1934 The Purchasing Agent’s View of Online Reverse Auctions RESULTS The initial analysis involved determining whether a correlation exists between a purchasing agent’s years of experience as a buyer and his or her perception of the impact of ORA on trust in the supplier relationship. The Pearson correlation ZDV VLJQL¿FDQW DW WKH OHYHO VHH 7DEOH 7KLVFRQ¿UPHGP\EHOLHIWKDWWKHUHLVDQHJDWLYH relationship between trust in a relationship and years of experience. The longer a purchasing agent has been a buyer, the less likely that he or she will believe that ORAs will have a positive impact on trust within the relationship with suppliers. This ¿ QG L Q JL V VX S S R U WH GE\ R W K HU U H V HD UF K HU VZK R ZD U Q that initiating an online reverse auction has the potential to damage a long ter m relationship with the supplier (Jap, 2000, 2007; Kwak, 2001). Table 2. Correlation matrix—Buyer experience, supplier trust SUPPLIER TRUST BUYER EXPERIENCE SUPPLIER TRUST Pearson Correlation 1 223(**) Sig. (2-tailed) . .007 N 144 144 BUYER EXPERIENCE Pearson Correlation 223(**) 1 Sig. (2-tailed) .007 . N 144 144 &RUUHODWLRQLVVLJQL¿FDQWDWWKHOHYHOWDLOHG Table 3. Correlation matrix—Buyer experience, supplier viability and cooperation Buyer Experience Pearson Correlation 1 130 202(*) Sig. (2-tailed) .119 .015 N 144 144 144 Supplier Viability Pearson Correlation 130 1 .425(**) Sig. (2-tailed) .119 .000 N 144 144 144 Supplier Cooperation Pearson Correlation 202(*) .425(**) 1 Sig. (2-tailed) .015 .000 N 144 144 144 &RUUHODWLRQLVVLJQL¿FDQWDWWKHOHYHOWDLOHG &RUUHODWLRQLVVLJQL¿FDQWDWWKHOHYHOWDLOHG 1935 The Purchasing Agent’s View of Online Reverse Auctions Next, I looked to see whether there was a re- lationship between the purchasing agents’ years of buying experience and the impact of ORAs on cooperation in the supplier relationships and long term supplier viability. The Pearson Correlation FRHI¿FLHQWVDUHLQFOXGHGLQ7DEOH Again, as the purchasing agents’ experience increases, his or her perception of the impact of the online reverse auction on cooperation becomes negative, as indicated by the negative correlation FRHI¿FLHQW7KLV UHVXOW LVVLJQL¿FDQW DW WKH level. The correlation between long term supplier YLDELOLW\DQGEX\HUH[SHULHQFHLVQRWVLJQL¿FDQW There is a slight relationship between these vari- ables, in a negative direction, meaning that as the buying experience increases, the purchasing agents’ perceptions of the impact of online reverse auctions on trust, cooperation and supplier’s long term viability decreases. We found these results to EHVLJQL¿FDQWDWWKHDQGOHYHOVIRUWUXVW and cooperation, respectively. The rationale for this may be that as a buyer gains experience in strategic sourcing, online reverse auctions become MXVWRQHPRUHPHWKRGXVHGLQWKH¿UP¶VVRXUFLQJ strategy. Therefore the impact of this sourcing method alone is perceived to be less. In order to determine whether there was a VLJQL¿FDQWGLIIHUHQFHEHWZHHQSXUFKDVLQJDJHQWV with low and high experience levels, Richins and Dawson’s methodology (1992) was followed to create three groups for buyer experience based on the buyers’ self-report of years of experience as a buyer. Three groups seemed appropriate, given the frequency distribution across years of experience. To create a clear separation be- tween groups following the Richins and Dawson methodology (1992), we chose Group 1 (N=53) to represent buyers with a low experience level (mean experience level of 1.5 years) and Group 3 (N=50) to represent buyers with a high experi- ence level (mean experience level of 12.58 years). In this manner, the original sample was reduced from 144 to 103 through eliminating the medium experience level group (n = 41). The high and low groups were then compared using t tests to assess VLJQL¿FDQWGLIIHUHQFHVEHWZHHQWKHWZRJURXSV regarding the impact of online reverse auctions on trust in the supplier relationship; cooperation in the supplier relationship; and the long term viability of suppliers. The means and standard deviations for trust, cooperation and long term viability of suppliers for the two groups are in- cluded in Table 4. The average values for high experience buy- ers on all variables tend toward the impact being negative, which supports the hypotheses. Thus, the Buyer Experience terciles N Std. Deviation Std. Error Mean SUPPLIER TRUST 1.00 (low experience) 53 4.17 1.638 .225 3.00 (high experience) 50 3.56 1.752 .248 SUPPLIER COOPERATION 1.00 (low experience) 53 4.36 1.360 .187 3.00 (high experience) 50 3.74 1.688 .239 SUPPLIER VIABILITY 1.00 (low experience) 53 4.09 1.290 .177 3.00 (high experience) 50 3.84 1.462 .207 Table 4. Group statistics 1936 The Purchasing Agent’s View of Online Reverse Auctions h ig h expe r ie nce buye rs t end to believe that OR As have a negative impact on trust, cooperation and long term viability of their suppliers. The independent samples t-test was conducted WRGHWHUPLQHLIWKHUHZDVDVLJQL¿FDQWGLIIHUHQFH between the groups on these three variables. The results are in Table 5. These results are decidedly mixed. The dif- ference between the high experience and low experience purchasing agents on supplier trust and VXSSOLHUFRRSHUDWLRQLVVLJQL¿FDQWDWWKHDQG 0.05 levels, respectively. This might be because all of the purchasing agents work for the same company. Even though they are a very diverse group, representing a broad range of industries, geographical locations and cultures, the fact that WKH¿UPKDVEHHQWKHEX\LQJFRPSDQ\LQPLOOLRQV of online reverse auction transactions may mean that there would be less difference between newer purchasing agents and those with more experi- ence. It is interesting to note that the difference between the two groups on supplier cooperation is WKHPRVWVLJQL¿FDQW7KLVLVSHUKDSVEHFDXVHWKH high experience buyers have worked on building supplier relationships longer than the low experi- ence buyers, so see the ORA as a threat to those relationships. All of our hypotheses were sup- ported except H3a: Experienced buyers will per- ceive that online reverse auctions will negatively impact long term viability of the suppliers. DISCUSSION The purpose of this study was to extend the re- search in online reverse auctions to include the purchasing agents’ perceptions of online reverse auctions. In particular, I wanted to determine their perceptions of how ORAs impact trust and cooperation with suppliers and suppliers’ long t e r m v i a b i l i t y. T h e m o r e e x p e r i e n c e d b u y e r s v i e w ORAs as having a negative impact on trust and cooperation with suppliers, but not supplier long term viability. A possible explanation could be that the high-experience purchasing agents were trained to develop supplier relationships and alli- ances which were built on trust and cooperation with their suppliers. These purchasing agents might see ORAs as going back to the past when the relationships between buyers and sellers were transactional, sometimes adversarial, and based on a contractual arm’s length relationship. Na- tional purchasing associations (for example, the Institute for Supply Management and APICS) have worked to promote the purchasing function such that it is now recognized as a competitive weapon and value adding function within orga- nizations. Purchasing agents are no longer order takers, but develop long term partnerships with their suppliers. Relationships take time to build. The high experience purchasing agents might see the online auction as a threat to strategic sourcing Table 5. Independent samples test results tdf Sig. (2- tailed) Mean Difference Std. Error Difference Supplier Trust Equal variances assumed 1.826 101 .071 .610 .334 Supplier Viability Equal variances assumed .938 101 .351 .254 .271 Supplier Cooperation Equal variances assumed 2.053 101 .043 .618 .301 1937 The Purchasing Agent’s View of Online Reverse Auctions and alliance building. The high experience pur- chasing agents may also view ORAs as just one more tool in the strategic sourcing tool box, and will only use ORAs when they deem them to be appropriate. Therefore, they would not rate one VSHFL¿FVRXUFLQJPHWKRGRORJ\DVEHLQJDJUHDWHU FRQWULEXWRUWR¿UPSHUIRUPDQFHWKDQDQRWKHU On the other hand, the low experience buyers PLJKWYLHZ25$VDVD³TXLFN¿[´WRUHGXFLQJ costs. Since they have less experience as buyers they may not have had a chance to build relation- ships with suppliers. Reducing spend, while im- proving quality, can be a way for a low experience purchasing agent to make a positive impact on the ¿UP¶VSHUIRUPDQFHHVSHFLDOO\LQWKHVKRUWWHUP Purchasing agents with low experience may see more opportunity to gain cost advantages from auctions than the purchasing agents with higher experience levels. Executives and supply managers should not take these results to mean that high experience purchasing agents are against online reverse auc- WLRQV7KH¿QGLQJVOHDGXVWRFRQFOXGHWKDWZH should use ORAs when appropriate and structure them such that the potentially negative impact of DQ25$RQWKHEX\HUVXSSOLHUUHODWLRQVKLSLV¿UVW understood; and then minimized. The implemen- tation of ORAs can send mixed messages to the purchasing agents. On the one hand, they are to develop long-term relationships with suppliers, IR F X V L Q J RQ W U X V W G HOL YH U \ ÀH[ LEL O LW \ D Q GS U RG X FW quality as well as cost (i.e., relational purchas- ing transactions). On the other hand, an online reverse auction can be implemented in a fairly short time frame and the purchasing agent may never interact with the winner of the bid. These two types of procurement activities are likely to UHTXLUHGLIIHUHQWVNLOOVVHWV,ID¿UPLQWHQGVWR use both sourcing methods on a routine basis, then the training received by purchasing agents should include the structure of ORAs, when they are appropriate, how to select suppliers for inclu- sion and the management of incumbent suppliers in the auction. From a supplier relationship perspective, LQFXPEHQW VXSSOLHUV VKRXOG EH QRWL¿HG RI WKH impending ORA, preferably by the purchasing agent. This communication, if not done correctly, could cause a rift in the relationship with a valuable supplier; especially if it is a Tier 1 supplier. Thus, it should probably be handled at the executive level. Although all of the hypotheses except H3a were VXSSRUWHGWKHVHUHVXOWVDUHQRWGH¿QLWLYHVLQFH, have simply shown that there is a difference be- tween the perceptions of purchasing agents with low experience levels as buyers and those with high experience levels as buyers. The next step would be to determine why this difference exists using more sophisticated statistical methods. In DGGLWLRQIXUWKHUVWXG\RI25$VLQGLIIHUHQW¿UPV and industries would be instructive. LIMITATIONS AND FUTURE RESEARCH As with any research effort, this study has limita- tions. Although the respondents come from a very broad range of industries, product categories, geo- graphical areas and cultures, they are all from one multinational organization. Consequently, there are not enough individuals from each industry, product category, geographical area, etc. to be able to generalize about each category. Future research should explore, at more depth, whether WKHVH ¿QGLQJV ZRXOG GLIIHU E\ LQGXVWU\ YDOXH of products and services purchased, corporate culture, type of products and services purchased, culture, and/or geography. A further limitation is how trust, cooperation and long term viability RIWKHVXSSOLHUVDUHGH¿QHG,WLVOLNHO\WKDWWKH SHUFHSWLRQVDQGGH¿QLWLRQVRIWKHVHWHUPVYDU\ among the respondents. Future work should use validated scales for trust and cooperation and multiple questions to determine long term sup- plier viability. The purpose of this chapter was to take the purchasing agent’s perspective and look at online 1938 The Purchasing Agent’s View of Online Reverse Auctions reverse auctions in the context of supplier selection and strategic sourcing. We found, as hypothesized, that high experience purchasing agents view on- line reverse auctions as having a negative impact on trust and cooperation in supplier relationships; but they do not view ORAs as having a negative impact on the long term viability of suppliers. Although I have only scratched the surface in exploring the perceptions of purchasing agents DERXW RQOLQH UHYHUVH DXFWLRQV WKHVH ¿QGLQJV have implications for managing and structuring o n l i n e r e v e r s e a u c t i o n s a s w el l a s l o n g t e r m b u ye r- supplier relationships. The training received by purchasing agents and managers must address WKHSRWHQWLDOFRQÀLFWLQJJRDOVRIRQOLQHUHYHUVH auctions and building a long term relationship with suppliers. The training should also address when online reverse auctions are (and are not) appropriate, how to address incumbent suppliers’ concerns, and how to structure an auction such that opportunism is not the unintended result. FUTURE RESEARCH DIRECTIONS Given the lack of previous work in the buyer-sup- plier relationships and strategic sourcing areas that take the purchasing agents point of view, future research in this area is only limited by the researcher’s imagination and resources. Future UHVHDUFKVKRXOGH[SORUHZKHWKHUWKHVH¿QGLQJV would differ by industry, value of products and services purchased, corporate culture, type of products and services purchased, demographic culture and/or geography. The concepts of trust DQGFRRSHUDWLRQQHHGIXUWKHUGH¿QLWLRQDQGUH- ¿QHPHQW7KHUHIRUHDGGLWLRQDOUHVHDUFKVKRXOG use established scales on trust and cooperation to explicitly measure trust and cooperation rather WKDQUHO\LQJRQWKHUHVSRQGHQW¶VGH¿QLWLRQRIWUXVW DQGFRRSHUDWLRQ0XOWLSOHDQGPRUHVSHFL¿FTXHV- tions designed to measure the long term supplier viability construct should also be conducted. The GH¿QLWLRQRIHDFKRIWKHVHYDULDEOHVLVRSHQWR interpretation by the respondent. Further studies should remove this potential for bias in the study. An additional contribution to this body of work would be to study buyer-supplier dyads who have participated in an online auction and a traditional procurement process. Looking at dyads over a period of time (i.e., longitudinal study analyses) would shed light on the issue of supplier long term viability. Ethnographic studies, case stud- ies of successful and unsuccessful auctions, and other research methodologies would also provide a rich area for further research efforts. Finally, an effort geared toward looking at the link between purchasing agent perceptions, online reverse auc- WLRQVDQG¿UPSHUIRUPDQFHRIERWKWKHEX\LQJ D QG V XS SO \L QJ ¿ U PZRX OGV L J Q L ¿FD QW O \ FR Q W U L EXW H to the discourse in this area. REFERENCES Bowersox, D. J., & Closs, D. J. (1996). Logistical management. New York: McGraw-Hill. Buono, A. F. (1997). Enhancing strategic partner- ships: Intervening in network organizations. 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Sole sourcing, competitive sourcing, parallel sourcing: Mechanisms for supplier performance. Manage- rial and Decision Economics (1986-1998), 16(1), 71. Ruiz-Torres, A. J., & Mahmoodi, F. (2007). The optimal number of suppliers considering the costs of individual supplier failures. Omega, 35(1), 104. Schrader, R. W., Schrader, J. T., & Eller, E. P. (2004). Strategic implications of reverse auc- tions. Journal of Business to Business Marketing, 11(1,2), 61. IMPLICATIONS FOR MANAGERS Title: The Purchasing Agent’s View of Online Reverse Auctions Description of Manuscript A survey was administered to purchasing agents of a multinational corporation, which has been the EX\LQJ¿UPLQPLOOLRQVRIRQOLQHUHYHUVHDXFWLRQ transactions. The purchasing agents represent P DQ \ L Q GX V W U L HV L Q FOXG L Q JP D Q X ID FW X U L Q J¿ Q D Q - cial services, aerospace technologies, health care, and transportation. The respondents were a very diverse group, representing a wide range of en- vironments within which procurement decisions are made. They were asked about the impact of online reverse auctions on trust and cooperation in relationships with suppliers and the long term viability of suppliers. Findings • The longer a purchasing agent has been a buyer, the less likely that he or she will be- lieve that ORAs will have a positive impact on trust and cooperation with suppliers. • 7KHUHLVDVLJQL¿FDQWGLIIHUHQFHEHWZHHQ the perceptions of purchasing agents with low buying experience and those with high buying experience with respect to trust in the buyer-supplier relationship. • 7KHUHLVDVLJQL¿FDQWGLIIHUHQFHEHWZHHQ the perceptions of purchasing agents with 1942 The Purchasing Agent’s View of Online Reverse Auctions This work was previously published in Best Practices for Online Procurement Auctions, edited by D. Parente, pp. 28-42, copy- right 2008 by Information Science Reference (an imprint of IGI Global). low buying experience and those with high buying experience with respect to coopera- tion in the buyer-supplier relationship. • 7KHUHZDVQRVLJQL¿FDQWGLIIHUHQFHEHWZHHQ the perceptions of purchasing agents with low buying experience and those with high buy i ng exp er ienc e w it h res pe ct to lo ng t er m viability of their suppliers. • Experienced buyers perceive that ORAs have a negative impact on trust and cooperation with suppliers. • Experienced buyers do not perceive that ORAs have a negative impact on the long term viability of suppliers. RECOMMENDATIONS 7KHVH¿QGLQJVVKRXOGEHXVHGE\SUDFWLWLRQHUVLQ the following manner: • To develop appropriate training programs for purchasing agents which stress that there should be a mix of sourcing strategies and supplier selection methods. • The training should include the critical factors for a successful online reverse auc- tion, how it should be implemented, and more importantly, how incumbent supplier relationships should be handled. • Managers should recognize that the deci- sion to use ORAs will require a different purchasing skill set than other supplier selection and strategic sourcing initiatives, which stress relationship building. • Managers should also recognize that the cooperation (or lack of cooperation) of a purchasing agent in the ORA might be be- cause of their perception that it will have a negative impact on his or her relationships with suppliers. LIMITATIONS Although these results are indicative of the need for further research in this area, managers should be cautioned that this is one study with 144 pur- chasing agents’ perceptions. Before wholesale changes are made in purchasing organizations, managers are urged to discuss these issues with the purchasing agents in their companies to de- termine the proper role for ORAs in the supplier selection and strategic sourcing processes. 1943 Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited. Chapter 6.15 Exploring Decision Rules for Sellers in Business-to-Consumer (B2C) Internet Auctions Jeff Baker Texas Tech University, USA Jaeki Song Texas Tech University, USA ABSTRACT T h e r e c e n t g r o w t h o f b u s i n e s s - t o - c o n s u m e r ( B 2 C ) Internet auctions challenges researchers to develop empirically-sound explanations of critical factors that allow merchants to earn price premiums in these auctions. The absence of a comprehensive model of Internet auctions leads us to conduct an exploratory study to elucidate and rank critical factors that lead to price premiums in Internet DXFWLRQV:HHPSOR\&ODVVL¿FDWLRQDQG5HJUHV- sion Trees (CART), a decision-tree induction WHFKQLTXH WR DQDO\]H GDWD FROOHFWHG LQ D ¿HOG study of eBay auctions. Our analysis yields deci- sion trees that visually depict noteworthy factors that may lead to price premiums and that indicate WKHUHODWLYHLPSRUWDQFHRIWKHVHIDFWRUV:H¿QG shipping cost, reputation, initial bid price, and auction ending time as the factors most predictive of price premiums in B2C Internet auctions. INTRODUCTION Over the past decade, Internet auctions have grown from a mere curiosity to a major focus of both researchers and businesses. In their early days, Internet auctions were dominated by individuals selling collectibles such as antiques, celebrity memorabilia, stamps, toys, coins, and trading cards; the vast majority of transactions were consumer-to-consumer (C2C) (Lucking-Reiley, 2000a). More recently, researchers have noted the growth of business-to-business (B2B) and . relationship; cooperation in the supplier relationship; and the long term viability of suppliers. The means and standard deviations for trust, cooperation and long term viability of suppliers for the. YDOXH of products and services purchased, corporate culture, type of products and services purchased, culture, and/ or geography. A further limitation is how trust, cooperation and long term viability. relationships and alli- ances which were built on trust and cooperation with their suppliers. These purchasing agents might see ORAs as going back to the past when the relationships between buyers and