The Effect of Supplier Selection on Firm’s Environmental Performance: Outcome and Process Controls.

Abstract

In today's business world, selecting, evaluating suppliers and cultivating relationships with them is a critical issue for firms. The reason is because no company can achieve strategic goals alone, and suppliers provide important raw materials for building and enhancing competitive advantages. Additionally, as environmental issues have become increasingly important, firms are turning to green manufacturing methods, which require green supply. To obtain resources or raw materials for green manufacturing, firms must carefully select suppliers and closely work with them. This dependence on external suppliers for resources or cooperation is necessary for staying competitive in the market. Therefore, this study attempts to examine how supplier selection affects a firm's green performance, while considering the moderating role of process and outcome control. Prior studies have demonstrated a favorable effect of supplier selection on a company's financial performance and product quality. However, in this study, we specifically focused on the relationship between supplier selection and green performance.

The research employs a quantitative research design, utilizing survey data collected from a diverse sample of firms across different industries in China. The study employs a structured questionnaire to collect information on supplier selection criteria, green performance indicators, and the implementation of process control and outcome control mechanisms. Initially, a sample of 1,000 Chinese manufacturing companies was gathered through a professional survey agency using a random selection process. As operational practices differ between firms that produce goods and those that offer services, this study focused exclusively on the manufacturing sectors, as indicated by Um and Kim (2019).

The findings reveal a significant positive relationship between supplier selection and a firm's green performance, indicating that the careful selection of suppliers who align with sustainability goals positively impacts environmental performance. Furthermore, the study identifies the moderating roles of process control and outcome control in this relationship. Process control refers to the extent to which a firm implements environmental management systems and procedures to ensure the compliance of selected suppliers with green standards. The results demonstrate that higher levels of process control weaken the positive relationship between supplier selection and green performance, indicating that actively monitoring and controlling supplier processes hinders a manufacturing firm from achieving environmental outcomes.

Outcome control refers to the measurement and evaluation of the supplier performance based on predefined green performance metrics. The study finds that outcome control strengthens the relationship between supplier selection and green performance, suggesting that clear performance evaluation mechanisms positively influence the effectiveness of supplier selection practices in achieving sustainable outcomes. These findings have significant implications for both theory and practice. From a theoretical perspective, this study contributes to the understanding of the relationship between supplier selection and green performance, shedding light on the importance of control mechanisms (process and outcome) as moderating factors. Practically, the study provides guidance to manufacturing firms seeking to enhance their green performance by emphasizing the importance of supplier selection, and the need for appropriate control mechanisms.

Overall, this research contributes to the growing body of literature on sustainable supply chain management by highlighting the effect of supplier selection on firm's green performance, and the crucial moderating roles of process control, and outcome control. It offers valuable insights for practitioners aiming to enhance their environmental sustainability practices through effective supplier selection strategies and control mechanisms.