Industrial online-reverse-auctions have become a common procurement strategy used by many firms to reduce the cost of purchased goods and services. The advantages of online-reverse-auctions include significant price reductions, increased purchasing and selling efficiencies, and access to new supply and purchasing markets. Despite these benefits, practitioners and academics alike have raised concerns with respect to the impact of online-reverse-auctions on the buyer-supplier relationship. Previous research suggests that the parameters and characteristics of an online-reverse-auction can influence the perceptions of online-reverse-auction participants. This dissertation investigates this phenomenon by examining how the design of an online-reverse-auction influences the supplier's perception of the buyer-supplier relationship. Specifically, this research considers the effects of online-reverse-auction design in terms of the independent variables of auction control, auction bid visibility, and auction award rules and the dependent variables of supplier commitment to the buyer and supplier trust in the buyer. Using a 2 x 2 x 2 quasi-experimental design and the statistical technique of MANCOVA, this study tests hypotheses related to how different online-reverse-auction design characteristics influence supplier commitment to the buyer and supplier trust in the buyer. The results of the study suggest that the type of online-reverse-auctions buyers utilize can have an impact on supplier perceptions of the buyer supplier relationship. Overall, the result suggest that supplier trust is influenced by the type of auction design buyers utilize, however, supplier commitment is not. Auctions utilizing third party auction providers, partial bid visibility, and post auction negotiations tended to result in higher levels of trust on the part of suppliers. This study makes a contribution to the literature in the following areas. First, this study is one of only a handful of empirical studies examining the effects of online-reverse-auction designs on the buyer-supplier relationship. While a considerable debate exists within the literature concerning the pros and cons of online-reverse-auctions, little empirical work exists. This study makes a contribution by providing insight with respect to how online-reverse-auction designs influence supplier perceptions of the buyer-supplier relationships. Secondly, this analysis considers the buyer-supplier relationship in terms of commitment and trust. Previous studies have largely neglected these constructs despite their prominence in the buyer-supplier relationship literature. Finally, given that the use of online-reverse-auctions seems well entrenched in the purchasing strategies of many buying organizations; this study provides guidance for the design of online-reverse-auctions such that buyers can potentially reduce the negative aspects of the process.

While there is an ever increasing adoption of e-sourcing, where a buyer auctions off procurement contracts to a small group of pre-qualified suppliers, there is a lack of understanding of the impact of dynamic bidding process on procurement outcomes and bidding behavior. To extend the knowledge of this important issue, in this thesis, we explore empirically the value of online procurement auction on cost reduction, quality management, and winner selection from the buyer's perspective. We also explore how incumbent status affects the procurement outcomes. From suppliers' perspective, we characterize their bidding behavior and examine the effect of incumbent status on bidding. First, we collect detailed auction and contract awarding data for manufacturing goods during 2002-2004 from a large buyer in the high-tech industry. The rich data set enables us to apply statistical model based cluster technique to uncover heterogeneous bidding behavior of industry participants. The distribution of the bidding patterns varies between incumbent and non-incumbent suppliers. We also find that the buyer bias towards the incumbent suppliers by awarding them procurement contracts more often and with a price premium. Next, focusing on recurring auctions, we find that suppliers bid adaptively. The adaptive bidding is affected by the rank of suppliers' final bids. Finally, with field data of procurement auction for legal services, we demonstrate that service prices are on average reduced after dynamic bidding events. Most interestingly, the cost savings are achieved without the sacrifice of quality. Incumbent winners' quality is higher, on average, than the quality of buyer's supplier base before the auctions, while non-incumbent winner's quality is lower. These findings imply that the main value of online procurement auctions for business services comes from incumbents in the form of reduced price and enhanced quality. We find that after adjusting for incumbents' higher quality, incumbent bias disappears. Our results also imply that the buyer might possess important information about the incumbents, through past experiences, that cannot be easily included in the buyer's scoring function due to uncodifiability.