This study draws from the knowledge theory of the firm to introduce the release capacity concept to the vendor selection process. The study proposes that suppliers' release capacity – a form of knowledge diffusion that describes the transmission of a sense of a supplier's tacit knowledge to manufacturers – influences their performance during vendor selection. The authors identify two release capacity dimensions: visualization, during which knowledge is embedded and diffused through a visual encoding process, and socialization, during which a sense of the supplier's knowledge is released through a social construction process. The authors use data from the equipment supply industry to empirically test their predictions. The findings show that the release capacity dimensions affect the market's aggregate responses during the formation of consideration sets and preferences. These findings contribute to integrating developments on the source side of the knowledge diffusion process with the vendor selection research tradition.
