Knowledge transfer in institutionalised supplier development and organisational performance: evidence from the construction industry in Zambia.

Abstract

Globally, the economic rationale for supporting SMEs using public procurement policy is well acknowledged and justified. Public procurement policy can be implemented directly through institutionalised supplier development initiatives such as Preferential and Reservation schemes, financial support, subcontracting and training. However, the efficacy of these initiatives on knowledge transfer and performance improvement are still underexplored. The purpose of the study is to examine the effect of knowledge transfer from institutionalised supplier development initiatives on the operational performance of local contractors. The study also investigates the mediating role of absorptive capacity on the relationship between knowledge transfer and operational performance. Additionally, the research investigates the moderating effect of institutional factors on the relationship between institutionalised supplier development initiatives and knowledge transfer. The study used a mixed-method strategy, consisting of nine expert interviews and 171 questionnaire responses from local contractors in Zambia. The qualitative findings revealed that the implementation of institutionalised supplier development is strongly affected by institutional factors such as political influence and favouritism, corruption, inadequate procurement regulatory regime, weak institutional oversight, and monitoring systems. However, the initiatives contributed to information dissemination and knowledge transfer. The survey findings established that direct institutionalised supplier development, such as the 20 per cent subcontracting policy and training, were significantly associated with knowledge transfer. However, the association between indirect institutionalised supplier development such as the Construction Finance Initiative, Preferential and Reservation schemes and knowledge transfer was insignificant. Furthermore, the study demonstrated that knowledge transfer indirectly improves the local contractor operational performance through overall absorptive capacity. Additionally, regulatory compliance and government support moderate the relationship between institutionalised supplier development and knowledge transfer. Moderation interactions indicated that low regulatory compliance is associated with high knowledge transfer, while government support is associated with high knowledge transfer at all levels. The research advances a more nuanced understanding of the influence of absorptive capacity and institutional factors in implementing institutionalised supplier development using evidence from the construction industry in Zambia. The study proposes a number of recommendations to the top management of construction companies and the government.