Organisational structure and purchasing linkage patterns of manufacturing firms in developing countries: Small- and medium-scale firms in Metropolitan Colombo, Sri Lanka

In this paper the pattern of purchasing linkages and their relationships with organisational structure of small- and medium-scale industries in Sri Lanka, particularly in the Colombo Metropolitan Area, are examined. The different structural features of this industrial sector, consisting of so-called registered and unregistered firms, reflect differences in size, ownership pattern, and their relationship with government organisations. These structural differences of firms influence their pattern and the degree of relationships with different types of suppliers. For the study a sample of 136 firms selected from textile, rubber, and metal industries is used. Principal components analysis is used to analyse the structure of firms and also to identify the significant characteristics of industries. The extent to which the organisational structure of firms is reflected in the purchasing linkage patterns is investigated by means of a correlation and stepwise multiple regression analysis. The conclusion is made that in most industries, purchasing links are highly localised, and retail and wholesale suppliers are more important than the private manufacturers and government organisations. Patterns of purchasing links and the relationship with different types of suppliers vary with the internal structure of firms and the types of industries involved. The study also suggests strong relationships between organisational structure and links with retailers and wholesalers, weak relationships with private manufacturers and government organisations.