A Comparison of Online and Offline Procurement in B2B Markets : Results from a Large-Scale Survey

Purchasing professionals in today's business-to-business (B2B) markets can choose between conducting bid solicitations and negotiations using an online or offline process. One dominant type of online procurement has been the online reverse auction, which has received both praise and criticism. However, the choice between an online reverse auction and alternate offline procurement methods cannot be taken lightly. It is the objective of this research to distinguish these two environments and investigate their differences along the dimensions of purchase importance, supply market availability, future orientation and item specification difficulty. Examining these issues from the buyer's perspective, we develop our arguments of procurement choice based on literature in industrial buyer behavior, strategic sourcing, and online reverse auctions; the psychological distance perspective and transaction cost economics serve as theoretical foundations for our hypotheses. Our hypotheses are tested with hierarchical logistic regression analysis using responses from 825 purchasing professionals in the U.S. manufacturing sector. Two of our four main hypotheses are supported, indicating that offline procurement is more likely to be chosen when the purchase is highly important, whereas auctions are the preferred choice as more suppliers become able and willing to participate in the bidding process. No differences were detected between the future orientation of the buyer and the item specification difficulty. Advice is provided to practitioners when reverse auctions are more amenable than offline methods. Contributions to academia include the extension of the literature in industrial buyer behavior and auctions, as well as the theoretical development based on the psychological distance perspective and transaction cost economics