A supplier development program: Rational process or institutional image construction?

Drawing on arguments from institutional theory, we examine the implementation and use of a supplier development program by a major North American automotive manufacturer. While all suppliers adopted the program as an apparent response to coercive institutional pressures from their customer, the study focuses on the effects of such pressures on internal information processing and the behavior of the actors involved. The study therefore addresses a significant gap in the institutional theory literature concerning the question of how managers reconcile potential conflicts between externally imposed institutional demands and internal operational efficiency constraints. Specifically, the supplier development process is conceptualized using two different approaches: one based on assumptions of rational efficiency, the other based on assumptions of institutional image construction. Five propositions were tested using quantitative data from the customer and interview data from the suppliers. Overall, the two propositions based on image construction were supported while only one proposition of the three for the rational decision making approach was partially supported. The results are discussed in terms of their implications for understanding how a firm's institutional context influences the implementation and use of operation management strategies.