Supply Management Capability, Strategic Orientation and Firm Performance

This study investigates the performance impact of how supply management capabilities
interacts with firm-level strategic configurations. The research addresses the significant gap in
empirical understanding of whether and how different firm-level strategies moderate the
relationship between procurement capabilities and firm performance. Using partial least
squares Structural Equation Modeling, mediation and moderation effects were tested for the
key variables include supply management capability measured as four routine bundles,
strategic orientation using the Miles and Snow typology and two performance outcomes
(operational and financial) on a sample of 518 usable responses from UK-based supply
management professionals. The findings reveal that supply management capability positively
affects financial performance but only indirectly through operational performance and only for firms with stable strategic orientations (prospectors, analysers or defenders). In contrast,
strategically unstable businesses (reactors) lack a performance impact from supply
management capability. Theoretically, this research advances understanding of the operational performance value of specific bundles of supply management capabilities by highlighting the necessity of strategic coherence for capability-driven performance gains. For practioners, these findings suggest that managers should prioritize building supply management capabilities only when their firms have a clear and stable strategy, as such investments yield no performance benefit in strategically incoherent contexts. The study opens avenues for future research on the dynamics of supply management during periods of strategic transition and the development of more granular capability measures.