Managing commercial relationships between indigenous business and large purchasing organisations : changing the play and the rules of the game

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The thesis on which this research is based is that inclusive procurement, while well-intentioned, is applied in ways that create numerous challenges in commercial relationships between Indigenous suppliers and the buyers of their goods and services. These challenges have influenced and undermined the realisation of strong, effective and collaborative business partnerships between Indigenous businesses and their customers. To investigate this thesis, research with Indigenous-owned companies was undertaken in both Australia and the US, investigating several key factors of commercial relationships between Indigenous suppliers and large corporate and government customers. In particular, the research sought to identify the factors that constrain, enable and underpin supplier diversity relationships then comparatively analyse the results. The thesis argues that the commitment of large purchasing organisations (LPOs) to supplier diversity has been found to be a key enabler in these relationships, however the nature of the relationships between Indigenous suppliers and LPOs, and whether it has realised its intended social outcomes, has been under researched, particularly in Australia. Supplier diversity is a strategic business process aimed at connecting minority and Indigenous-owned companies with major corporations and government agencies through inclusive procurement practices. Recent years have seen substantial increases in the number and size of Indigenous-owned companies providing goods and services to LPOs. These increases can be attributed in part to pro-social procurement government policies and an emerging strategic commitment to supplier diversity amongst LPOs. An improved entrepreneurial expertise in Indigenous communities and greater levels of innovation and quality of Indigenous-produced goods and services in both Australia and the US has also contributed. Driving the adoption of supply diversity initiatives is the assumption that, from the Indigenous perspective, increased procurement from Indigenous suppliers will in turn create greater self-determination opportunities for Indigenous people and communities by enabling them to become more economically independent and empowered, and from the LPO perspective, supply diversity will promote positive inclusive cultural change within the LPOs themselves. This research questions these assumptions and argues that supplier diversity initiatives, as they are currently operationalised by LPOs, are not producing these outcomes for many Indigenous-owned suppliers or for the LPOs themselves. To test this thesis, the research sought to identify whether there is a discernible difference in how LPOs treat Indigenous owned suppliers compared to non-Indigenous suppliers. Results suggest that supplier diversity initiatives do not foster the kinds of collaborative, culturally-aware partnerships that are required to deliver social outcomes for Indigenous communities or realise internal cultural change within LPOs. To conduct this study, relationships between Indigenous suppliers and their LPO buyers are examined through the dual theoretical lens of Indigenous Standpoint Theory (IST) (Nakata 1998; Foley 2000; 2003; 2005) and Transaction Cost Economic Theory (TCE) (Williamson 1998; 2008). Through IST, I articulate an Indigenous perspective and contest mainstream worldviews, in particular as they relate to a better practice approach to building relationships in the supply diversity marketplace. TCE theory posits that firms should focus on minimising transactions costs (Coase 1937; Simon 1957; March and Simon 1958; Williamson 1971). I argue that IST supports the assertion that transaction costs within relationships, commercial and otherwise, can be minimised through appreciation of IST perspectives in ways that humanise relationships, a process which involves greater appreciation and adoption of Indigenous practices. To investigate the range, and identify some key features of, Indigenous supplier and LPO buyer relationships, the thesis first examines Indigenous-related corporate and government policies and procedures. It then presents the findings of 22 in-depth interviews focusing on key elements shaping Indigenous business relationships. These in-depth interviews were conducted with Indigenous business owners in Australia and the US. Findings from the interviews suggest that many of these Indigenous suppliers and LPO buyer relationships are characterised by an unequal distribution of power, reduced levels of trust, and misunderstandings about the importance of Indigenous cultural values within the commercial relationship. These elements are significantly shaped by the extent of the buyers’ lack of understanding of culturally significant Indigenous practices of reciprocity, obligation and other culturally aligned behaviours. A key finding of the research is that, despite extensive commitment to supplier diversity as articulated in a range of LPOs’ institutional policies and procedures, the uneven distribution of power, suboptimum levels of trust and a problematic approach to culturally safe behaviours has, in numerous cases, undermined the realisation of strong and effective collaboration and meaningful business relationships. It is argued that without genuine partnerships, supplier diversity strategies are unlikely to be successful. Success in this case refers to the realisation of key supplier diversity program goals such as economic independence and empowerment, Indigenous self-determination and for LPOs the benefit of adopting innovative Indigenous business ideas that add value, competitive advantage and positive cultural change. Since white settlement it has been consistently assumed that there was virtually no Indigenous economies pre-invasion and that Indigenous people have a lot to learn from the west / mainstream about how to do business. This thesis argues that it is the other way around - mainstream business have a lot to learn from Indigenous communities, particularly about how to develop equal, trusting and reciprocal relationships that minimise transaction costs and deliver positive social outcomes. These findings provide an Indigenous perspective to the academic field of inclusive procurement research and are particularly relevant to private and public organisations seeking to develop respectful, collaborative and strategic business partnerships that lead to an emergence of genuine relationships with Indigenous suppliers.
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