Enhancing reverse auction use theory: an exploratory study

The purpose of this paper is to explore how a sourcing professional arrives at a decision to use an electronic reverse auction (eRA) to source a particular requirement by examining eRA appropriateness.

Past eRA research findings are synthesized into a summary table. From a comprehensive review of the literature, theories of technology adoption, social influence, referent‐dependence theory, and planned behaviour are discussed and synthesized into a model that explains the antecedents of eRA appropriateness. A case study methodology using structured interviews resulted in a refined model that sheds light on some of the controversial findings regarding electronic reverse auction appropriateness.

Expected savings, buyer confidence, and prior eRA sourcing satisfaction are identified as new constructs that help explain the decision to source via eRAs. Additionally, perceived eRA appropriateness is proposed as a new construct that mediates the influence of external, strategy factors on the decision to source via eRAs.

Recent literature suggests that the benefits of reverse auctions are overstated and reverse auctions constitute a fundamentally coercive use of buyer power. Reconciling the conflicting supplier perceptions of reverse auctions as use of coercive power with buyer perceptions of cost savings requires an explanation for the factors that lead to the decision to source via eRAs.

The modern competitive supply chain environment entices businesses to explore all avenues for cost savings. Explaining the drivers of reverse auction use illuminates the advantages and pitfalls of reverse auctions as a strategic sourcing venue.

From an extensive review of the eRA literature and eight case studies, the authors propose a model that integrates and extends previous eRA research. Key insights from the model are the mediating effect of perceived eRA appropriateness and the integration of individual level variables with the strategic decision to source via eRA. Additionally, a table is provided summarizing the findings from relevant eRA research that reveals key insights into the phenomenon.