between small and large companies.

H 4: There are no differences regarding the determinants of QM practices for ex-

ternally sourced BS between manufacturing and service as well as between

small and large companies.

C.3.2 Development of the measurement instrument

I decided to use the survey method as it is more useful in testing hypotheses than, for

example, case studies (Huber and Power, 1985). The survey instrument was developed

in three steps: First, an exploratory, multiple, embedded (Yin, 2003) and comparative

(Dul and Hak, 2008; Silverman, 2002) case study was conducted in order to investi-

gate the broader domain of purchasing of BS by interviewing 32 representatives of 16


177

manufacturing and service companies. Second, a prototype questionnaire was devel-

oped based on the results of the previous case studies and an extensive review of lit-

erature in the areas of QM and service quality. Constructs from earlier research were

used whenever possible. The questionnaire and its subsequent version measured items

on a seven-point Likert scale with end points of “not at all (=1)” to “to the fullest ex-

tent (=7)”. Third, the prototype questionnaire was pre-tested by seven purchasing

managers, six quality managers and four academics from the area of operations man-

agement. Each of these filled out the questionnaire. Afterwards, the pilot study was

statistically tested. The results of the pre-test were discussed with the respondents.

Their feedback and the statistical analysis led to modifications of the wording of some

survey questions. The final items and corresponding constructs are given in

Table C- 4 to 7.

C.3.3 Sample

The final version of the questionnaire was made available online to firms operating in

Austria, Germany and Switzerland. The sample was drawn from two sources: First, a

contact list from the researchers‟ university was used. Second, several contacts were

found by searching the publicly available company databases to avoid potential bias

from convenience sampling (Zhu et al., 2008). In total, I identified 1,977 companies

and contacted them by e-mail. 664 e-mails were undeliverable because contact data

were out of date. This left us with a list of 1,313 usable e-mail addresses. In total, I

received 513 responses. Responses with missing values were excluded from further

analysis. Thus, a sample of 252 complete questionnaires remained resulting in a re-

sponse rate of 19.2%.

As can be seen in Table C- 3, the sample includes companies buying BS from a broad

range of industries. Also, these companies range from small and medium enterprises to

multinational corporations. Most of the responses came from Germany, followed by

Switzerland and Austria. The respondents majorly held positions such as head of pur-

chasing or purchasing manager followed by head of QM, chief executive officer

(CEO) and quality manager. Furthermore, many respondents represented other posi-

tions such as head of supply chain management, head of operations, head of marketing

etc. indicating that they were intensive consumers of BS purchased by their company.

I therefore concluded that the respondents possessed the required knowledge to answer

the questions appropriately.



C.3.4 Data analysis

Data from 7-point Likert scales are ordinal (Barnes et al., 2001) and were in our sam-

ple not normally distributed. I therefore decided to use the non-parametric Mann-

Whitney-U test to examine differences in managerial perceptions. I adopted the Mann-

Whitney-U test on the level of single items and aggregated constructs which are shown

in Table C- 4 to 7 in order to obtain more detailed results. The null hypothesis states

that there is no statistical significant difference between the mean scores of manufac-

turing and service as well as between small and large companies.

The reliability of the constructs was tested by computing Cronbach‟s alpha (Cronbach,

1951). All constructs showed values well above the recommended threshold of 0.7

(Henseler et al., 2009) with the exception of the construct for determinants

(Cronbach‟s alpha of 0.691). Following a recommendation by Nilsson et al. (2001) I

nevertheless retained the construct in the study due to its closeness to the recommend-

ed value and its theoretical importance. The mean values of the constructs were calcu-

lated by dividing the sum of the means values of the items by their quantity. This pro-

cedure is similar to that of Martinez-Lorente et al. (1998) and Powell (1995).

The four independent samples for this test were companies from the manufacturing

and the service sector as well as large and small companies. According to recommen-

dations by the European Commission, the participating companies were assigned to

either the manufacturing or the service sector by their NACE Rev. 2 code. Organiza-

tions from section G to N and P to S in NACE Rev. 2 were assigned to the service sec-

tor while firms from sections A to F and L were defined as manufacturers (European

Commission, 2010b; European Commission, 2010a). Furthermore, large companies

were considered having more than 250 employees (European Commission, 2010c).

Table C- 3: Response sample composition

Response

sample size:

252 responses

Industry

Name of the NACEa group Number of

responses

Percentage

of responses

Manufacturing (C): 100 39.7%

Transportation and storage (H): 46 18.3%

Administrative and support service activities (N):

28 11.1%

Information and communication (J): 15

6.0%

Professional scientific and technical activities (M):

12

4.8%

Financial and insurance activities (K): 11 4.4%


179

Wholesale and retail trade; repair of motor vehicles and motorcycles (G):

11

4.4%

Construction (F): 9 3.6%

Human health and social work activities (Q): 9 3.6%

Electricity, gas, steam and air conditioning supply (D):

5 2.0%

Public administration and defence; compulsory social security (O):

3

1.2%

Education (P): 2 0.8%

Agriculture, forestry and fishing (A) 1 0.4% Total number of manufacturers (NACE code A to F and L) 115 45.6%

Total number of service companies (NACE code G to N and P)

137 54.4%

Number of

employees

per company

Category of number of employees

1-9 employees: 11 4.4%

10-49 employees: 26 10.3% 50-249 employees: 41 16.3%

240-999 employees: 47 18.7% 1,000 – 4,999 employees: 54 21.4%

≥ 5,000 employees: 73 29.0%

Total number of large companies (>250 employees) 174 69.0% Total number of small companies (≤ 250 employees) 78 31.0%

Turnover per

company

Category of turnover

0 < 2 million Euro: 17 6.7%

2 < 10 million Euro: 17 6.7%

10 < 50 million Euro: 36 14.3% 50 < 250 million Euro: 48 19.0%

250 < 1,000 million Euro: 39 15.5% 1,000 < 5,000 million Euro: 41 16.3%

≥ 5,000 million Euro: 44 17.5% Not specified: 10 4.0%

Country of

headquarter

of company

Country

Austria: 11 4.4% Germany: 138 54.8%

Switzerland: 54 21.4% Liechtenstein: 2 0.8%

Other: 6 2.4%

Not specified: 41 16.3% Respondent

titles

Title

Head of purchasing: 65 25.8% Purchaser: 30 11.9%

Head of quality management: 30 11.9% Quality manager: 17 6.7%

CEO: 26 10.3%

Other (Head of supply chain management, head of operations etc.):

84 33.3%

a According to Nomenclature statistique des activités économiques dans la Communauté européenne (NACE

Rev. 2) (European Commission, 2010b).

C.4 Results and discussion

In the following section the result of the quantitative analysis are presented and further

discussed.



C.4.1 Results regarding the adoption of QM practices

Table C- 4 provides a summary of the adoption of QM practices for externally sourced

BS in manufacturing, service, small and large companies. As can be seen, on the level

of the whole population the most intensively used QM practices for externally sourced

BS in descending order of their mean values are service design, workforce manage-

ment, management support, customer involvement, quality information, process and

provider management.

As for the differences between manufacturing and service companies on the level of

constructs, the null hypothesis was rejected for management support and customer in-

volvement indicating significant differences in the adoption of these QM practices be-

tween manufacturing and service companies. Service firms demonstrate more support

by top management for quality issues for externally sourced BS and a more intensive

customer involvement. These results are in contrast to results of earlier studies which

examined the adoption of QM on an aggregate level and concluded that manufacturing

companies score higher than service firms (Beaumont et al., 1997; Lagrosen and Lag-

rosen, 2003) or did not detect any significant differences between industries at all

(Singh et al., 2006; Woon, 2000). Several authors have inferred that manufacturers are

more adept than service providers in the usage of QM practices for outgoing goods or

services (Huq and Stolen, 1998; Quazi et al., 1998; Sharma and Gadenne, 2002; Solis

et al., 1998). When examining the QM for incoming services, however, service com-

panies use the same or even more intense levels of QM practices. A potential explana-

tion might be that they are able to transfer their knowledge and experience from ser-

vices they offer to their customers to the QM for their externally purchased services.

This also means that for certain QM practices manufacturing companies may be able

to learn from service firms in order to improve their QM.

On the level of single items, top management of service companies more often reviews

quality issues of externally sourced services and is more intensively involved in quali-

ty-related activities. Furthermore, it more frequently sets objectives regarding the qual-

ity of externally sourced BS than management of manufacturing firms. In terms of

workforce management, service providers offer more training related to quality of ex-

ternally sourced services and enhance the quality awareness of their employees more

intensively than manufacturers. In addition, service companies are more skilled in in-

volving their internal or external customers into QM for externally sourced BS. In par-

ticular, they more often integrate the requirements and the feedback of their external

customers and analyze their satisfaction regarding the service. The relatively intense


181

adoption of top management support, workforce management and customer involve-

ment may reflect the importance of personal interaction between service providers and

its customers during service production and delivery (Grönroos, 2007). For example, it

may be more important for a service provider than a manufacturer to properly train its

employees regarding the quality of its externally sourced services as these may be-

come part of its own service offering. Furthermore, service providers may possess

more experience in customer involvement as a larger percentage of their employees

are in direct contact with their customers. Service companies in our sample are also

ahead of manufacturers when it comes to quality information in terms of defining the

required level of service quality. They more frequently use key performance indicators

or service level agreements to define their demands and monitor their attainment.

Again, this may be an effect of longer experience in using key performance indicators

and service level agreements for the services they offer to their customers.

By contrast, manufacturers more often involve multiple departments into the service

design than service providers. They also conduct a more intense provider management

requiring their service providers to establish an effective system for measuring quality

and to provide certifications such as ISO 9000, ISO 14001 or SA 8000. This result cor-

responds to the study by Powell (1995). He found out that supplier relationships are

stronger correlated with performance for manufacturing companies than for service

firms. A potential explanation for this may lie in the evolution of QM. Many authors

have argued that QM and related certifications were first adopted by manufacturing

companies (Rönnbäck and Witell, 2008; Sharma and Gadenne, 2002; Singh et al.,

2006). Therefore, they may also possess deeper knowledge regarding supplier in-

volvement which can now be easily transferred to their service providers. This may,

however, represent a threat to the effectiveness of QM practices for externally sourced

BS. For example, if manufacturers use techniques of the involvement of goods suppli-

ers to service providers without adjusting them to the specifics of services, they might

loose some of their impact and efficiency.

Significant differences in the adoption of QM practices for externally sourced BS exist

for provider involvement, quality information, service design and process management

between large and small companies on the construct level. In all these cases, large

companies use the practices to a higher extent than small ones. This contradicts earlier

empirical research by Sila (2007) who did not discover significant differences in the

adoption of QM practices between large and small companies.



Examining the differences on the item level, it becomes clear that larger companies

audit and train their service suppliers more intensively than small firms. Furthermore,

they more often require their service providers to establish a QM system for the ser-

vices they sell and to provide quality-related certifications. As for quality information,

large companies more frequently use benchmarking as well as key performance indi-

cators or service level agreements than small companies. In addition, multiple depart-

ments, internal service customers and the service providers themselves are more often

involved in the service design process in large than in small companies. In terms of

process management, large companies make more use of electronic systems and statis-

tical methods for inspection and assessment of externally sourced BS than small ones.

Furthermore, processes related to the provision of such services are better documented

in large rather than small firms.

Regarding the items related to customer involvement, only one significant difference

was detected related to the feedback on the quality of externally sourced BS given by

internal customers. Large companies receive such information more often than small

ones. In terms of management support and workforce management no significant dif-

ferences between large and small companies were found. These findings may be relat-

ed to the lower degree of formalized structures and hierarchical levels in small firms

(Ghobadian and Gallear, 1997; Hewitt, 1997). Thus, the top management of a small

firm may have to be more involved into the QM for externally sourced services as

there are no specialized departments dealing with it.

Overall, these differences may reflect that large companies possess the required re-

sources in terms of budgets and skilled staff to implement more formal QM practices

such as provider involvement, quality information, service design and process man-

agement. In line with research by Sun (2000) and Ghobadian and Gallear (1997), small

companies in our sample, by contrast, seem to leverage their advantages for the im-

plementation of a more informal and people-oriented QM for externally sourced ser-

vices.

C.4.2 Results regarding the effects of QM practices

Table C- 5 indicates that the survey sample experienced positive effects by using QM

practices for externally sourced BS. Overall, the strongest effects were the increase of

service quality and cost efficiency followed by further effects and raise of customer

satisfaction.


183

On the construct level, service companies scored higher than manufacturers on the ad-

ditional effects associated with QM. Examining the level of the single items, service

companies could increase the satisfaction of their external customers and reduce their

complaint rates related to externally sourced BS to a higher extent than manufacturing

companies. Furthermore, activities related to the QM for externally sourced BS led to

a steeper rise of sales volumes in service than in manufacturing companies. Manufac-

turing companies, by contrast, could lower the purchase prices of externally sourced

BS through QM practices more than service companies. These results are in contrast to

studies by Beaumont et al. (1997), Powell (1995) who did not discover significant dif-

ferences regarding the effects of QM between manufacturing and service companies.

They support, however, authors such as Nilsson et al. (2001) and Singh et al. (2006)

who posited that service companies can achieve more customer satisfaction and in-

crease of sales volumes by implementing QM than manufacturers. A potential reason

for this may be that for service companies externally purchased BS are a more substan-

tial part of their own service offering. Thus, such services may have a more direct ef-

fect on customer satisfaction and sales volume as they are more frequently transferred

to end customers. On the contrary, manufacturers may purchase more services exter-

nally which are not part of their final offer to their customers.

On the construct level, larger companies could achieve significantly higher levels of

customer satisfaction and cost efficiency than small firms by using QM practices for

externally sourced BS. In addition, the overall value of QM for services was perceived

higher in manufacturing and in service firms. Looking at the single items, large com-

panies could achieve a significantly greater increase in satisfaction of internal custom-

ers with the quality of externally sourced BS and a higher reduction of complaints by

external customers. Moreover, larger firms could lower purchase prices of externally

sourced BS, operating costs and the cost for their quality failures to a higher degree

than small firms. Furthermore, larger organizations experienced a stronger increase of

productivity than small ones by the adoption QM practices for externally sourced BS.

In total, these results contrast previous findings by Sila (2007) who detected no differ-

ence regarding the effects of QM on organizational performance between large and

small firms and Hendricks and Singhal (2001) who suggested that small companies

obtain better performance results than large ones by implementing QM. The findings

are in line, however, with Sun and Cheng (2002) who discovered that QM contributes

less to organizational performance in small than in large companies. The reason for the

greater effects of QM in large companies may lie in their higher degree of outsourcing.



Large companies may have outsourced a greater share of their required BS than small

companies. This may mean that externally sourced BS represent a bigger share of a

large company‟s purchasing volume than that of a small one. Therefore, the implemen-

tation of QM practices for such services may also have stronger effects on organiza-

tional performance in large than in small firms.

C.4.3 Results regarding the barriers to the implementation of QM practices

The results relating to the difficulties faced with the implementation of QM practices

for externally sourced BS are summarized in Table C- 6. Overall, the heterogeneity

and the necessity to subjectively evaluate the quality of services were perceived as ma-

jor impediments to successful QM implementation. Neither on the construct nor on the

item level could major differences between manufacturing and service as well as large

and small companies be detected. The only exception was the lack of support by top

management which was more critical for large than for small companies. These results

are in line with the ones by Beaumont et al. (1997) and Singh et al. (2006) who identi-

fied similar barriers to QM and ISO 9000 implementation in manufacturing and ser-

vice firms.

These relative homogeneous values may indicate that barriers in establishing QM for

externally sourced BS are more related to the general characteristics of services which

cannot be influenced by the individual buying company. More specific factors such as

degree of service definition, resistance to change or level of software support and

availability of resources do not seem to represent a major impediment to the realiza-

tion of QM in buying firms. For example, it may be more difficult for a buying com-

pany to set-up a comprehensive system of QM for the complete set of their BS rather

than finding suitable service specifications for a particular service. This may mean that

buying companies need particular support in the creation of a QM for BS which com-

prises many instead of just few of their externally sourced BS.

C.4.4 Results regarding the determinants of QM practices

Table C- 7 presents the results related to the determinants of QM practices for exter-

nally sourced BS. Overall, buying companies focus their QM activities on services

whose quality failure would represent a critical risk, which represent an important

share of their purchasing volume, are important to the production process or trans-

ferred to the buying company‟s customers.


185

On the level of constructs, the determinants of QM for incoming services significantly

differ between large and small companies whereas no difference could be detected

between manufacturing and service firms.

On the level of single items, however, manufacturers more often than service firms

focus their QM activities on services which are important for their production process-

es. Although production processes are performed in manufacturing and service organi-

zations, this result may be due to the widespread understanding that production repre-

sents the core business of manufacturing companies rather than service providers. Ser-

vice firms, by contrast, attach more importance to services which are well specified

than manufacturers. This result may reflect the greater experience of service providers

in the definition and description of services they offer. This knowledge may have been

transferred to the specification of externally sourced services. The impact of externally

sourced BS on the production process, its share in the purchasing volume and the de-

gree of specification were more critical determinants for large than small companies.

A potential explanation for this result may be that small companies have not yet taken

a very structured approach to focusing their QM activities for their externally sourced

BS. Therefore, they may not have analyzed which of these services are important for

their production processes, are well specified or reflect a significant share of their pur-

chasing volume to the same degree as large companies. Rather, they may perform their

QM activities for all of their externally sourced BS alike while large companies put

more focus on the critical ones.


186

,

Table C- 4: Adoption of QM practices for externally sourced BS in manufacturing, service, small and large companies

Constructs

(Cronbach’s alpha)

Items

Population

mean

(std. dev.a)

Mean value

manufacturing companies

(std. dev.a)

Mean value

service companies

(std. dev.a)

Mann-

Whitney U score /

Z score /

Sig. levelb

Hypothesis

test result

(two-tailed, α=0.05)

H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Management support

(0.931)

4.04

(1.734)

3.76

(1.704)

4.28

(1.729)

6,465/

-2.457 /

0.014

Reject 3.93

(1.718)

4.29

(1.756)

5,980 /

-1.510 /

0.131

Do not reject

Our top management

reviews problems related to the quality of externally sourced business services in

organizational top management meetings.

4.36

(1.855)

4.10

(1.849)

4.58

(1.838)

6,686 /

-2.094 /

0.036

Reject 4.25

(1.801)

4.59

(1.964)

6,007 /

-1.476 /

0.140

Do not reject

Our top management sets

objectives regarding the quality of externally sourced business services.

4.05

(1.860)

3.78

(1.853)

4.28

(1.842)

6,648 /

-2.159 /

0.031

Reject 3.97

(1.862)

4.24

(1.853)

6,226 /

-1.060 /

0.289

Do not reject

Our top management is

personally involved in activities to improve the

quality of externally sourced business services.

3.72

(1.833)

3.39

(1.810)

3.99

(1.813)

6,376 /

-2.640 /

0.008

Reject 3.58

(1.819)

4.03

(1.837)

5,849 /

-1.775 /

0.076

Do not reject


(0.872)

4.40

(1.475)

4.24

(1.472)

4.53

(1.470)

6,795/

-1.880 /

0.060

Do not reject 4.44

(1.435)

4.30

(1.566)

6,535/

-0.470 /

0.639

Do not reject

Training related to quality of services is given to the employees in our company.

3.64

(1.935)

3.12

(1.812)

4.07

(1.935)

5,656 /

-3.906 /

0.000

Reject 3.63

(1.936)

3.67

(1.945)

6,715 /

-0.134 /

0.893

Do not reject

Our company forms teams to

solve problems related to the quality of externally sourced business services.

4.99

(1.712)

5.13

(1.673)

4.88

(1.742)

7,201 /

-1.197 /

0.231

Do not reject 5.11

(1.604)

4.73

(1.918)

6,116 /

-1.276 /

0.202

Do not reject

We give some of our 4.07 3.99 4.14 7,481 / Do not reject 4.16 3.88 6,271 / Do not reject


187

Constructs


Items

Population mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

employees (for example, purchasers or quality managers) clear objectives regarding the quality of externally sourced business services.

(1.903) (1.922) (1.891) -0.696 /

0.486

(1.851) (2.013) -0.974 /

0.330

Ideas from our employees

are actively used to improve the quality of externally sourced business services.

4.72

(1.748)

4.66

(1.796)

4.77

(1.712)

7,607 /

-0.476 /

0.634

Do not reject 4.78

(1.757)

4.59

(1.732)

6,334 /

-0.858 /

0.391

Do not reject

Our company continually

enhances the awareness of its employees regarding the quality of externally sourced business services.

4.56

(1.765)

4.30

(1.747)

4.77

(1.757)

6,540 /

-2.354 /

0.019

Reject 4.53

(1.759)

4.62

(1.789)

6,586 /

-0.379 /

0.705

Do not reject

Provider involvement

(0.867)

3.70

(1.245)

3.86

(1.320)

3.57

(1.167)

6,885 /

-1.724 /

0.085

Do not reject 3.94

(1.259)

3.17

(1.040)

4,501 /

-4.273 /

0.000

Reject

We strive to establish long-

term relationships with our providers of business services.

5.77

(1.152)

5.78

(1.082)

5.75

(1.211)

7,815 /

-0.114 /

0.909

Do not reject 5.80

(1.107)

5.69

(1.252)

6,552 /

-0.457 /

0.648

Do not reject

Our company has a thorough

rating system for its providers of business services.

4.48

(1.822)

4.49

(1.889)

4.48

(1.770)

7,817 /

-0.107 /

0.915

Do not reject 4.58

(1.822)

4.27

(1.814)

6,119 /

-1.263 /

0.207

Do not reject

The rating of our service

providers is followed by pre-defined measures.

4.24

(1.898)

4.08

(2.001)

4.38

(1.803)

7,178 /

-1.228 /

0.219

Do not reject 4.36

(1.884)

3.97

(1.914)

6,013 /

-1.462 /

0.144

Do not reject

We continually audit our

service providers to make sure we receive quality

3.50

(1.863)

3.65

(1.892)

3.36

(1.835)

7,205 /

-1.183 /

Do not reject 3.71

(1.856)

3.01

(1.798)

5,291 /

-2.833 /

Reject


188

,

Constructs


Items

Population mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

business services. 0.237 0.005

Our service providers have

an effective system for measuring the quality of the business services they sell us.

4.08

(1.953)

4.44

(1.957)

3.78

(1.905)

6,345 /

-2.687 /

0.007

Reject 4.37

(1.845)

3.44

(2.042)

4,944 /

-3.481 /

0.000

Reject

Our service providers are

involved in our quality training.

2.48

(1.583)

2.51

(1.672)

2.45

(1.510)

7,855 /

-0.040 /

0.968

Do not reject 2.70

(1.674)

2.00

(1.238)

5,227 /

-3.019 /

0.003

Reject

Our service providers are

recognized and rewarded for service quality improvement.

3.04

(1.678)

3.02

(1.665)

3.07

(1.694)

7,747 /

-0.231 /

0.817

Do not reject 3.14

(1.698)

2.83

(1.623)

6,144 /

-1.222 /

0.222

Do not reject


to produce the ISO 9000 or an equivalent certification

regarding their quality management.

3.86

(2.268)

4.36

(2.181)

3.44

(2.262)

6,057 /

-3.213 /

0.001

Reject 4.25

(2.164)

2.99

(2.265)

4,648 /

-4.066 /

0.000

Reject


to produce the ISO 14001 or an equivalent certification regarding their environmental management.

3.08

(2.097)

3.56

(2.185)

2.69

(1.939)

6,018 /

-3.323 /

0.001

Reject 3.59

(2.121)

1.96

(1.541)

3,725 /

-5.891 /

0.000

Reject

Our service providers have to produce the SA 8000 or

an equivalent certification regarding their occupational health and safety.

2.48

(1.920)

2.74

(2.022)

2.27

(1.809)

6,759 /

-2.078 /

0.038

Reject 2.90

(2.053)

1.55

(1.124)

4,088 /

-5.399 /

0.000

Reject

Quality information

(0.873)

3.82

(1.416)

3.80

(1.413)

3.84

(1.424)

7,738 /

-0.243 /

0.808

Do not reject 3.95

(1.421)

3.52

(1.370)

5,680 /

-2.070 /

0.038

Reject


189

Constructs


Items

Population mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

In our company, quality data (for example, error rates,

complaint rates etc.) regarding externally sourced business services are available for purchasers.

4.22

(1.942)

4.47

(1.916)

4.01

(1.946)

6,827 /

-1.843 /

0.065

Do not reject 4.29

(1.827)

4.06

(2.182)

6,412 /

-0.707 /

0.480

Do not reject

In our company, quality data

(for example, error rates, complaint rates etc.)

regarding externally sourced business services are available for the internal requisitioner.

4.58

(1.842)

4.68

(1.819)

4.49

(1.863)

7,412 /

-0.819 /

0.413

Do not reject 4.61

(1.775)

4.49

(1.992)

6,618 /

-0.319 /

0.749

Do not reject

We regularly report data

regarding the quality of externally sourced business services.

3.99

(1.946)

4.01

(1.949)

3.97

(1.951)

7,801 /

-0.135 /

0.893

Do not reject 3.97

(1.923)

4.04

(2.009)

6,607 /

-0.339 /

0.734

Do not reject

We exchange data regarding

quality of externally sourced business services with other companies.

2.52

(1.568)

2.38

(1.565)

2.64

(1.567)

7,028 /

-1.525 /

0.127

Do not reject 2.71

(1.672)

2.09

(1.208)

5,458 /

-2.567 /

0.010

Reject

We use data regarding the

quality of externally sourced business service to improve their quality.

4.25

(1.835)

4.37

(1.857)

4.15

(1.817)

7,309 /

-0.999 /

0.318

Do not reject 4.32

(1.789)

4.10

(1.938)

6,358 /

-0.810 /

0.418

Do not reject

We define the required level of service quality by means

of key performance indicators or service level agreements.

3.83

(2.087)

3.48

(2.096)

4.12

(2.042)

6,423 /

-2.552 /

0.011

Reject 4.19

(2.052)

3.03

(1.947)

4,615 /

-4.105 /

0.000

Reject

We benchmark the quality of

our externally sourced

3.35

(1.888)

3.19

(1.877)

3.47

(1.895)

7,168 /

-1.248 /

Do not reject 3.56

(1.922)

2.86

(1.726)

5,373 /

-2.680 /

Reject


190

,

Constructs


Items

Population mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

business services. 0.212 0.007

Service design

(0.771)

4.43

(1.174)

4.50

(1.064)

4.37

(1.259)

7,616 /

-0.455 /

0.649

Do not reject 4.63

(0.989)

3.97

(1.409)

4,961/

-3.417 /

0.001

Reject

In our company, multiple

departments (such as purchasing, quality

management and internal customers) coordinate in the design process for externally sourced business services.

5.35

(1.742)

5.70

(1.482)

5.06

(1.889)

6,442/

-2.567 /

0.010

Reject 5.71

(1.493)

4.54

(1.978)

4,409 /

-4.579 /

0.000

Reject

Our company actively

involves its internal customers into the design

process for externally sourced business services.

5.29

(1.637)

5.35

(1.590)

5.25

(1.679)

7,701 /

-0.315 /

0.753

Do not reject 5.65

(1.401)

4.50

(1.843)

4,291 /

-4.784 /

0.000

Reject

Our company actively

involves its external customers into the design process for externally sourced business services.

3.57

(1.864)

3.50

(1.832)

3.64

(1.894)

7,567 /

-0.546 /

0.585

Do not reject 3.69

(1.782)

3.31

(2.021)

5,905 /

-1.667 /

0.095

Do not reject

We involve our service providers in the design

process of our externally sourced business services.

4.45

(1.659)

4.55

(1.629)

4.37

(1.685)

7,472 /

-0.716 /

0.474

Do not reject 4.64

(1.502)

4.04

(1.910)

5,615 /

-2.224 /

0.026

Reject

Our specifications for

externally sourced business services are clear.

4.60

(1.577)

4.62

(1.565)

4.59

(1.593)

7,786 /

-0.162 /

0.871

Do not reject 4.72

(1.456)

4.33

(1.799)

5,961 /

-1.570 /

0.117

Do not reject

We thoroughly review new externally sourced business

services before they are used.

3.31

(1.820)

3.30

(1.860)

3.31

(1.793)

7,827 /

-0.090 /

0.928

Do not reject 3.39

(1.766)

3.12

(1.934)

6,059 /

-1.380 /

0.168

Do not reject


191

Constructs


Items

Population mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2


(0.884)

3.99

(1.489)

3.74

(1.440)

4.20

(1.501)

6,372 /

-2.614 /

0.009

Reject 4.07

(1.459)

3.81

(1.546)

6,253/

-0.998 /

0.318

Do not reject

We use the requirements of

our internal customers of externally sourced business services as basis for the definition of their quality.

4.37

(1.720)

4.28

(1.819)

4.45

(1.636)

7,504 /

-0.660 /

0.510

Do not reject 4.46

(1.709)

4.17

(1.739)

6,086 /

-1.330 /

0.183

Do not reject

We use the requirements of

our external customers of externally sourced business services as basis for the definition of their quality.

3.83

(1.973)

3.35

(1.905)

4.23

(1.945)

5,805/

-3.541 /

0.000

Reject 3.82

(1.922)

3.86

(2.093)

6,707 /

-0.076 /

0.939

Do not reject

Our company analyzes the

satisfaction of its internal customers of externally

sourced business services and the results are used for quality improvements.

4.16

(1.765)

4.17

(1.782)

4.16

(1.758)

7,875 /

-0.005 /

0.996

Do not reject 4.29

(1.747)

3.87

(1.783)

5,900 /

-1.680 /

0.093

Do not reject

Our company analyzes the

satisfaction of its external customers of externally sourced business services and the results are used for quality improvements.

3.79

(2.034)

3.33

(1.920)

4.17

(2.053)

5,953 /

-3.178 /

0.001

Reject 3.83

(2.007)

3.71

(2.102)

6,438 /

-0.516 /

0.606

Do not reject

Our internal customers give

us feedback on the quality of externally sourced business services.

4.19

(1.794)

4.16

(1.804)

4.23

(1.790)

7,627 /

-0.441 /

0.659

Do not reject 4.37

(1.758)

3.79

(1.819)

5,553 /

-2.334 /

0.020

Reject

Our external customers give

us feedback on the quality of externally sourced business

3.57

(1.916)

3.07

(1.764)

3.99

(1.944)

5,708 /

-3.714 /

0.000

Reject 3.62

(1.918)

3.46

(1.918)

6,422 /

-0.619 /

0.536

Do not reject


192

,

Constructs


Items

Population mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

services.

Process management

(0.862)

3.72

(1.636)

3.74

(1.677)

3.70

(1.607)

7,856 /

-0.038 /

0.970

Do not reject 3.91

(1.647)

3.29

(1.537)

5,276/

-2.827 /

0.005

Reject

We regularly inspect, assess,

or approve the quality of our externally sourced business services.

4.24

(1.868)

4.17

(1.893)

4.29

(1.852)

7,629 /

-0.437 /

0.662

Do not reject 4.36

(1.825)

3.97

(1.947)

5,988 /

-1.512 /

0.131

Do not reject

We use electronic systems to

inspect, assess, or approve the quality of externally sourced business services.

3.15

(2.025)

3.18

(2.024)

3.13

(2.032)

7,713 /

-0.292 /

0.770

Do not reject 3.39

(2.062)

2.63

(1.845)

5,291 /

-2.848 /

0.004

Reject

Our company uses statistical

methods to monitor the quality of externally sourced business services.

3.26

(1.944)

3.32

(1.931)

3.20

(1.960)

7,557 /

-0.566 /

0.572

Do not reject 3.43

(1.986)

2.88

(1.802)

5,740 /

-1.985 /

0.047

Reject

Our company‟s processes

related to the provision of externally sourced business services are documented.

4.21

(1.941)

4.27

(1.935)

4.16

(1.953)

7,631 /

-0.433 /

0.665

Do not reject 4.46

(1.877)

3.65

(1.979)

5,207 /

-2.986 /

0.003

Reject

a Std. dev. = Standard deviation

b Sig. level = Significance level


193

Table C- 5: Effects of QM practices for externally sourced BS in manufacturing, service, small and large companies

Constructs


Items

Population

mean

(std. dev.a)

Mean value


(std. dev.a)

Mean value

service companies

(std. dev.a)

Mann-

Whitney U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Service quality

(0.945)

4.28

(1.426)

4.19

(1.441)

4.35

(1.414)

7,332 /

-0.948 7

0.343

Do not reject 4.37

(1.406)

4.07

(1.456)

5,916 /

-1.629 /

0.103

Do not reject

Our company has been able

to enhance the overall quality of its externally sourced business services by

measures in the area of quality management for services during the last three years.

4.45

(1.634)

4.36

(1.748)

4.53

(1.534)

7,598 /

-0.494 /

0.621

Do not reject 4.47

(1.640)

4.40

(1.630)

6,572 /

-0.409 /

0.683

Do not reject


to enhance the response time of the providers of its

externally sourced business services by measures in the area of quality management for services during the last three years.

4.39

(1.636)

4.30

(1.655)

4.46

(1.623)

7,446 /

-0.764 /

0.445

Do not reject 4.48

(1.579)

4.19

(1.751)

6,158 /

-1.197 /

0.231

Do not reject


to enhance the know-how of the providers of its

externally sourced business services by measures in the area of quality management for services during the last three years.

4.32

(1.647)

4.17

(1.622)

4.45

(1.662)

7,028 /

-1.500 /

0.134

Do not reject 4.41

(1.652)

4.10

(1.624)

5,957 /

-1.576 /

0.115

Do not reject

Our company has been able to enhance the appearance

(for example, physical

3.83

(1.674)

3.74

(1.649)

3.91

(1.695)

7,298 /

-1.022 /

0.307

Do not reject 3.99

(1.575)

3.47

(1.836)

5,551 /

-2.346 /

0.019

Reject


194

,

Constructs


Items

Population mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

facilities, personal appearance) of the providers of its externally sourced business services by measures in the area of quality management for

services during the last three years.


to enhance the attention and commitment of the providers of its externally sourced business services by

measures in the area of quality management for services during the last three years.

4.23

(1.524)

4.14

(1.515)

4.31

(1.532)

7,361 /

-0.917 /

0.359

Do not reject 4.30

(1.498)

4.08

(1.577)

6,190 /

-1.139 /

0.255

Do not reject


to enhance the reliability of the providers of its externally sourced business

services by measures in the area of quality management for services during the last three years.

4.44

(1.541)

4.42

(1.556)

4.47

(1.534)

7,705 /

-0.306 /

0.759

Do not reject 4.55

(1.500)

4.21

(1.615)

5,837 /

-1.816 /

0.069

Do not reject

Satisfaction

(0.894)

3.99

(1.329)

3.86

(1.305)

4.10

(1.343)

6,986 /

-1.553 /

0.120

Do not reject 4.11

(1.277)

3.73

(1.411)

5,701 /

-2.038 /

0.042

Reject

Satisfaction of our internal

customers with externally sourced business services has increased during the last

4.30

(1.457)

4.27

(1.453)

4.33

(1.466)

7,652 /

-0.401 /

0.688

Do not reject 4.45

(1.345)

3.97

(1.643)

5,623 /

-2.225 /

0.026

Reject


195

Constructs


Items

Population mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

three years through measures in the area of quality management for these services.

Satisfaction of our external

customers with externally sourced business services

has increased during the last three years through measures in the area of quality management for these services.

3.82

(1.591)

3.57

(1.586)

4.04

(1.569)

6,429 /

-2.347 /

0.019

Reject 3.91

(1.544)

3.63

(1.683)

6,078 /

-1.211 /

0.226

Do not reject

Our company has reduced

the number of complaints of internal customers about the

quality of externally sourced business through measures in the area of quality management for these services.

4.11

(1.470)

4.10

(1.481)

4.12

(1.466)

7,791 /

-0.154 /

0.877

Do not reject 4.21

(1.375)

3.87

(1.646)

5,887 /

-1.718 /

0.086

Do not reject

Our company has reduced the number of complaints of

external customers about the quality of externally sourced business through measures in the area of quality management for these services.

3.72

(1.581)

3.46

(1.648)

3.93

(1.496)

6,409 /

-2.385 /

0.017

Reject 3.85

(1.549)

3.44

(1.624)

5,642 /

-2.051 /

0.040

Reject

Cost efficiency

(0.873)

4.21

(1.456)

4.28

(1.490)

4.16

(1.430)

7,450 /

-0.745 /

0.456

Do not reject 4.41

(1.446)

3.79

(1.395)

5,046 /

-3.262 /

0.001

Reject

Our company has been able 4.27 4.50 4.08 6,729 / Reject 4.50 3.77 5,069 / Reject


196

,

Constructs


Items

Population mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

to lower the purchase prices of externally sourced business services through measures in the area of quality management for services during the last three years.

(1.752) (1.803) (1.689) -2.019 /

0.043

(1.792) (1.554) -3.253 /

0.040


to lower the cost for quality failures of externally sourced business services through measures in the area of quality management for


4.12

(1.566)

4.08

(1.568)

4.15

(1.570)

7,688 /

-0.336 /

0.737

Do not reject 4.26

(1.519)

3.79

(1.631)

5,627 /

-2.208 /

0.001

Reject


to lower its operating costs through measures in the area of quality management for externally sourced services during the last three years.

4.25

(1.569)

4.27

(1.624)

4.24

(1.527)

7,860 /

-0.031 /

0.975

Do not reject 4.46

(1.564)

3.79

(1.489)

5,096 /

-3.215 /

0.027

Reject

Value of quality management

(0.919)

4.22

(1.501)

4.26

(1.524)

4.18

(1.485)

7,717 /

-0.280 /

0.779

Do not reject 4.30

(1.475)

4.03

(1.550)

6,129 /

-1.232 /

0.218

Do not reject

The benefits our company

achieved through its measures in the area of quality management for

externally sourced business services exceed the sacrifices for their implementation.

4.07

(1.629)

4.13

(1.646)

4.01

(1.618)

7,618 /

-0.459 /

0.646

Do not reject 4.12

(1.628)

3.95

(1.635)

6,332 /

-0.866 /

0.387

Do not reject


197

Constructs


Items

Population mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

The benefits our company achieved through its

measures in the area of quality management for externally sourced business services exceed the sacrifices for their maintenance.

4.00

(1.601)

4.07

(1.615)

3.93

(1.591)

7,556 /

-0.568 /

0.570

Do not reject 4.07

(1.591)

3.82

(1.618)

6,210 /

-1.096 /

0.273

Do not reject

Overall, our company‟s

measures in the area of quality management for externally sourced business services have paid off.

4.60

(1.625)

4.58

(1.638)

4.61

(1.620)

7,764 /

-0.202 /

0.840

Do not reject 4.72

(1.564)

4.32

(1.732)

5,953 /

-1.588 /

0.112

Do not reject

Further effects

(0.921)

4.00

(1.505)

3.77

(1.495)

4.20

(1.490)

6,464 /

-2.455 /

0.014

Reject 4.08

(1.508)

3.84

(1.493)

6,167 /

-1.159 /

0.247

Do not reject

Our activities related to the

quality management of our externally sourced business services have …

… led to an increase of our productivity.

4.20

(1.589)

4.14

(1.675)

4.25

(1.518)

7,656 /

-0.392 /

0.695

Do not reject 4.33

(1.635)

3.91

(1.452)

5,729 /

-2.012 /

0.044

Reject

… led to an enhancement of our competitive position.

4.19

(1.730)

4.02

(1.701)

4.34

(1.746)

6,947 /

-1.639 /

0.101

Do not reject 4.26

(1.730)

4.03

(1.728)

6,239 /

-1.037 /

0.300

Do not reject

… led to higher sales

volumes (for example, for externally sourced services

3.56

(1.765)

3.23

(1.754)

3.84

(1.733)

6,306/

-2.771 /

0.006

Reject 3.59

(1.767)

3.50

(1.771)

6,566 /

-0.419 /

0.675

Do not reject


198

,

Constructs


Items

Population mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

which were transferred to our end customers).

… led to innovation. 3.81

(1.751)

3.59

(1.747)

3.99

(1.740)

6,848 /

-1.811 /

0.070

Do not reject 3.92

(1.722)

3.55

(1.799)

5,975 /

-1.536 /

0.125

Do not reject

… led to an improvement of

the quality of goods or services offered by our company.

4.26

(1.790)

3.87

(1.799)

4.58

(1.722)

6,083 /

-3.158 /

0.002

Reject 4.28

(1.814)

4.21

(1.746)

6,569 /

-0.411 /

0.681

Do not reject




199

Table C- 6: Barriers to the implementation of QM practices for externally sourced business services in manufacturing, service, small and large companies

Constructs


Items

Population

mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result

(two-tailed,

α=0.05)

H0: M1 = M2

Mean

value

large

companies

(std. dev.a)

Mean

value

small

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result

(two-tailed,

α=0.05)

H0: M1 = M2

Barriers (0.799)

3.96 (1.160)

4.09 (1.145)

3.85 (1.165)

6,779 / -1.908 / 0.056

Do not reject 4.03 (1.076)

3.81 (1.324)

6,104 / -1.276 / 0.202

Do not reject

The implementation of quality management for externally sourced business services is difficult because

…

… services are very heterogeneous.

4.51 (1.826)

4.76 (1.710)

4.31 (1.900)

6,850 / -1.809 /

0.071


4.32 (1.798)

6,196 / -1.120 /

0.263

Do not reject

… the evaluation of services is always subjective.

4.75 (1.633)

4.90 (1.646)

4.62 (1.619)

7,067 / -1.433 / 0.152


4.46 (1.814)

6,049 / -1.404 / 0.160

Do not reject

… the requirements regarding the services are often unclear.

3.99 (1.775)

4.12 (1.758)

3.88 (1.788)

7,249 / -1.107 / 0.268


3.74 (1.747)

6,059 / -1.381 / 0.167

Do not reject

… employees resist new processes and systems.

3.84 (1.628)

3.95 (1.695)

3.75 (1.571)

7,371 / -0.893 / 0.372


3.67 (1.835)

6,158 / -1.194 / 0.232

Do not reject

… top management does not support it enough.

3.50 (1.813)

3.64 (1.855)

3.39 (1.775)

7,269 / -1.070 / 0.285


3.15 (1.831)

5,652 / -2.148 / 0.032

Reject

… there is no adequate software support available.

3.46 (1.729)

3.51 (1.749)

3.42 (1.718)

7,612 / -0.468 / 0.640


3.55 (1.835)

6,545 / -0.458 / 0.647

Do not reject

… we cannot provide enough resources in our

3.67 (1.650)

3.77 (1.586)

3.60 (1.704)

7,335 / -0.955 /


3.78 (1.870)

6,495 / -0.552 /

Do not reject


200

,

Constructs


Items

Population

mean

(std. dev.a)

Mean value

manufacturing

companies

(std. dev.a)

Mean value

service

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result

(two-tailed,

α=0.05)

H0: M1 = M2

Mean

value

large

companies

(std. dev.a)

Mean

value

small

companies

(std. dev.a)

Mann-

Whitney

U score /

Z score /

Sig. levelb

Hypothesis

test result

(two-tailed,

α=0.05)

H0: M1 = M2

company. 0.340 0.581 a Std. dev. = Standard deviation



201

Table C- 7: Determinants of QM practices for externally sourced BS in manufacturing, service, small and large companies

Constructs


Items

Population

mean

(std. dev.a)

Mean value


(std. dev.a)

Mean value

service companies

(std. dev.a)

Mann-

Whitney U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Mean

value

large companies

(std. dev.a)

Mean

value

small companies

(std. dev.a)

Mann-

Whitney U score /

Z score /

Sig. levelb

Hypothesis

test result


H0: M1 = M2

Determinants

(0.691)

4.56

(1.096)

4.52

(1.095)

4.59

(1.101)

7,490 /

-0.673 /

0.501

Do not reject 4.69

(1.021)

4.28

(1.208)

5,463 /

-2.477 /

0.013

Reject

We focus our activities to

manage the quality of our externally sourced services to services …

… which are transferred to our customers.

4.50

(1.907)

4.30

(1.835)

4.68

(1.955)

6,877 /

-1.761 /

0.078

Do not reject 4.43

(1.851)

4.67

(2.030)

6,166 /

-1.175 /

0.240

Do not reject

… which are important for our production processes.

4.51

(1.929)

4.88

(1.773)

4.19

(2.006)

6,308 /

-2.676 /

0.007

Reject 4.75

(1.844)

3.97

(2.019)

5,254 /

-2.843 /

0.004

Reject

… which are important for our administrative processes.

3.87

(1.805)

3.85

(1.788)

3.88

(1.825)

7,801 /

-0.134 /

0.893

Do not reject 4.01

(1.763)

3.54

(1.863)

5,809 /

-1.849 /

0.065

Do not reject

… which represent an

important share of our purchasing volume.

5.07

(1.631)

4.91

(1.735)

5.20

(1.533)

7,273 /

-1.080 /

0.280

Do not reject 5.25

(1.536)

4.67

(1.770)

5,499 /

-2.474 /

0.013

Reject

… which are well described/specified.

3.78

(1.662)

3.57

(1.753)

3.96

(1.564)

6,749 /

-1.991 /

0.046

Reject 4.00

(1.669)

3.29

(1.547)

5,230 /

-2.957 /

0.003

Reject

… for which a quality

failure represents a particular risk for us.

5.64

(1.491)

5.61

(1.543)

5.67

(1.451)

7,790 /

-0.159 /

0.873

Do not reject 5.70

(1.451)

5.51

(1.577)

6,336 /

-0.877 /

0.380

Do not reject





C.5 Conclusions, limitations and future research

This study wanted to examine to which extent buying companies adopt QM practices

for their externally sourced BS, what the effects of their usage as well as barriers and

determinants of their implementation are. Furthermore, it examined if adoption, ef-

fects, barriers and determinants of QM practices for incoming services differ between

manufacturing and service as well as between large and small companies.

It was found out that service design, workforce management, management support,

customer involvement, quality information, process and provider management are the

most widely used QM practices for externally sourced BS. Moreover, significant dif-

ferences in the adoption of QM practices for externally sourced BS and its effects on

organizational performance between manufacturing and service as well as between

large and small companies were detected. Therefore, I reject the first two hypotheses.

However, I did not detect significant distinctions regarding the barriers associated with

the implementation of QM for these services and thus do not reject the third hypothe-

sis. Results related to the fourth hypothesis are mixed. While I could identify signifi-

cant differences between large and small companies regarding the determinants of QM

for incoming services on the construct level, I did not detect any between manufactur-

ers and service firms on the construct level.

C.5.1 Managerial implications


follows:

QM for externally sourced BS is associated with positive effects such as en-

hanced service quality, higher customer satisfaction and reduced costs. The posi-

tive effects of QM for BS are perceived to exceed the costs of its implementation

and maintenance. It may therefore be a profitable investment for buying compa-

nies to expand their efforts in QM for incoming services.

In contrast to QM for goods, service companies excel manufacturers in the adop-

tion of management support and customer involvement when regarding QM for

externally sourced services. This means that manufacturing companies which

strive to improve their QM for services can learn from service providers. In par-


203

ticular, they may try to imitate the knowledge of service providers regarding the

integration of requirements and feedback of their external customers as well as

the analysis of their satisfaction in order to improve the quality of the services

they purchase.

Large companies outperformed small ones in the adoption of QM practices for

externally sourced BS and could also achieve higher levels of positive effects on

performance. For managers of small firms, this means that it may be worthwhile

extending their efforts into QM for incoming services. For example, they may

invest more time and resources into improving their activities of obtaining quali-

ty information, thorough service design, and process or provider management.

Our analysis showed that the barriers associated to the implementation of QM for

BS are similar among industries and companies of different sizes. They are most-

ly related to the peculiar characteristics of services such as heterogeneity and in-

tangibility rather than more specific organizational factors such as degree of

specification, software support etc. For purchasing managers this means that they

should strive to reduce the impact of service characteristics before taking further

QM activities. For example, they may try to reduce heterogeneity by standardiz-

ing externally sourced BS. For example, this could be achieved by defining ho-

mogeneous service definitions for major groups of externally sourced services,

for example, transportation services, facility services etc. Furthermore, they may

introduce systems of receiving customer feedback and analyzing their satisfac-

tion with the purchased services in order to systematically monitor subjective

evaluations of service quality.

Before taking further action to implement QM for externally sourced BS, buying

companies may want to prioritize the services in order to implement it sequen-

tially. Our analysis of the determinants of QM for incoming services suggests

that the perceived risk associated with quality failure, purchasing volume and us-

age of the service (for example, consumption for the production process or trans-

fer to external customers) may be suitable criteria for managers to discover the

services a buying company should focus its QM activities on.



C.5.2 Theoretical implications

This study provides several theoretical insights into service research in general and

into the quality management for BS from a buying company‟s perspective in particu-

lar.

First, I analyzed quality management from the perspective of a buying company, i.e.

from a different perspective than the one taken by most of the previous empirical stud-

ies, and for BS, i.e. for a different object of quality management than of many other

studies in quality management. Examining research questions from a different angle is

important for increasing the generalizability and extension of previous findings (Tsang

and Kwan, 1999). Overall, our results suggest that quality management has positive

effects on organizational performance when it is implemented for externally sourced

BS. I thus transfer and corroborate findings of earlier studies which found positive re-

lationships between the adoption of quality management for outgoing goods by manu-

facturing companies (for example, Dow et al., 1999; Cua et al., 2001; Kaynak and

Hartley, 2008; Sila and Ebrahimpour, 2005; White, 1996).

Second, by identifying and analyzing differences related to QM for BS between manu-

facturing and service as well as between large and small companies, this study con-

tributed to the existing body of contingency research in operations and service man-

agement following a call by Sousa and Voss (2008). As I found several significant dif-

ferences regarding the adoption of QM practices, its effects and determinants, our re-

sults cast some doubt on the universal applicability of QM suggested by previous re-

search (for example, Crosby, 1979; Deming, 1986; Flynn et al., 1995; Hendricks and

Singhal, 1997; Juran and Blanton Godfrey, 2000). Rather, they signify that research on

QM may not only consider the perspective of the user of QM (i.e. buying or selling

company), the object of QM (i.e. goods or services) but also contingent factors such as

industry and size of company.

Third, the successful implementation of QM practices for externally sourced BS is to a

large degree determined by general characteristics of services (for example, their het-

erogeneity and their subjective evaluation) rather than industry or company-related

factors.


205

C.5.3 Limitations and future research

This study also has some limitations which may, however, be useful starting points for

future research. First, I used cross-sectional data to test our hypotheses which captured

the situation at buying companies at one point in time (Fink, 1995). QM practices and

their effects may, however, be constructs which are dynamic in nature. Thus, their de-

velopment may change over time and might be better examined over an extended peri-

od (Lakhal, 2009). In order to observe the implementation of quality management for

externally sourced BS and its complexities or barriers, future research may therefore

use longitudinal studies.

Furthermore, our results are based on perceptional, self-reported rather than objective,

publicly available archival information. Although this approach is in line with previous

research on quality management and services (for example, Choi and Eboch, 1998;

Stanley and Wisner, 2001; Kaynak and Hartley, 2008; Kaynak, 2003), future research

should nevertheless attempt to include more objective data into the examination of

quality management practices for externally sourced BS.

In addition, I did not examine the relationships between QM practices and between

them and organizational performance. Future research may add further insights into

questions regarding what the relationships between QM practices adopted by buying

companies for externally sourced BS are and how they are related to organizational

performance. Structural equation modelling may be a suitable research method to an-

swer these questions as it allows the simultaneous “estimation of multiple interrelated

dependence relationships” (Hair, Jr. et al., 2006: 711).

Moreover, our study examined the QM for all BS which were externally purchased by

the participating companies and did not make any differentiation between, for exam-

ple, services which represent a high or a low portion of a company‟s purchasing vol-

ume or whose quality failure represents a critical or non-critical risk to the buying

company. Our results suggest, however, that risk, purchasing volume and type of ser-

vice usage are important determinants of the QM for externally sourced services. Thus,

future research may examine how such factors affect the adoption of QM in more de-

tail, for example, by conducting case studies.

Finally, I did not distinguish between different service categories a buying company

may purchase (for example, professional services, logistics services, facility services

etc.). Thus did not take the nature of the service as potential contingency factor into

account. Future research may therefore replicate this study for just one group of BS.



Despite these limitations, I am confident that the study presents a useful starting point

for further investigations into QM for BS and enlarges the scope of service research.


207

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D Quality management for business services

from a buyer’s perspective


The fourth paper was submitted to the International Journal of Operations Manage-

ment and is currently under review:

Holschbach, E., & Hofmann, E. Quality management for business services from a

buyer‟s perspective. International Journal of Operations Management: Under review.

Abstract

This paper investigates how buying companies manage the quality for their externally

sourced business services (BS). It explores what the relationships between quality

management (QM) practices for these services are and how they are related to selected

measures of organizational performance. Based on a comprehensive literature review,

this study first develops a research model. The associated hypotheses are then tested

using cross-sectional survey data from 260 manufacturing and service companies

mainly operating in Austria, Germany and Switzerland. The data analysis using struc-

tural equation modelling (SEM) supports the proposed hypotheses. This study fills a

theoretical gap as previous literature has predominantly adopted the perspective of a

goods or service provider and did not specifically address QM for externally sourced

services. The results reveal that QM for incoming BS positively affects organizational

performance with provider involvement, process management, service design and cus-

tomer involvement directly influencing service quality. The insights obtained from this

paper can assist buying companies in their decision on how to design QM practices for

incoming BS.

Keywords: Quality management; services; structural equation modelling

D.1 Introduction

Nowadays, services represent a significant share of the purchasing volume of most

companies (Axelsson & Wynstra, 2002; Jackson, Neidell, & Lunsford, 1995; OECD,

2000; Schneider & White, 2004). Some authors estimate that externally purchased ser-

vices on a weighted average account for more than half of a company‟s total spend

(Fearon & Bales, 1995). More recent studies suggest that the ratio of BS to total pur-


217

chasing volume lies between 15 and 28% for manufacturing companies (BME, 2005:

5; Centre for Management Development, 2005). The share of these business-to-

business services on the total purchasing volume may even increase in the future due

to a continuous trend towards concentration on core competencies and resulting out-

sourcing (Cox, Chicksand, Ireland, & Davies, 2005; Ellram, Tate & Billington, 2007;

Fuller, 1998; Krause, Scannell, & Calantone, 2000; Miettinen, Ventovuori & Hyttinen,

2005; Murray & Kotabe, 1999; Smeltzer & Ogden, 2002; van der Valk & Rozemeijer,

2009). In addition, the portion of services on many product offerings is increasing due

to a risen demand for augmented core goods (Nilsson, Johnson, & Gustafsson, 2001;

Wise & Baumgartner, 1999).

Despite the growing significance of BS, most buying departments have focused on the

optimization of the supply of goods (Axelsson & Wynstra, 2002; Ellram et al., 2007;

van der Valk, 2008; van der Valk, 2007). Similarly, the academic literature on pur-

chasing has predominantly concentrated on the supply of goods (Bals, Hartmann, &

Ritter, 2009; Cox et al., 2005; Ellram et al., 2007; Smeltzer & Ogden, 2002; van der

Valk & Rozemeijer, 2009; van der Valk, 2008; Wynstra, Axelsson, & van der Valk,

2006). In particular, QM of externally purchased BS from the perspective of a buying

company has received little attention so far by academics (Hemsworth, Sánchez-

Rodríguez, & Bidgood, 2008; Hemsworth, Sánchez-Rodríguez, & Bidgood, 2005;

Sánchez-Rodríguez & Martínez-Lorente, 2004). Accordingly, the literature on QM

predominantly has adopted the viewpoint of a provider of goods or services, and tried

to answer the question how sellers can improve the quality of the products or services

offered to their customers (Forker, 1997; Fynes & Voss, 2002; Flynn, Schroeder, &

Sakakibara, 1994; Rönnbäck & Witell, 2008). However, research on the question how

companies receiving goods or services manage their quality is scarce (Forker, Mendez,

& Hershauer, 1997; Fynes, 1999; Fynes & Voss, 2002; Molina-Azorín, Tarí, Claver-

Cortés, & López-Gamero, 2009; Stanley & Wisner, 2001). The relative disregard of

QM from a buyer‟s perspective is surprising as the quality of a company‟s output is

highly dependent on the quality of its input (Forker, 1997; Forker et al., 1997; Ghoba-

dian & Gallear, 1997; Krause, Pagell, & Curkovic, 2001; Yang, Wong, Lai, & Ntoko,

2009).

So far, only little research has examined the QM practices used by buying companies.

Sánchez-Rodríguez & Martínez-Lorente (2004) presented a study examining the im-

plementation of QM practices in the purchasing function and their impact on purchas-

ing‟s performance (Sánchez-Rodríguez & Martínez-Lorente, 2004). More recently,



Hemsworth et al. (2005) and Hemsworth et al. (2008) verified and extended their re-

sults using the same sample. However, these contributions regard manufacturing com-

panies receiving goods as unit of analysis and are limited to perceptions of purchasers

regarding a reduced set of QM practices only (Hemsworth et al., 2008; Hemsworth et

al., 2005; Sánchez-Rodríguez & Martínez-Lorente, 2004). They may thus neglect the

particular characteristics of services and their impact on the adoption of QM practices

by buying companies. Furthermore, most of these studies (Hemsworth et al., 2005;

Hemsworth et al., 2008) operationalized QM practices as a single construct and thus

do not examine their direct and indirect effects on organizational performance

(Curkovic, Melnyk, Calantone, & Handfield, 2000; Kaynak, 2003; Rönnbäck &

Witell, 2008).

Therefore, this study wants to answer the following two research questions (RQ):

RQ 1: What are the relationships between QM practices adopted by buying compa-

nies for externally sourced BS?

RQ 2: What are the relationships of these practices to selected measures of organiza-

tional performance?

This paper contributes to theory in the area of QM by examining QM practices from

the perspective of a customer in a B2B environment instead of a vendor. Furthermore,

it specifically focuses on QM practices for externally sourced BS and testing the rela-

tionships between QM practices and their effects on organizational performance.

Methodologically, the study is based on a review of related literature in the area of QM

on which it formulates 20 hypotheses. These are tested by analysing data from an

online survey of 260 companies using SEM. Thus, the study adds further insights to

the large body of research on QM published in the Journal of Operations Management

(for example, Kaynak, 2003; Kaynak & Hartley, 2008; Nair, 2006; Sila, 2007; Sousa

& Voss, 2002; Sroufe & Curkovic, 2008; Zu, Fredendall, & Douglas, 2008).

The remainder of this paper is divided into five sections: After these introductory re-

marks, the second section provides a research model and related hypotheses based on a

review of the literature on QM and service quality. The third section introduces the

data collection procedure, the sample and data analysis methods and presents their re-

sults. The fourth section discusses these results. Finally, we outline the managerial and

theoretical implications and propose future areas of further research in the fifth sec-

tion.


219

D.2 Theoretical background

The following section shortly investigates relevant research regarding the components

of QM and their effects on organizational performance. In doing so, it draws on litera-

ture on QM stemming from the wider domain of operations management and – partic-

ularly in the paragraph on performance – academic work on service quality from mar-

keting. After exploring the academic literature, the hypotheses are developed and a

research model is presented.

D.2.1 QM practices and services

We understand QM as a collective, interlinked system of quality practices which is

associated with organizational performance (Anderson, Rungtusanatham, & Schroed-

er, 1994; Choi & Eboch, 1998; Madu, Kuei, & Lin, 1995). As Hackman & Wageman

(1995) point out, QM and Total Quality Management (TQM) are highly convergent

and therefore often used interchangeably.

Early empirical research on QM has mostly focussed on attempts to define what con-

stitutes QM (Kaynak, 2003; Zakuan, Yusof, Laosirihongthong, & Shaharoun, 2010).

These constituting elements of QM are called QM practices (Zu, 2009) which can be

understood as operational interventions implemented by management to achieve quali-

ty performance objectives (Das, Handfield, Calantone, & Ghosh, 2000).

Three levels of examination have to be distinguished when examining QM (Dean &

Bowen, 1995; Evans & Lindsay, 2002; Rönnbäck & Witell, 2008; Sousa & Voss,

2002): (a) principles, i.e. the basic management systems necessary for QM to function,

for example, continuous improvement, customer focus etc. (Zu, 2009), (b) practices,

i.e. the observable constructs of QM, for example, top management support, quality

information etc. (Das et al., 2000), (c) techniques, i.e. the guidelines and methods to

perform certain activities, for example, quality function deployment, histograms etc.

(Rönnbäck & Witell, 2008). Sousa & Voss (2002) recommend that research on QM

should deal with the level of practices since „principles are too general for empirical

research and techniques are too detailed to obtain reliable results‟ (Sousa & Voss,

2002: 92). This paper concedes their view.


QM practices. Later, Flynn et al. (1994) categorized QM practices into seven dimen-

sions: top management support, quality information, process management, product (or



service) design, workforce management, supplier and customer involvement. Accord-

ing to Fynes (1999), these practices also mirror the dimensions used in quality award

schemes such as the Malcolm Baldrige National Quality Award (Baldrige National

Quality Program, 2010) or the European Foundation for Quality Management Award

(European Foundation for Quality Management, 2010) and are therefore the ones most

commonly examined (see also Molina-Azorín et al., 2009; Zu, 2009). Thus, they will

form the constructs, along which QM for BS by buying companies is to be examined.

Marketing literature emphasizes that services have peculiar characteristics which dif-

ferentiate them from goods (Fisk, Brown, & Bitner, 1993; Seth, Deshmukh, & Vrat,

2006). Among these are heterogeneity, intangibility, inseparability of production and

consumption (Parasuraman, Zeithaml, & Berry, 1985) as well as the fact that service

production normally, but not necessarily always, involves some interaction between

customer and provider (Grönroos, 2007; Meffert & Bruhn, 2000). These characteris-

tics can all be considered continua on which different service types vary (Schneider &

White, 2004). More recently, Wynstra et al. (2006) emphasize that the application of a

BS by a buying organization represents another differentiator to goods. BS in this con-

text are understood as services which are delivered by firms or organizations and

bought by other firms or organizations (Axelsson & Wynstra, 2002; van der Valk &

Rozemeijer, 2009). The authors show that externally sourced BS can either be con-

sumed by buying companies internally or transferred to the customer with or without

changes (Wynstra et al., 2006; van der Valk, Wynstra, & Axelsson, 2009; van der

Valk, 2007).

The implications of this part of the literature review for our study are twofold: First,

previous studies provide us with a first set of practices which buying companies may

adopt to manage the quality of their externally sourced BS. Second, the differences

between goods and services and particularly their different usage may affect the design

of QM practices and require the particular attention of the researchers when construct-

ing the survey instrument. For example, as there may be internal and external consum-

ers of BS purchased by the buying company, existing constructs regarding practices

such as service design and customer involvement may have to be adjusted. The con-

struction of the survey instrument will be discussed in detail in Section D.3.


221

D.2.2 QM and performance

Ample amount of research in the area of operations management and particular QM

has been conducted on the relationship between QM practices and organizational per-

formance (Zakuan et al., 2010). Organizational performance in such studies is often

regarded as how well an organization achieves its market-oriented or operational as

well as financial goals (Lakhal, 2009). In these works operational performance was,

for example, measured by constructs such as percentage of defects, cost of quality,

product quality, on-time delivery, productivity results whereas return-on-assets, return-

on-equity, return-on-investment, market share and stock prices were used for measur-

ing financial business performance (for an overview of empirical studies on the effect

of QM practices on organizational performance please refer to Kaynak, 2003; Molina-

Azorín et al., 2009; Nair, 2006; Sila & Ebrahimpour, 2005). Sometimes these studies

provide mixed results (Das et al., 2000; Nair, 2006; Rönnbäck & Witell, 2008). How-

ever, most authors agree that the use of QM practices has a positive, significant and

strong effect on operational performance (Dow, Samson, & Ford, 1999; Cua, McKone,

& Schroeder, 2001; Maani, Putterill, & Sluti, 1994; Sila & Ebrahimpour, 2005; Sluti,

Maani, & Putterill, 1995; Sousa & Voss, 2002; White, 1996). The impact of QM prac-

tices on financial business performance is seen as positive and significant, but in some

cases less strong than on operational performance (Capon, Farley, & Hoenig, 1990;

Hendricks & Singhal, 1997; Nilsson et al., 2001; Powell, 1995; Rönnbäck & Witell,

2008).

Authors in the area of service marketing add the customer perspective to the measure-

ment of organizational performance. They conclude that there is a causal relationship

between service quality and customer satisfaction and that service quality is an ante-

cedent of customer satisfaction (Churchill & Surprenant, 1982; Cronin, Jr. & Taylor,

1992; Cronin, Jr., Brady, & Hult, 2000; Schneider & White, 2004; Storbacka,

Strandvik, & Grönroos, 1994; Woodside, Frey, & Daly, 1989). Moreover, many au-

thors also posit that customer satisfaction is positively – although not always perfectly

– related to customer‟s repurchase intentions and thus to a firm‟s sales volume (Cro-

nin, Jr. et al., 2000; Patterson & Spreng, 1997; Schneider & White, 2004; Shonk,

2006; Kuo, Wu, & Deng, 2009). These relationships are conceptually reflected in the

service profit chain, a theoretical framework developed by Heskett, Jones, Loveman,

Sasser, Jr., & Schlesinger (2008). The model proposes that „[…] profit and growth are

stimulated primarily by customer loyalty. Loyalty is a direct result of customer satis-

faction. Satisfaction is largely influenced by the value of services provided to custom-



ers. Value is created by satisfied, loyal, and productive employees. Employee satisfac-

tion, in turn, results primarily from high-quality support services and policies that ena-

ble employees to deliver results to customers‟ (Heskett et al., 2008: 120). Consequent-

ly, higher service quality may result in higher satisfaction of internal or external cus-

tomers and finally in higher sales revenues.

The discussion of the literature on QM and performance shows that – in the case of

QM for BS from a buyer‟s perspective – positive relationships can particularly be as-

sumed between QM practices and operational performance as well as service quality

and customer satisfaction. This circumstance is made allowance for by setting up our

hypotheses in the next section.

D.2.3 Proposed hypotheses and resulting research model

As discussed before, the literature on the usage of QM practices by buying companies

for externally sourced BS is limited. Therefore, we draw our hypotheses pertaining to

the relationships between QM practices and between them and organizational perfor-

mance on existing literature on operations management (especially QM for goods) and

service marketing. Selected studies from these areas empirically supporting our hy-

potheses are introduced in Table D- 4 in the appendix. The resulting research model

with its 20 hypotheses is shown in Figure D- 1.

.


223

Figure D- 1: Research model

Quality

infor-mation

Provider

involve-ment

Top mgt.

support

Customer

involve-ment

H1

Process

mgt.

Workforce

mgt.

Service

design

Service quality Satisfaction

Cost efficiency Value of QM

H2

H4

H5

H6

H7

H8

H9

H20

H17

H19

H12

H13

H15

H14H10

H11

H3

H16

H18

Relationships between QM practices

Relationships between QM practices and organizationalperformance measures

Relationships between organizationalperformance measures



D.2.3.1 Hypothesized relationships between QM practices

Many contributions on QM highlighted the role of top management support and man-

agement leadership for a successful implementation of QM (Deming, 1986; Ishikawa,

1985; Juran, 1989). Top management support comprises managers actively accepting

their responsibility for quality, participating in quality improvement efforts and setting

goals regarding quality (Saraph et al., 1989; Ahire, Landeros, & Golhar, 1995). The

management of relationships with service providers is essential for QM of externally

sourced BS (Kaynak & Hartley, 2008; Robinson & Malhotra, 2005) as the quality of

incoming products or services is crucial for the quality of delivered products or ser-

vices (Forker, 1997; Forker et al., 1997; Yang et al., 2009). Top management of a buy-

ing company can promote beneficial relationships with providers of BS, for example,

by allowing prioritizing quality and delivery performance over price in supplier selec-

tion and providing resources for the creation of systems of provider certification and

assessments (Flynn, Schroeder, & Sakakibara, 1995; Sila & Ebrahimpour, 2005; Zu et

al., 2008). Consequently, we propose:

H 1: Top management support is positively related to provider involvement.

It is also top management which is in charge to provide required trainings and other

resources for employees in order to realize the new principles and tools related to QM

(Ahire & O‟Shaughnessy, 1998). Furthermore, top management can establish an envi-

ronment which allows open communication, cooperation and learning thus involving

employees into the necessary change processes when implementing QM (Anderson et

al., 1994; Das et al., 2000; Flynn et al., 1995). Thus, the literature allows us to hypoth-

esize:

H 2: Top management support is positively related to workforce management.

Products and services are usually not designed within one organization alone but in

more or less close cooperation with key customers and/or suppliers (Das et al., 2000;

Robinson & Malhotra, 2005). Top management can influence the degree of integration

that occurs during service design within the buying company, with its customers as

well as with key supply chain partners (Kaynak & Hartley, 2008). We found five stud-

ies that discovered a positive relationship between top management support and prod-

uct design (Ahire & O‟Shaughnessy, 1998; Flynn et al., 1995; Kaynak & Hartley,


225

2008; Kaynak, 2003). We argue that the same relationship may hold between top man-

agement support and the design of externally sourced BS and therefore propose:

H 3: Top management is positively related to service design.

Similarly, top management support may directly be related to customer involvement.

Top management can provide the required policies, structures and work environments

which foster customer orientation within the buying company (Ahire &

O‟Shaughnessy, 1998). Furthermore, it can promote customer involvement by provid-

ing the resources for plant visits, requiring the solicitation of detailed customer needs

and the inclusion of customer representatives on service design teams (Kaynak &

Hartley, 2008; Flynn et al., 1995; Zu et al., 2008).

H 4: Top management support is positively related to customer involvement

Many authors have used case studies and anecdotal examples to contend that QM can

best be achieved when there is a high level of human resource or workforce manage-

ment (Li, 1997; Hackman & Wageman, 1995). Workforce management, among other

components, encompasses a clear commitment to quality-related training, involvement

of employees in continuous improvement and problem solving as well as recognition

and reward systems regarding quality (Dean & Bowen, 1995; Fynes, 1999; Sila &

Ebrahimpour, 2003). As these tools can increase awareness for quality-related issues

of employees, we argue in line with empirical findings by Curkovic et al. (2000),

Kaynak & Hartley (2008), and Zu et al. (2008) that more intense workforce manage-

ment can improve the usage of quality information. Therefore, we posit that:

H 5: Workforce management is positively related to quality information.

The management by fact is highly advocated by the early QM advocates (Deming,

1982; Garvin, 1988; Ishikawa, 1985; Juran & Blanton Godfrey, 2000). It can be

achieved by a steady flow of accurate and timely quality-related information such as

failure and complaint rates, rework, warranty costs as well as benchmarking with other

organizational units or companies and further usage of these data for quality improve-

ments (Ahire et al., 1995; Li, 1997; Evans & Lindsay, 2002). Techniques related to

quality information are, for example, histograms, Pareto charts, cause-and-effect dia-

grams etc. (Fynes, 1999; Zwikael & Globerson, 2007). The provision and usage of

quality information may enhance the involvement of providers of externally sourced

BS by offering the required data for their monitoring, certification and assessment

(Forza & Filippini, 1998; Sila & Ebrahimpour, 2005). We therefore argue that:



H 6: Quality information is positively related to provider involvement.

It may also be assumed that quality information positively affects process manage-

ment. For example, quality information provides the employees of the buying compa-

ny with data required to detect process disruptions in service production and delivery

as early as possible. Furthermore, efficient quality information may enhance the in-

spection, assessment and approval of purchased services by the buying company. Sev-

eral empirical studies have confirmed the linkage between quality information and

process management from the perspective of manufacturers of goods (Ahire &

O‟Shaughnessy, 1998; Choi & Eboch, 1998; Lee, Rho, & Lee, 2003). Accordingly, we

propose for companies buying BS:

H 7: Quality information is positively related to process management.

Furthermore, the service design process can only be efficient if quality-related data are

collected and available. For example, failure and complaint information can be an es-

sential source for defining and specifying the required characteristics of BS which are

newly purchased by a buying company. In line with Ahire & O‟Shaughnessy (1998)

and Kaynak & Hartley (2008) we thus argue that:

H 8: Quality information is positively related to service design.

Customer involvement comprises the effective measurement and monitoring of cus-

tomers‟ needs, expectations and/or satisfaction (Molina-Azorín et al., 2009; Powell,

1995). However, several authors have posited that the definition of requirements and

specifications is more difficult for services than for goods due to their specific charac-

teristics (see for example, Jackson et al., 1995; Lindberg & Nordin, 2008). These diffi-

culties may be increased by the circumstance that BS can have internal service cus-

tomers within the buying company as well as external ones (Wynstra et al., 2006; van

der Valk et al., 2009; van der Valk, 2007). Successful involvement of internal and ex-

ternal service customers may be even more crucial for efficient QM for BS than for

goods (cf. Curkovic et al., 2000; Das et al., 2000; Hackman & Wageman, 1995). Flynn

et al. (1995) proposed that customer involvement is directly related to product design.

However, their results did not support their hypotheses. Considering the peculiarities

of BS and the resulting difficulties in service design, however, we argue that intense

customer involvement positively affects service design.

H 9: Customer involvement is positively related to service design.


227

Ahire & Dreyfus (2000) emphasize that successful manufacturing firms make exten-

sive use of product design. Such companies aim at designing quality into the products

so that the ensuing manufacturing processes are not disrupted by quality failures

(Ahire & Dreyfus, 2000; Flynn et al., 1995). The design process can comprise tech-

niques such as using cross-functional teams for product design, involvement of suppli-

ers and customers into the design process, intensive tests of the good before production

etc. (Fynes & Voss, 2002; Sila & Ebrahimpour, 2003). Knowledge and experience

gained during the design process can also be used to optimize the production processes

and thus process management (Ahire & Dreyfus, 2000). We argue that the same rela-

tionships hold for the design of externally sourced BS and therefore offer the follow-

ing hypothesis:

H 10: Service design is positively related to process management.

In line with empirical findings by Kaynak (2003), Kaynak & Hartley (2008) and Zu et

al. (2008) we also posit that provider involvement positively affects process manage-

ment. Long-term relationships with service providers may, for example, lead to a bet-

ter understanding of the working processes of supply chain partners and a careful se-

lection and permanent assessment of a service provider may reduce process variability

(Flynn et al., 1995; Forza & Filippini, 1998). Therefore, we propose that

H 11: Provider involvement is positively related to process management.

D.2.3.2 Hypothesized relationships between QM practices and organizational

performance

Hackman & Wageman (1995) criticize that most researchers in QM use general organ-

izational outcomes, such as market share, profitability, stock price etc. as measure-

ments for the effects of QM practices. They point out that such outcomes can be the

result of many influential factors and thus they may not be directly related to QM prac-

tices alone. In order to be able to make more definite statements about cause and ef-

fect, they therefore accept using subjective measures for QM performance. These can

in return be better directly attributed to the adoption of QM practices (Hackman &

Wageman, 1995). Considering their view and the fact that QM for BS from the per-

spective of buying companies is a comparably uncharted area, we gave special atten-

tion to the discovery of potential outcomes which are closely related to the usage of

QM practices. We therefore conducted case studies with 16 manufacturing and service



companies before outlining this study and developing the associated measurement

scales. We ascertained that operating costs, service quality, customer satisfaction, and

value of QM may be appropriate measures of organizational performance closely re-

lated to QM. The hypothesized relationships between QM practices and these perfor-

mance measures and the relations among the performance measures themselves are

described in the following.

We first argue that higher levels of involvement of service providers results in higher

levels of service quality of externally sourced BS. For example, regular assessments of

service providers by the buying company may confront the supplier with its quality

issues and thus cause the vendor to improve its service quality continuously. Further-

more, provider evaluation may function as an instrument to identify low-performing

service providers. The buying company can then phase out these suppliers over time

which may lead to a higher overall level of quality for that specific service. In line

with empirical studies by Cua et al. (2001) and Krause et al. (2000) who detected a

strong and positive correlation between supplier management/development and con-

formance/service quality, we suggest that:

H 12: Provider involvement is positively related to service quality.

We further argue that process management directly enhances service quality. Perma-

nent monitoring of the production and delivery process for externally sourced BS, sys-

tems of service approval and process documentations may, for example, help to iden-

tify and correct quality problems as soon as they occur and thus increase service quali-

ty in the long run (Ahire & Dreyfus, 2000; Li, 1997). Some previous studies found

positive relationships between process management and measures of product quality

(Choi & Eboch, 1998; Cua et al., 2001; Lee et al., 2003; Li, 1997; Zu et al., 2008). We

therefore bring forward that the same relationships holds for externally sourced BS.

H 13: Process management is positively related to service quality.

Using cross-functional teams for the design of externally sourced BS, testing them in-

tensively etc. may also support the improvement of service quality. For example, high

levels of reliability of a product or service may be achieved by considering potential

failures from various perspectives during the design process (Flynn et al., 1995; Forza

& Filippini, 1998). Similar to Cua et al. (2001) and Kaynak & Hartley (2008) we

therefore posit that more intensive service design has positive effects on service quali-

ty.


229

H 14: Service design is positively related to service quality.

In addition, customer involvement may support a company buying BS in its attempts

to receive detailed requirements of internal and external service consumers. Thus, it

may be able to better define the needed level of service quality before the actual pur-

chase (Fitzsimmons, Noh, & Thies, 1998). Regular assessments of satisfaction levels

and feedback from internal and external service customers may, by contrast, improve

the quality evaluation after the purchase (cf. Jackson et al., 1995) and hence enhance

service quality as well. Although the relationship between customer involvement and

service quality is not yet fully examined in research on QM (cf. Cua et al., 2001; Dow

et al., 1999; Samson & Terziovski, 1999), we bring forward the following hypothesis:

H 15: Customer involvement is positively related to service quality.

Although some of the seminal QM literature mentions customer satisfaction as the ma-

jor goal of any activity in QM (see, for example, Juran & Blanton Godfrey, 2000;

Deming, 1986), quality-related performance has been conventionally defined in terms

of operational performance (Das et al., 2000). Following the suggestions from Reeves

& Bednard (1994) we therefore introduce customer satisfaction as a crucial outcome

measure of QM and propose two hypotheses related to it. In accordance with Nilsson

et al. (2001) and Samson & Terziovski (1999) we first argue that involvement of cus-

tomers can directly increase customers‟ satisfaction by better defining customers‟ re-

quirements for BS (Evans & Lindsay, 2002).

H 16: Customer involvement is positively related to customer satisfaction.

D.2.3.3 Hypothesized relationships between measures of organizational per-

formance

As described earlier, various studies from the area of service marketing (see Section

D.2) and some studies in QM for goods (for example, Choi & Eboch, 1998; Das et al.,

2000; Madu, Kuei, & Jacobi, 1996) have shown that higher levels of service quality

also increase customer satisfaction. Therefore, we bring forward our next hypotheses:

H 17: Service quality is positively related to customer satisfaction.

Although the early proponents of QM already posited that higher levels of product

quality reduce manufacturing costs (Deming, 1986; Garvin, 1988), the existing empir-

ical evidence for this connection is still fragmentary (Maani et al., 1994). We only



found two studies which discovered a direct and positive relationship between the lev-

el of product quality and aggregated performance constructs including manufacturing

costs (Maani et al., 1994; Madu et al., 1995). As – together with enhancing customer

satisfaction – lowering costs is an overriding aim of QM, we include cost efficiency as

a separate construct in our network of performance measures. Higher levels of busi-

ness service quality may lower the purchase prices, cost of quality failures or operating

costs for buying companies. For example, BS better meeting the actual needs of cus-

tomers may reduce the purchase price by cutting-off non-required parts of the service.

Better service quality may also reduce the costs for re-negotiating and solving quality

problems. We therefore propose:

H 18: Service quality is positively related to cost efficiency.

Finally, we introduce the performance measure “value of QM” as the ultimate depend-

ent variable in our research model. We thus follow the suggestion by Hackman &

Wageman (1995) who advocate the use of outcome criteria which can be directly

traced back to the activities related to QM even when they are subjective. Value of

QM can be defined as „a ratio of total benefits received to total sacrifices‟ (Patterson &

Spreng, 1997: 416) related to the QM for externally sourced BS. We assume that high-

er levels of cost efficiency and customer satisfaction positively influence the value of

QM whereas the costs for the implementation and maintenance of QM may decrease

it. Therefore, we propose:

H 19: Cost efficiency is positively related to value of QM.

H 20: Customer satisfaction is positively related to value of QM

D.3 Research methodology

D.3.1 Development of the survey instrument

Three steps were taken to develop our survey instrument: First, an exploratory, multi-

ple, embedded (Yin, 2003) and comparative (Dul & Hak, 2008; Silverman, 2002) case

study was conducted in order to investigate the broader domain of purchasing of BS by

interviewing 32 representatives of 16 manufacturing and service companies. Among

other things, the case studies revealed that QM for externally sourced BS has positive

effects on their overall quality and can improve satisfaction. Furthermore, it became


231

clear that QM for externally sourced BS not only involves purchasing and the service

provider but also internal as well as external customers. Thus, when investigating QM

and its effects, one should include both types of customers into the analysis.

Second, a prototype questionnaire was developed in German based on an extensive

review of literature in the areas of QM and service quality. Constructs from earlier re-

search were used whenever possible. Several items had to be adjusted, however, due to

the specifics of BS. Furthermore, constructs such as service design, customer involve-

ment and satisfaction had to include internal as well as external customers of the buy-

ing companies. The questionnaire and its subsequent version measured items on a sev-

en-point Likert scale with end points of “not at all (=1)” to “to the fullest extent (=7)”.

Third, the prototype questionnaire was pre-tested by seven purchasing managers, six

quality managers and four academics from the area of operations management. Each

of these filled out the questionnaire. Afterwards, we statistically tested the pilot study.

Due to the small sample size, our statistical tests were limited to Cronbach‟s alpha

(Cronbach, 1951) and item-to-total correlations. The values of Cronbach‟s alpha for all

constructs exceeded the recommended threshold of 0.7 (Nunnally & Bernstein, 1994)

apart from the constructs for workforce management, customer involvement and satis-

faction. We then discussed these results with the respondents. Their feedback and the

statistical analysis led to modifications of the wording of some survey questions for

these constructs.

D.3.2 Data collection and sample

The target population for this study consisted of manufacturing and service companies

buying BS from a wide array of industries. The data were obtained from firms operat-

ing in Austria, Germany and Switzerland through a cross-sectional web survey carried

out in 2010. The sample was drawn from two sources: First, a contact list of authors‟

university was used. Second, several contacts were found by searching publicly avail-

able company databases to avoid potential bias from convenience sampling (Zhu,

Sarkis, & Kee-hung, 2008).

Power analysis determined a target sample of 1,084 companies. In total, we identified

1,977 companies and contacted them by e-mail. 664 e-mails were undeliverable be-

cause contact data were out of date. This left us with a list of 1,313 usable e-mail ad-

dresses. Following the Tailored Design Method for web surveys (Dillman, 2007), we

sent out up to three reminders with a link to the survey to subjects which have not re-



sponded to the previous e-mails. In total, we received 513 responses. Responses with

missing values for the items related to the QM practices and performance measures

were excluded from further analysis. Thus, a sample of 260 complete questionnaires

remained. This reflects the experience that high abandonment rates after the first intro-

duction window are usual for web-based surveys (Grant, Teller, & Teller, 2005). The

response rate of 19.8 % is in line with other studies in this research area (for example,

Das et al., 2000; Ravichandran & Rai, 2000) and comparable to many other studies in

the wider field of organizational research (Yu & Cooper, 1983).

As can be seen in Table D- 1, the sample includes companies buying BS from a broad

range of industries. Also, these companies range from small and medium enterprises to

multinational corporations. Most of the responses came from Germany, followed by

Switzerland and Austria. The respondents majorly held positions such as head of pur-

chasing or purchasing manager followed by head of QM, chief executive officer

(CEO) and quality manager. Furthermore, many respondents represented other posi-

tions such as head of supply chain management, head of operations, head of marketing

etc. indicating that they were intensive consumers of BS purchased by their company.

We therefore concluded that the respondents possessed the required knowledge to an-

swer the questions appropriately.


233

Table D- 1: Response sample composition

Response sample

size:

260 responsesa

Industry

Name of the NACEb group Number of

responses

Percentage

of responses

Manufacturing (C): 101 38.8%

Transportation and storage (H): 46 17.8% Administrative and support service activities (N): 29 11.2%

Information and communication (J): 15

5.8%

Professional scientific and technical activities (M): 12 4.6% Financial and insurance activities (K): 11 4.2%

Wholesale and retail trade; repair of motor vehicles and motorcycles (G):

11

4.2%

Construction (F): 9 3.5% Human health and social work activities (Q): 9 3.5%

Electricity, gas, steam and air conditioning supply (D): 5 1.9% Public administration and defence;

compulsory social security (O):

3

1.2%

Education (P): 2 0.8%

Others: 6 2.3% Number of

employees per

company

Category of number of employees

1-9 employees: 11 4.3% 10-49 employees: 27 10.6%

50-249 employees: 41 16.1%

240-999 employees: 47 18.4% 1,000 – 4,999 employees: 55 21.6%

≥ 5,000 employees: 74 29.0% Turnover per

company

Category of turnover

0 < 2 million Euro: 18 7.1%

2 < 10 million Euro: 17 6.7% 10 < 50 million Euro: 36 14.1%

50 < 250 million Euro: 48 18.8% 250 < 1,000 million Euro: 40 15.7%

1,000 < 5,000 million Euro: 41 16.1% ≥ 5,000 million Euro: 45 17.6%

Not specified: 10 3.9%

Country of

headquarter of

company

Country Austria: 11 4.2%

Germany: 139 53.5% Switzerland: 55 21.2%

Liechtenstein: 2 0.8%

Other: 6 2.3% Not specified: 47 18.1%

Respondent titles Title Head of purchasing: 66 25.9%

Purchaser: 30 11.8% Head of quality management: 30 11.8%

Quality manager: 17 6.7%

CEO: 27 10.6% Other (Head of supply chain management, head of

operations etc.): 85 33.3%

a Only the items regarding the constructs related to QM practices and performance had to be filled in by the respondents completely. By contrast, the respondents were free not to provide information regarding their demographics in order to ob-tain a sufficiently large sample. Therefore, the total number of responses regarding demographics is slightly lower for some

demographic items than the total number of responses for the rest of the questionnaire.

b According to Nomenclature statistique des activités économiques dans la Communauté européenne (NACE Rev. 2) (Euro-pean Commission, 2010).



D.3.3 Treatment of data, key informant, non-respondent and

common-method bias

In our study, responses containing missing data were excluded from further analyses.

In addition, we checked if multivariate normality can be assumed. It has to be noted

that data from 7-point Likert scales are by definition not normally distributed (Barnes,

Cote, Cudeck, & Malthouse, 2001). In line with Kline (2004), however, we assessed

the descriptive statistics to test for multivariate normality. All indicators showed a

skew level well below the threshold of 3 and kurtosis below the cut-off criterion of 10

(Kline, 2004).

We attempted to minimize key-informant bias by only requesting the informant with

the most comprehensive knowledge about QM for externally sourced BS within the

buying organization to complete the survey (Kumar, Stern, & Anderson, 1993). Ac-

cordingly, contacts were asked to forward the link to the web-survey to the experts

within their organization if they did not consider themselves competent. In addition, it

was suggested that key informants may answer the questionnaire collaboratively with

other employees involved into QM for BS. On average, the 260 completed question-

naires were filled out by 1.31 employees from the buying organization (standard de-

viation = 0.698, standard error of mean = 0.044). Furthermore, every respondent was

requested to assess his/her knowledge level regarding the topic as suggested by Kumar

et al. (1993). On a seven-point Likert scale, 76.8% of the participants evaluated their

level of knowledge as above average resulting in a mean of 5.20 (standard deviation =

1.196, standard error of mean = 0.076) equal or greater than the suggested threshold of

five (Li & Calantone, 1998). Thus, we considered the key-informants who have an-

swered the survey as knowledgeable and suitable for this survey.

In line with Armstrong & Overton (1977) potential non-response bias was evaluated

by conducting t-tests comparing early and late respondents. The companies were ap-

proached in four waves of electronic mailings. Therefore, responses from the first two

e-mails were compared with the ones from the latter two ones. Sample t-tests were

performed for the constructs related to QM and performance. The t-tests did not show

any significant differences between the data from early and late respondents. The two

groups were also not significantly different regarding the companies‟ demographics

(i.e. number of employees and turnover). As it can be assumed that late-respondent

bias is similar to non-respondent bias, we concluded that non-respondent bias is small

(Armstrong & Overton, 1977). In addition, we conducted telephone calls with 20 ran-

domly chosen non-respondents to find out what the reasons for their non-response


235

were. As main reasons for their non-participation these companies stated the large

number of various surveys received, the lack of time due to other commitments and

existing policies not to respond to surveys. Such reasons suggest that non-response is

not specifically related to our study but to more general trends (Ravichandran & Rai,

2000). This qualitative information also suggests that non-respondents did not signifi-

cantly differ from respondents in our study.

Several measures were taken to minimize potential common-method bias (Podsakoff,

Mackenzie, Jeong-Yeon, & Podsakoff, 2003) from the outset: First, anonymity and

confidentiality was guaranteed to respondents in all communication (Podsakoff et al.,

2003). Second, the respondents were explained the usefulness of the study and offered

a copy of the results (Huber & Power, 1985). Third, Harman‟s single factor test was

conducted post facto as suggested by Podsakoff & Organ (1986). “The basic assump-

tion of this technique is that if a substantial amount of common method variance is

present, either (a) a single factor will emerge from the factor analysis, or (b) one „gen-

eral‟ factor will account for the majority of the covariance in the independent and cri-

terion variables” (1986: 536). We performed an unrotated factor analysis which re-

vealed that ten factors fulfil the eigenvalue-greater-than-one criterion and that at least

three factors are needed to explain a variance of more than 50%. Therefore, we con-

cluded that there is no significant common-method bias (cf. Podsakoff & Organ,

1986).

D.3.4 Data analysis

We decided to use SEM as method for data analysis due to its ability to incorporate

latent constructs (Byrne, 2010) and to estimate the relationships of multiple interrelat-

ed dependence relationships simultaneously (Hair, Jr., Black, Babin, Anderson, & Tat-

ham, 2006). Furthermore, we chose the partial least squares (PLS) estimation tech-

nique as it provides latent variables scores and can estimate complex models with

many latent and manifest variables (Henseler, Ringle, & Sinkovics, 2009). We applied

smartPLS 2.0 M3 (Ringle, Wende, & Will, 2005) for the analysis of our path model.

We followed the two-step approach proposed by Anderson & Gerbing (1988). It con-

sists of the development of the measurement model and its validation and the actual

testing of the structural model. Both steps are described in more detail in the following

sections.



D.3.4.1 Measurement model

We tested reliability and validity of our measurement model following suggestions by

Henseler et al. (2009).

Scale reliability: We tested reliability on the indicator as well as on the construct level.

On the construct level we calculated Cronbach‟s alpha (Cronbach, 1951) as well as

composite reliability (Werts, Linn, & Jöreskog, 1974). Both reliability coefficients can

be interpreted in the same way using a threshold value of above 0.7 (Henseler et al.,

2009). All constructs showed values well above this limit. On the item level, Hulland

(1999) suggests that the loadings of all indicators with their respective constructs

should exceed 0.707 to ensure that at least half of the variance in the manifest variable

is shared. The squared correlation equals the variance explained, where 0.707 ≈ √0.5.

As can be seen from Table D- 5 in the appendix all retained items fulfilled this re-

quirement.

Content validity: As described in Section D.3, we attempted to ensure content validity

by conducting an exploratory case study investigating how buying companies manage

the quality of externally sourced BS. Based on the results of the case study, we then

developed a prototype questionnaire on basis of an extensive review of the literature

related to QM and service quality. Most of the items regarding QM practices stemmed

from earlier research in QM such as Saraph et al. (1989) while items related to service

quality and customer satisfaction were mainly adopted from studies in service quality

(for example, Parasuraman, Zeithaml, & Berry, 1988). Finally, we pilot-tested this

questionnaire with practitioners and members of academia. Their feedback led to the

refinement of the original items whose final version can be seen in Table D- 5 in the

appendix.

Convergent validity and unidimensionality: Convergent validity can be assessed by the

unidimensionality of indicators relating to a construct (Henseler et al., 2009). To test

unidimensionality, we conducted an exploratory factor analysis using principal com-

ponent extraction with varimax rotation. The exploratory factor analysis was separate-

ly performed for the constructs related to QM practices and the performance measures.

On basis of an examination of the eigenvalues the proposed seven constructs for QM

practices and four performance constructs were affirmed. Afterwards, the standardized

factor loadings and communalities of all items were checked which resulted in the

elimination of several indicators of the constructs provider involvement, quality in-

formation and service design. For each final scale pertaining to QM practices and per-


237

formance measures, Cronbach‟s alpha was recalculated (Cronbach, 1951, see Table D-

5). All items then passed the suggested threshold value of 0.7 (Nunnally & Bernstein,

1994). The retained items with their standardized factor loadings on the respective

scale and corresponding t-values can be seen in Table D- 5 in the appendix.

Discriminant validity: According to Henseler et al. (2009), discriminant validity can

be evaluated by using two measures in PLS path modelling: First, the Fornell-Larcker

criterion (Fornell & Larcker, 1981) which postulates that a latent variable should share

more variance with its assigned indicators than with any other latent construct. We

checked the Fornell-Larcker criterion by testing if the average variance extracted

(AVE) of each construct is greater than any squared correlation with the other factors

(Fornell & Larcker, 1981). Second, the loading of each indicator should be greater

than all of its cross-loadings (Chin, 1998; Henseler et al., 2009), i.e. indicators for one

construct should not load too much on indicators from a different construct. As Table

D- 2 shows all constructs and indicators are in conformance with these criteria and

thus indicating sufficient discriminant validity.

Predictive validity: Predictive (Nunnally & Bernstein, 1994) or criterion-related validi-

ty (Diamantopoulos & Siguaw, 2006) is concerned with how well the scales of a sur-

vey instrument are associated with an independent measure of the relevant criterion

(Sila & Ebrahimpour, 2005). Therefore, in this study, the seven QM practices have

predictive validity if they are positively correlated with the performance measures as

hypothesized in the research framework.


238

Table D- 2: Results of testing the measurement model

Construct Indicator Cronbach’s

alpha

Composite

reliability

Factor

loadings

Average

variance

extracted (AVE)

Squared latent variable

correlations

Fornell-Larcker

criterion

Minimum Maximum

Top management support

Mtsup 1 .944 .964

.957 .899 .29 .55 Fulfilled

Mtsup 2 .949

Mtsup 3 .938


Workmt 1 .899 .926 .779 .713 .35 .60 Fulfilled

Workmt 2 .841

Workmt 3 .850

Workmt 4 .863

Workmt 5 .888

Provider involvement

Proinv 2 .909 .943 .937 .846 .23 .62 Fulfilled

Proinv 3 .928

Proinv 4 .894

Quality information

Qinf 1 .901 .939 .880 .792 .29 .66 Fulfilled

Qinf 2 .894

Qinf 3 .902

Qinf 5 .884

Service design Des 1 .846 .896 .783 .682 .34 .53 Fulfilled

Des 2 .835

Des 4 .833

Des 5 .850


Cuinv 1 .907 .928 .815 .682 .36 .64 Fulfilled

Cuinv 2 .839

Cuinv 3 .827

Cuinv 4 .835

Cuinv 5 .816

Cuinv 6 .821

Process management

Promt 1 .879 .917 .881 .734 .27 .66 Fulfilled

Promt 2 .843

Promt 3 .872

Promt 4 .829


239

Construct Indicator Cronbach’s

alpha

Composite

reliability

Factor

loadings

Average

variance

extracted (AVE)

Squared latent variable

correlations

Fornell-Larcker

criterion

Minimum Maximum

Service quality Servq 1 .960 .968 .928 .834 .42 .70 Fulfilled

Servq 2 .908

Servq 3 .925

Servq 4 .852

Servq 5 .925

Servq 6 .939

Cost efficiency Cost 1 .907 .942 .910 .843 .23 .56 Fulfilled

Cost 2 .920

Cost 3 .925

Satisfaction Sat 1 .916 .941 .901 .799 .32 .70 Fulfilled

Sat 2 .900

Sat 3 .887

Sat 3 .887

Value of QM Value 1 .939 .961 .953 .891 .32 .55 Fulfilled

Value 2 .947

Value 3 .932

Suggested values n/a ≥.70 (Nunnally & Bernstein, 1994)

≥.60 (Henseler et al., 2009)

≥.70 (Nunnally & Bernstein, 1994)

≥.50 (Fornell & Larcker, 1981)

n/a n/a Squared correlation coefficients < AVE (Fornell & Larcker, 1981)



D.3.4.2 Structural model

After having established confidence in the measurement model, we tested the structur-

al model, i.e. the hypothesized relationships between the proposed constructs, using

smartPLS (Ringle et al., 2005). The results regarding the relationships between QM

practices and performance factors are depicted in Figure D- 2. All proposed hypothe-

ses and parameters to be estimated are supported.

In structural models using PLS, an overall goodness of fit index cannot be reported as

the main objective is prediction versus fit (Ulaga & Eggert, 2006). However, Henseler

et al. (2009) suggests four tests for assessing structural models using PLS which are

shortly described in the following. Their results are given in Figure D- 2 and in Table

D- 3 respectively.

First, we estimated the path coefficients using the bootstrap procedure to obtain t-

statistics for the evaluation of the significance of parameters (Tenenhaus, Esposito

Vinzi, Chatelin, & Lauro, 2005; Efron & Tibshiran, 1986). All path coefficients are

directed as hypothesized and significant. The results are shown in Figure D- 2 provid-

ing empirical support all of our hypotheses.

Second, we checked the coefficient of determination (R2) of the latent endogeneous

variables as the most essential criterion for quality of a structural model (Henseler et

al., 2009). Chin (1998) considers R2 values of 0.67, 0.33 and 0.19 in structural models

using PLS as substantial, moderate or weak respectively. Thus, in our model, the coef-

ficient for process management, service quality and satisfaction are substantial, while

the coefficient for cost efficiency and value of QM can be regarded as moderate. No

endogeneous variable possesses a weak value of R2. In total, the model is able to ex-

plain 70% of the variance of service equality.

Third, in addition to the R2 as a criterion for predictive relevance, we also calculated

Stone-Geisser‟s Q2 (Geisser, 1975; Stone, 1974) which posits that a model must be

able to provide a prediction of the indicators of the endogenous latent variable

(Henseler et al., 2009). A value of Q2 greater than zero for a certain endogenous latent

variable indicates the model has predictive relevance, whereas values smaller than zero

represent a lack of predictive relevance (Chin, 1998). Furthermore, positive values for

the relative impact of predictive relevance of 0.02, 0.15 and 0.35 indicate a small, me-

dium or large predictive relevance of a certain latent variable (Henseler et al., 2009).


241

The results of our calculation of Stone-Geisser‟s Q2 in Table D- 3 reveal that all values

are greater than zero. Therefore, the model possesses predictive relevance.

Fourth, we calculated the size of each effect in the path model by means of Cohen‟s f2

(Cohen, 1988). The effect size is the relative increase of the proportion of variance of

the endogenous latent variable that remains unexplained (Henseler et al., 2009). Cohen

(1988) deems values of 0.02, 0.15 and 0.35 as signifying small, medium and large ef-

fects. The results for Cohen‟s f2 for each of the hypothesized paths will be further dis-

cussed in the next section.


242

Figure D- 2: Structural model

a +/- = direction of path coefficient (positive/negative); *** = p<.01; ** = p<.05; *=p<.1; t= t-value; level of effect size (Cohen, 1988): Large effect: f

2≥.35, medium effect: : f

2≥.15, small effect: :

f2≥.02; level of relative predictive relevance (Henseler et al., 2009): Large: q

2≥.35, medium: q

2≥.15, small: q

2≥.02

Quality

infor-mation

(R2=0.554)

Provider

involve-ment

(R2=0.589)

Top mgt.

support

Customer

involve-ment

(R2=0.550)

H1

+ .195***

t=3.19

f2=.052

q2=.035

Process

mgt.(R2=0.736)

Workforce

mgt.(R2=0.532)

Service

design(R2=0.529)

Service

quality(R2=0.700)

Satis-

faction(R2=0.751)

Cost

efficiency(R2=0.562)

Value of

quality mgt.(R2=0.606)

H2

+ .729***

t=19.02

H4

+.742***

t=18.42

H5

+ .774***

t=20.41

H6

+ .625***

t=10.09

f2=.534

q2=.373

H7

+ .446***

t=6.89

f2=.271

q2=.157

H8

+ .408***

t=7.44

f2=.159

q2=.063

H9

+ .317***

t=4.68

f2=.076

q2=.037

H20

+ .301***

t=4.95

f2=.107

q2=.179

H17

+ .553***

t=10.69

f2=.444

q2=.259

H19

+.531***

t=10.07

f2=.328

q2=.293

H12

+ .102**

t=2.247

f2=.019

q2=.014

H13

+ .207***

t=2.82

f2=.029

q2=.030

H15

+ .503***

t=9.12

f2=.352

q2=.213

H14

+ .138***

t=2.35

f2=.035

q2=.030

H10

+.121***

t=3.34

f2=.028

q2=.051

H11

+ .374***

t=6.13

f2=.218

q2=.134

H3

+.077*

t=1.385

f2=.004

q2=.004

H16

+ .359***

t=6.55

f2=.179

q2=.063

H18

+ .75***

t=18.58


243

Table D- 3: Results of testing the structural model

Construct Coefficient of determination (R

2)

Level of coefficient of determination (R

2)

Prediction relevance (Q

2)

Top management support

n/a n/a n/a

Workforce management .532 Moderate .373 Provider involvement .589 Moderate .497

Quality information .554 Moderate .437 Service design .529 Moderate .337

Customer involvement .550 Moderate .357

Process management .736 Substantial .553

Service quality .700 Substantial .565 Cost efficiency .562 Moderate .450

Satisfaction .751 Substantial .577 Value of QM .606 Moderate .528

Suggested values n/a Substantial: R2≥ .67

Moderate: R2≥ .33

Weak: R2≥ .19

(Chin, 1998)

Q2>0

(Geisser, 1975; Stone, 1974)

D.4 Discussion

The primary objective of our study was to investigate the relationships amongst QM

practices for BS and their impact on organizational performance from a buying com-

pany‟s perspective. We attempted to reach this purpose by developing and testing a

structural model which was based on a comprehensive review of relevant literature.

The findings as a whole suggest that the adoption of QM practices for BS is positively

related to organizational performance of the buying company. The various relation-

ships amongst the QM practices and between QM practices and performance are short-

ly discussed in the following.

Supporting findings from previous studies examining QM from the perspective of a

goods provider (for example, Flynn et al., 1995; Forza & Filippini, 1998; Kaynak,

2003; Kaynak & Hartley, 2008), top management support represents a crucial compo-

nent of QM for BS. It is positively, directly and strongly related to workforce man-

agement and customer involvement, whereas its direct relationship to provider in-

volvement and service design is less strong. In case of service design it is significant

only at the 10% level. It may be that workforce management and customer involve-

ment are seen as more strategic QM practices which require more intense attention by

top management than provider involvement and service design. The latter two practic-

es may be regarded as more operative tasks supported or performed not by top man-

agement but by functional departments such as purchasing and QM. It may be worth-



while for future studies to examine which other factors exert stronger effects on sup-

plier management and service design. For example, the professionalism of purchasing

may influence the degree to which both constructs are applied in a buying company.

Workforce management is positively, directly and strongly related to quality infor-

mation. This result is in line with studies, for example, by Samson & Terziovski

(1999) and Zu et al. (2008). This means that well-trained employees who are aware of

the importance of quality of incoming BS and empowered to make decisions regarding

their quality are paramount in obtaining reliable and efficient quality information. Our

result supports the notion by Flynn et al. (1995) and Zu (Zu, 2009) that workforce

management represents an important infrastructure QM practice facilitating the im-

plementation of other core QM practices rather than possessing direct effects on organ-

izational performance.

Quality information itself appears to be a crucial ingredient for the successful adoption

of QM for externally sourced BS. It is directly and very strongly related to provider

involvement, and slightly less strongly related to service design and process manage-

ment. The important role of quality information was also established by previous stud-

ies (for example, Ahire & O‟Shaughnessy, 1998; Kaynak & Hartley, 2008; Kaynak,

2003) from the perspective of goods providers. Considering the rather large path coef-

ficients and substantial effect sizes, it seems that quality information is even more crit-

ical to successful QM for externally sourced BS than it is for QM of goods. This may

be associated to the heterogeneity and intangibility of services which – on the one

hand – make it more difficult to obtain useful quality data about them but – on the oth-

er hand – increase the demand for such information.

Provider involvement in our study is directly and positively related to process man-

agement and service quality. Our findings regarding the comparably strong influence

of provider involvement onto process management are consistent with earlier research

on QM for goods (for example, Ahire & O‟Shaughnessy, 1998; Forza & Filippini,

1998). However, results on the relationship between provider involvement and per-

formance have sometimes been mixed. Powell (1995), for instance, concluded that

closeness to suppliers is only marginally correlated to quality performance whereas

Kaynak & Hartley (2008) found direct and indirect relationships between supplier QM

and different performance measures. In our study, provider involvement is directly but

not particularly strongly related to service quality. Additionally, it may exert indirect

effects on service quality mediated by process management and on all other perfor-

mance measures via service quality as well. Provider involvement shows direct influ-


245

ence on service quality. This contrasts research by Zu (2009) who only detected indi-

rect effects of supplier involvement on quality performance and thus regarded it an

infrastructure practice. Future research may further evaluate the role of provider in-

volvement as an infrastructure or core QM practice.

Flynn et al. (1995) discovered an under researched link between product design and

process management and called for its examination. We therefore included this rela-

tionship into our study and detected a positive direct relation between service design

and process management. The comparably weak connection (cf., for example, Ahire &

Dreyfus, 2000, Kaynak & Hartley, 2008) is, however, somewhat surprising consider-

ing that several authors posit that a thorough design and specification is of paramount

importance for successful purchasing of BS (for example, Jackson et al., 1995; Lind-

berg & Nordin, 2008). The strength of the relationship between service design and

process management may be affected by the specific characteristics of services which

may make the design of BS more difficult than the design of goods for buying compa-

nies. For example, professional buyers may find it more challenging to define the

specification of a business service upfront due to the fact that it is produced and con-

sumed at the same time, i.e. that it is inseparable. Therefore, common techniques

which are used by buying companies to design goods, for example, quality function

deployment or design of experiments, may not be applicable to the same extent for BS.

The link between service design and service quality is not strong either which may

mean that it is difficult for a buying company to determine what quality characteristics

become important after the service is purchased. In total, service design should be re-

garded a core practice of QM for externally sourced BS. Future research may, howev-

er, further investigate to which degree buying companies make use of efficient tech-

niques of service design in order to improve service quality.

Another notable result of our study is the analysis of the role of involvement of inter-

nal and external customers for QM for BS. Customer involvement not only exerts a

positive and direct, however rather weak, effect on service design but also strong or

medium effects on service quality and customer satisfaction. Thus, it can be regarded a

decisive core component of QM for services. This contrasts some earlier research

which either did not include customer involvement into the set of QM practices (for

example, Anderson, Rungtusanatham, Schroeder, & Devaraj, 1995; Saraph et al.,

1989) or did not detect significant direct relationships between customer involvement

and service design (for example, Flynn et al., 1995) or customer involvement and qual-

ity performance (for example, Sila & Ebrahimpour, 2005; Kaynak & Hartley, 2008).



Furthermore, the direct relationships between customer involvement and performance

cast some doubt onto the classification of customer involvement to infrastructure QM

practices (Flynn et al., 1995; Zu, 2009). It may be necessary to take the object of QM

(i.e. goods vs. services) into consideration when classifying QM practices as infra-

structure or core. Customer involvement seems to be more critical for QM for services

than for goods when taking the perspective of a buying company. On the one hand,

this may be due to the supposedly lower professionalism in purchasing of services than

goods (Axelsson & Wynstra, 2002; Ellram et al., 2007; van der Valk, 2008; van der

Valk, 2007). Purchasing professionals may thus be more dependent on the input of

their internal and external customers when defining the requirements on externally

sourced services or on their feedback when evaluating their quality. On the other hand,

the fact that service production often involves the interaction between the service con-

sumer and the service provider implies a close involvement of customers if a company

strives to improve the quality of a business service. In total, customer involvement

seems to be the crucial QM practice for buying companies striving to improve the

quality of their externally sourced BS.

In our study, process management is another QM practice which is positively, directly

and comparably strongly related to service quality. This result corroborates findings in

studies such as, for example, Ahire & Dreyfus (2000), Choi & Eboch (1998) and Lee

et al. (2003) and transfers it to the perspective of companies buying BS. Due to its di-

rect relation to performance, it furthermore classifies process management as a core

practice as suggested by Flynn et al. (1995) and Zu (2009).

We also investigated the relationships among several performance measures. Service

quality appeared to be strongly positively related to satisfaction of internal and exter-

nal customers and cost efficiency. The first relationship is in line with previous studies

from service marketing (for example, Cronin, Jr. et al., 2000; Patterson & Spreng,

1997) and QM (for example, Choi & Eboch, 1998; Madu et al., 1996). It is notable,

however, that the same relationship holds when examining not only the satisfaction of

a buying company‟s external customers but also of its internal customers (for example,

internal departments consuming externally purchased BS) as it was done in our study.

It is important to include these two types of satisfaction in research on QM for exter-

nally sourced BS as they can be either consumed internally within the buying company

or transferred to its external customers (Wynstra et al., 2006; van der Valk et al., 2009;

van der Valk, 2007).


247

The strong link between service quality and cost efficiency is somewhat surprising as

one could argue that higher levels of service quality of externally sourced BS are usu-

ally related to higher acquisition costs for the buying company (Kim & Kim, 2010).

However, our study suggests that companies can lower purchase prices, cost of quality

failures or operating costs by increasing the quality of externally purchased BS

through measures in the area of QM for services. It thus transfers Crosby‟s notion that

– in the longer run – quality is for free (Crosby, 1979) from the perspective of a manu-

facturer of goods to the one of a company buying BS. Increased cost efficiency and

satisfaction are positively related to the value of QM for BS. Overall, the benefits of

QM of a company buying BS thus outweigh the sacrifices for its implementation and

maintenance.

D.5 Conclusion

This study wanted to find out what the relationships between QM practices for exter-

nally sourced BS are and how they are related to measures of organizational perfor-

mance. We found out that QM practices for these services are highly interrelated vali-

dating the interdependence of QM practices. Furthermore, we could detect direct rela-

tionships between QM practices (provider and customer involvement, process man-

agement, services design) and service quality as well as between customer involve-

ment and customer satisfaction.

D.5.1 Managerial implications


follows:

This study shows that QM for externally sourced BS is associated with positive

effects such as enhanced service quality resulting in higher customer satisfaction

and reduced costs. The positive effects of QM for BS are perceived to exceed the

costs of its implementation and maintenance. It may therefore be a profitable in-

vestment for buying companies to expand their efforts in QM for services.

When a buying company considers the implementation of QM for externally

sourced BS, it should take an integrative perspective. Our study has shown that

the various practices are highly interrelated. Therefore, implementing only a lim-

ited set of QM practices may not lead to the expected positive results. However,



our findings suggest that a sequential launch including all the QM practices for

externally sourced BS may realize their full potential. For example, buying com-

panies may first secure the full support by top management and introduce the

practices which were identified as infrastructure instruments in our study, i.e.

workforce management and quality information. Employees who are well trained

in QM for BS and an efficient system of quality data will then alleviate the intro-

duction of the other core practices, i.e. supplier and customer involvement, ser-

vice design and process management.

Our study has shown that customer involvement is a key practice of QM for ex-

ternally sourced BS. This also means that functional borders, for example, be-

tween purchasing and departments consuming BS within buying companies

should be reduced when purchasing BS. Rather, purchasers and quality managers

should work very closely together with their internal or external customers in

cross-functional teams in order to determine their requirements and obtain regu-

lar feedback regarding the quality of externally sourced BS.

Before taking further action to implement QM for externally sourced BS, buying

companies may want to assess its current status in their organization. The refined

version of the questionnaire developed in this study may be used by practitioners

to measure the current realization of QM for services and/or benchmark it with

other companies.

From the perspective of a service provider, our findings suggest that companies

offering a business service should – if possible – thoroughly involve the service

consumer (for example, the internal department of the buying company consum-

ing the service or the external customer of the buying company) into the service

production and delivery process. Furthermore, processes for quality approval and

evaluation should be made as easy as possible for the buying company. For ex-

ample, service providers could regularly survey the satisfaction of customers and

report these data to the purchasing responsibles or they could offer easy-to-use

electronic systems for the approval of delivered services by the buying company.

D.5.2 Theoretical implications

Our study also provides several theoretical insights into the QM for BS from a buying

company‟s perspective.


249

First, we analyzed QM from the perspective of a buying company, i.e. from a different

perspective than the one taken by most of the previous studies, and for BS, i.e. for a

different object of QM than of many other studies in QM. Examining research ques-

tions from a different angle is important for increasing the generalizability and exten-

sion of previous findings (Tsang & Kwan, 1999). Overall, our results suggest that QM

has positive effects on organizational performance when it is implemented for exter-

nally sourced BS. We thus transfer and corroborate findings of earlier studies which

found positive relationships between the adoption of QM for outgoing goods by manu-

facturing companies (for example, Dow et al., 1999; Cua et al., 2001; Kaynak & Hart-

ley, 2008; Sila & Ebrahimpour, 2005; White, 1996).

Second, we examined the direct and indirect relationships amongst QM practices, be-

tween these practices and several selected measures of organizational performance and

among the performance measures themselves. The analysis of this complex network of

relationships – among other things – reveals that top management support, workforce

management and quality information have positive direct links to other QM practices.

They can thus be considered crucial infrastructure QM practices when regarding QM

for BS from a buying company‟s perspective. Provider involvement, process manage-

ment, service design and customer involvement, however, exert positive influence on

performance directly. Thus, they are important core practices for QM for BS. As this

classification of QM practices contrasts some previous analyses for QM of goods (cf.

Flynn et al., 1995; Zu, 2009), we suggest that future research should take the object

(i.e. goods or services) of QM into account when assigning practices to these catego-

ries.

Third, our results underline the crucial role of customer involvement for QM of exter-

nally sourced BS from a buying company‟s perspective. Earlier research did some-

times not include relationships with customers into the set of QM practices or could

not detect positive direct effects of customer involvement on firm performance when

investigating QM for goods (for example, Anderson et al., 1995; Saraph et al., 1989;

Flynn et al., 1995; Sila & Ebrahimpour, 2005; Kaynak & Hartley, 2008). By contrast,

our study revealed a strong and positive relationship between customer involvement

and service quality as well as customer satisfaction. Therefore, customer involvement

seems to be a crucial ingredient of QM for BS and should not be left out in future re-

search.

Fourth, our investigation of the relationships amongst performance measures indicates

their interrelation. It seems that a buying company can not only increase the satisfac-



tion of internal and external customers by enhancing the quality of externally sourced

BS by means of QM but it can also increase cost efficiency, i.e. lower operating costs.

Overall, these benefits of QM practices for externally sourced BS were perceived to

outweigh the sacrifices of their implementation and maintenance which was measured

by the construct of value of QM. As these results contribute to a more detailed exami-

nation of the effects of QM we suggest to include several performance measures and

the examination of their relations into future research on QM.

D.5.3 Limitations and future research

There are several limitations to this empirical study which correspond to the cross-

sectional design of this study, the usage of perceptional, self-reported data and the ne-

glect of potential contingency factors affecting the adoption of QM practices for exter-

nally sourced BS.

We used cross-sectional data to test our hypotheses which captured the situation at

buying companies at one point in time (Fink, 1995). QM practices and firm perfor-

mance are, however, constructs which may be dynamic in nature. Thus, their devel-

opment may change over time and might be better examined over an extended period

(Lakhal, 2009). In order to observe the implementation of QM for externally sourced

BS and its complexities or barriers, future research may therefore use longitudinal

studies.

Furthermore, our results are based on perceptional, self-reported rather than objective,

publicly available archival information. We decided to use perceptional data on basis

of three grounds: First, our case studies performed before the survey showed that buy-

ing companies do not yet regularly collect data regarding their QM for externally

sourced BS or the performance measures used in this study. Second, objective or ar-

chival data are often at the wrong level of aggregation, out-of-date or unavailable for

small and medium companies (Boyd, Dess, & Rasheed, 1993). As 49.6% of compa-

nies which responded to our survey have less than 1,000 employees and 47.2% realize

a turnover of less than 250 million Euros, we concluded that objective data may not be

available to an acceptable degree. We thus opted to use perceptional data in order to

maintain a comparably large sample. Third, in order to make more definite statements

about QM and its effect on organizational performance, we refused to use archival data

on global organizational outcomes, such as market share, profitability, stock price etc.

According to Hackman & Wageman (1995), these can be the result of various influen-


251

tial factors and may therefore not directly relate to QM practices alone. Future research

should nevertheless attempt to include more objective data into the examination of QM

practices for externally sourced BS.

In addition, we did not include contingency factors into our structural model and thus

did not test their potential moderating effects. Contingency theory posits that an organ-

ization must be aligned with its environment to achieve optimal performance (Don-

aldson, 2001; Lawrence & Lorsch, 1969). A contingency perspective of QM implies

that QM practices must be consistent with situational factors (Das et al., 2000). Previ-

ous research on QM for goods from a manufacturer‟s perspective has identified situa-

tional factors such as competitive intensity (for example, Das et al., 2000; Powell,

1995), organizational size (for example, (Cua et al., 2001) or type of industry (for ex-

ample, Nilsson et al., 2001; Quazi, Jemangin, Kit, & Kian, 1998; Woon, 2000) as im-

portant parameters influencing the relationship between QM and firm performance.

Such variables may, however, also affect the amplitude or even the existence of the

relationships we detected in our study. For example, it may be that larger firms or

manufacturing companies have an advantage when implementing QM for externally

sourced BS due to the better availability of resources or the existing know-how in QM

for goods. Thus, these organizations may reap more benefits from the realization of

QM for BS. It is therefore a worthwhile task for future research to further examine the

effect of such factors on our research model.

Finally, our study examined the QM for all business services which were externally

purchased by the participating companies. We did not make any differentiation be-

tween, for example, services which represent a high or a low portion of a company‟s

purchasing volume or whose quality failure represents a critical or non-critical risk to

the buying company. Future research may examine how such factors affect the adop-

tion of QM in more detail, for example, by conducting case studies.

Despite these limitations, we are confident that our study presents a useful starting

point for further research into QM for BS from a buying company‟s perspective.



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264

Appendices of paper D

Table D- 4: Selected empirical studies supporting the proposed hypotheses

Study Method /

Sample /

Level of analysis /

Manufacturing vs. service industries /

Countries

Proposed hypotheses

H

1

H

2

H

3

H

4

H

5

H

6

H

7

H

8

H

9

H

10

H

11

H

12

H

13

H

14

H

15

H

16

H

17

H

18

H

19

H

20

Ahire & Dreyfus (2000)

Structural equation modelling / 418 / Plants / Manufacturing / US

X X X

Ahire & O‟Shaughnessy (1998)

Correlation analysis and stepwise multiple regression / 449 /

Plants / Manufacturing / US, Canada

X X X X X X X X X X X X X X

Choi & Eboch

(1998)

Structural equation modelling /

339 / Plants / Manufacturing / US

X X X

Cronin, Jr. et al. (2000)

Structural equation modelling / 1,944 / End consumers / Service / US

X X X X X

Cua et al. (2001) Multiple discriminant analysis / 163 / Plants / Manufacturing /

Germany, Italy, Japan, UK, US

X X X X


265

Study Method /

Sample /

Level of analysis /


Countries

Proposed hypotheses

H

1

H

2

H

3

H

4

H

5

H

6

H

7

H

8

H

9

H

10

H

11

H

12

H

13

H

14

H

15

H

16

H

17

H

18

H

19

H

20

Curkovic et al. (2000)

Structural equation modelling / 526 / Plants / Manufacturing /

US

X X

Das et al. (2000) Structural equation modelling / 290 /

Companies / Manufacturing / US

X X

Dow et al. (1999) Structural equation modelling /

698 / Plants / Australia, New Zealand

X

Flynn et al. (1994) Canonical correlation analysis / 45 / Plants / Manufacturing / US

X X X X X X X X X X

Flynn et al. (1995) Path analysis / 42 / Plants / Manufacturing / US

X X X X X

Forza & Filippini (1998)

Structural equation model / 43 / Companies /

Manufacturing / France, Germany, Italy, US

X X X X X

Kaynak (2003) Structural equation modelling / 214 /

Companies / Manufacturing / US

X X X X X X X X X X X


266

Study Method /

Sample /

Level of analysis /


Countries

Proposed hypotheses

H

1

H

2

H

3

H

4

H

5

H

6

H

7

H

8

H

9

H

10

H

11

H

12

H

13

H

14

H

15

H

16

H

17

H

18

H

19

H

20

Kaynak & Hartley (2008)

Structural equation modelling / 263 / Companies / Manufacturing /

US

X X X X X X X X X X X X

Kuo et al. (2009) Structural equation modelling / 387 /

End consumers / Service / Taiwan

X

Lee et al. (2003) Structural equation modelling /

109 / Companies / Manufacturing / US

X X

Li (1997) Path analysis / 150 / Hospitals / Service / US

X X X

Maani et al. (1994) Structural equation modelling / 184 / Plants / Manufacturing /

New Zealand

Madu et al. (1996) Correlation analysis / 165 /

Companies / Manufacturing and service / US

X X X

Nilsson et al. (2001) Structural equation modelling /

482 / Companies / Manufacturing and service /

X X


267

Study Method /

Sample /

Level of analysis /


Countries

Proposed hypotheses

H

1

H

2

H

3

H

4

H

5

H

6

H

7

H

8

H

9

H

10

H

11

H

12

H

13

H

14

H

15

H

16

H

17

H

18

H

19

H

20

Sweden

Patterson & Spreng (1997)

Structural equation modelling / 128 / Companies /

Service / Australia

X

Quazi et al. (1998) Factor and correlation analysis / 33 /

Companies / Europe, Japan, Singapore, US, Other

X X

Samson &

Terziovski (1999)

Correlation analysis and multiple

regression analysis / 1,024 / Plants / Manufacturing / Australia, New Zealand

X X X X X X

Sila & Ebrahimpour (2005)

Structural equation modelling / 220 / Companies / Manufacturing / US

X X X X X

Zu et al. (2008) Structural equation modelling / 226 / Plants /

Manufacturing / US

X X X X X X X X


268

Table D- 5: Measurement scales, items and their sources

The items marked with the symbol * were eliminated after testing the reliability values and the measurement model. The first value in parenthesis for each retained item indicates the standard-ized factor loadings obtained in the factor analysis; the second value represents the t-value resulting from testing each item‟s coefficient.

Items Description Factor

loading

(t-value)

Sources

1 QM practices

1.1 Top management support

Mtsup 1: Our top management reviews problems related to the quality of externally sourced BS in organizational top management meetings.

.957 (161.39)

Adapted from Forker et al. (1997)

Mtsup 2: Our top management sets objectives regarding the quality of externally sourced BS.

.949 (113.19)

Adapted from Forker et al. (1997) and Li (1997)

Mtsup 3: Our top management is personally involved in activities to improve the

quality of externally sourced BS.

.938

(79.48)

Adapted from Cua et al. (2001) and Sadikoglu & Zehir

(2010) 1.2 Workforce management Workmt 1: Training related to quality of services is given to the employees in our

company. .779 (25.88)

Adapted from Saraph et al. (1989), Zu (2009) and Zu et al. (2008)

Workmt 2: Our company forms teams to solve problems related to the quality of externally sourced BS.

.841 (31.28)

Adapted from Cua et al. (2001) and Fynes & Voss (2002)

Workmt 3: We give some of our employees (for example, purchasers or quality managers) clear objectives regarding the quality of externally sourced BS.

.850 (38.75)

Adapted from Black & Porter (1996)

Workmt 4: Ideas from our employees are actively used to improve the quality of

externally sourced BS.

.863

(37.96)

Adapted from Dow et al. (1999)

Workmt 5: Our company continually enhances the awareness of its employees regarding the quality of externally sourced BS.

.888 (54.96)

Adapted from Forker et al. (1997) and Saraph et al. (1989)

1.3 Provider involvement Proinv 1: * We strive to establish long-term relationships with our providers of

BS. Adapted from Flynn et al. (1994), Fynes & Voss (2002) and

Zu (2009) Proinv 2: Our company has a thorough rating system for its providers of BS. .937

(104.46)

Adapted from Zu (2009) and Zu et al. (2008)

Proinv 3: The rating of our service providers is followed by pre-defined measures. .928 (80.51)

Inspired by Das et al. (2000)


269


loading (t-value)

Sources

Proinv 4: We continually audit our service providers to make sure we receive quality BS.

.894 (55.91)

Adapted from Sila & Ebrahimpour (2005)

Proinv 5: * Our service providers have an effective system for measuring the quality of the BS they sell us.

Adapted from Dow et al. (1999) and Samson & Terziovski (1999)

Proinv 6: * Our service providers are involved in our quality training. Adapted from Zu (2009) and Zu et al. (2008) Proinv 7: * Our service providers are recognized and rewarded for service quality

improvement.

Adapted from Sánchez-Rodríguez & Martínez-Lorente

(2004) Proinv 8: * Our service providers are certified for quality. Adapted from Cua et al. (2001) and Sila & Ebrahimpour

(2005)

1.4 Quality information Qinf 1: In our company, quality data (for example, error rates, complaint rates

etc.) regarding externally sourced BS are available for purchasers. .880 (38.12)

Adapted from Curkovic et al. (2000), Zu (2009) and Zu et al. (2008)

Qinf 2: In our company, quality data (for example, error rates, complaint rates etc.) regarding externally sourced BS are available for the internal requisitioner.

.894 (54.62)

Qinf 3: We regularly report data regarding the quality of externally sourced BS. .902 (65.89)

Inspired by Saraph et al. (1989)

Qinf 4: * We exchange data regarding quality of externally sourced BS with other companies.

Inspired by Curkovic et al. (2000) and Woon (2000)

Qinf 5: We use data regarding the quality of externally sourced business service to improve their quality.

.884 (57.63)

Adapted from Kaynak & Hartley (2008), Kaynak (2003) and Saraph et al. (1989)

Qinf 6: * We define the required level of service quality by means of key performance indicators or service level agreements.

Inspired by Curkovic et al. (2000) and Sila & Ebrahimpour (2005)

Qinf 7: * We benchmark the quality of our externally sourced BS. Adapted from Curkovic et al. (2000) 1.5 Service design

Des 1: In our company, multiple departments (such as purchasing, QM and internal customers) coordinate in the design process for externally sourced BS.

.783 (17.91)

Adapted from Kaynak & Hartley (2008), Kaynak (2003), Saraph et al. (1989), Zu (2009) and Zu et al. (2008)

Des 2: Our company actively involves its internal customers into the design process for externally sourced BS.

.835 (24.90)

Inspired by Powell (1995)

Des 3: * Our company actively involves its external customers into the design

process for externally sourced BS.

Des 4: We involve our service providers in the design process of our externally sourced BS.

.833 (28.47)

Inspired by Fynes & Voss (2002) and Quazi et al. (1998)

Des 5: Our specifications for externally sourced BS are clear. .850

Adapted from Sadikoglu & Zehir (2010), Saraph et al. (1989) and Sila & Ebrahimpour (2005)


270


loading (t-value)

Sources

(46.60) Des 6: * We thoroughly review new externally sourced BS before they are

used. Adapted from Sadikoglu & Zehir (2010) and Kaynak &

Hartley (2008), Kaynak (2003)

1.6 Customer involvement Cuinv 1: We use the requirements of our internal customers of externally sourced

BS as basis for the definition of their quality. .815 (34.12)

Adapted from Zu (2009) and Zu et al. (2008)

Cuinv 2: We use the requirements of our external customers of externally sourced BS as basis for the definition of their quality.

.839 (38.56)

Cuinv 3: Our company analyzes the satisfaction of its internal customers of

externally sourced BS and the results are used for quality improvements.

.827

(34.42)

Inspired by Dow et al. (1999) and Nilsson et al. (2001)

Cuinv 4: Our company analyzes the satisfaction of its external customers of externally sourced BS and the results are used for quality improvements.

.835 (35.45)

Cuinv 5: Our internal customers give us feedback on the quality of externally sourced BS.

.816 (36.54)

Adapted from Cua et al. (2001), Fynes & Voss (2002), Zu (2009) and Zu et al. (2008)

Cuinv 6: Our external customers give us feedback on the quality of externally sourced BS.

.821 (34.42)

1.7 Process management Promt 1: We regularly inspect, assess, or approve the quality of our externally

sourced BS. .881 (61.30)

Inspired by Kaynak & Hartley (2008), Kaynak (2003), Quazi et al. (1998), Saraph et al. (1989)

Promt 2: We use electronic systems to inspect, assess, or approve the quality of externally sourced BS.

.843 (36.04)

Promt 3: Our company uses statistical methods to monitor the quality of

externally sourced BS.

.872

(45.98)

Adapted from Powell (1995)

Promt 4: Our company‟s processes related to the provision of externally sourced BS are documented.

.829 (31.11)

Inspired by Nilsson et al. (2001) and Samson & Terziovski (1999)

2 Performance measures

2.1 Service quality Servq 1: Our company has been able to enhance the overall quality of its

externally sourced BS by measures in the area of QM for services during the last three years.

.928 (83.85)

Inspired by Singh, Feng, & Smith (2006) and Woon (2000)

Servq 2: Our company has been able to enhance the response time of the providers of its externally sourced BS by measures in the area of QM for


.908 (45.04)

Inspired by Parasuraman, Berry, & Zeithaml (1991), Parasuraman et al. (1988), Sánchez-Rodríguez & Martínez-

Lorente (2004) and Young & Varble (1997). Servq 3: Our company has been able to enhance the know-how of the providers

of its externally sourced BS by measures in the area of QM for services during the last three years.

.925 (78.50)


271


loading (t-value)

Sources

Servq 4: Our company has been able to enhance the appearance (for example, physical facilities, personal appearance) of the providers of its externally sourced BS by measures in the area of QM for services during the last three years.

.852 (35.55)

Servq 5: Our company has been able to enhance the attention and commitment of the providers of its externally sourced BS by measures in the area of QM

for services during the last three years.

.925 (66.02)

Servq 6: Our company has been able to enhance the reliability of the providers of

its externally sourced BS by measures in the area of QM for services during the last three years.

.939 (83.70)

2.2 Cost efficiency Cost 1: Our company has been able to lower the purchase prices of externally

sourced BS through measures in the area of QM for services during the last three years.

.910 (56.95)

Inspired by Curkovic et al. (2000) and Solis, Subba, Raghu-Nathan, Chen, & Pan (1998)

Cost 2: Our company has been able to lower the cost for quality failures of

externally sourced BS through measures in the area of QM for services during the last three years.

.920

(54.73)

Inspired by Dow et al. (1999), Curkovic et al. (2000), Solis

et al. (1998), Zu (2009) and Zu et al. (2008)

Cost 3: Our company has been able to lower its operating costs through measures in the area of QM for externally sourced services during the last three years.

.925 (68.04)

Inspired by Singh et al. (2006) and Solis et al. (1998)

2.3 Satisfaction Sat 1: Satisfaction of our internal customers with externally sourced BS has

increased during the last three years through measures in the area of QM for these services.

.901 (60.61)

Adapted from Zu (2009), Zu et al. (2008) and Nilsson et al. (2001)

Sat 2: Satisfaction of our external customers with externally sourced BS has

increased during the last three years through measures in the area of QM for these services.

.900

(46.57)

Sat 3: Our company has reduced the number of complaints of internal customers about the quality of externally sourced business through measures in the area of QM for these services.

.887 (45.40)

Adapted from Fynes & de Búrca (2005), Nilsson et al. (2001), Sadikoglu & Zehir (2010) and Solis et al. (1998)

Sat 4: Our company has reduced the number of complaints of external

customers about the quality of externally sourced business through measures in the area of QM for these services.

.887

(40.40)

2.4 Value of QM

Value 1: The benefits our company achieved through its measures in the area of QM for externally sourced BS exceed the sacrifices for their

.953 (110.59)

Inspired by Sila & Ebrahimpour (2005), Patterson & Spreng (1997), Patterson, Johnson, & Spreng (1997) and Kuo et al.


272


loading (t-value)

Sources

implementation. (2009) Value 2: The benefits our company achieved through its measures in the area of

QM for externally sourced BS exceed the sacrifices for their maintenance.

.947 (84.23)

Value 3: Overall, our company‟s measures in the area of QM for externally sourced BS have paid off.

.932 (89.68)


273

E Author's Curriculum Vitae

Name: Elmar Holschbach

Date of birth: 7th

August 1975, Paderborn, Germany

Nationality: German

EDUCATION AND WORK EXPERIENCE

since Mar. 06 Senior Consultant

Procurement Strategy & Structures

Capgemini Deutschland

GmbH

Cologne, Germany

Oct. 08 – Sep. 11 Doctoral studies in business Administration

Part-time

Thesis: 5.5 (very good)

University of St. Gallen Institute of Logistics

Management

St. Gallen, Switzerland

Oct. 04 – Oct. 05 MSc Management Research

Leyland scholarship,

Graduated with distinction

University of Oxford

Saïd Business School

Templeton College

Oxford, UK

Oct. 00 – Sep. 04 Manager Supply Marketing

Corporate Purchasing

CLAAS KGaA mbH

Harsewinkel, Germany

Jan. 01 – Apr. 01 Webmaster (IHK)

Part-time training

IHK Ostwestfalen zu

Bielefeld

(German Chamber of Trade and Industry in Bielefeld,

Germany)



Oct. 03 – Jul. 04 Specialized Tradesman in

Purchasing and Logistics

Part-time training

IHK Cologne

(German Chamber of Trade

and Industry in Cologne,

Germany)

Oct. 99 – Sep. 00 Auditor Internal Auditing

CLAAS KGaA mbH Harsewinkel, Germany

Oct. 96 – Nov. 99 BSc in Business Studies

Overall mark: 1.6

(Student of the year)

Dual studies with 74 weeks of

internships at CLAAS group.

Thereof:

Fachhochschule der

Wirtschaft (FHDW)

Paderborn, Germany

Jun. – Sep. 98 Internship in sales and marketing CLAAS UK Ltd.

Bury St. Edmunds, UK

Jan. – Mar. 99 Internship in sales, sales

promotion, accounts receivable,

parts

CLAAS of America, Inc.

Columbus, Indiana, USA

Jul. 95 – Apr. 96 Military service Tank battalion 2./214

Augustdorf, Germany

Jun. 86 – Jul. 95 A-level Gymnasium Theodorianum

Paderborn, Germany