How could supplier development activities increase buying firm performance?

The increased purchase of products and services from external suppliers has augmented the dependence of buying firms on the capabilities and performance of their suppliers. so, the implementation of supplier development activities is a need of manufacturing organizations to make long-term relationships with their key supplier to increase supplier capabilities.  This research model introduced six elements of supplier development programs such as information sharing within and between firms, communication methods, top management support, trust between trading partners and supplier quality support and also revealed three major factors of buying firm’s performance such as inventory management, product quality improvement and financial performance. Product quality improvement, as a mediator endogenous variable in the purpose model, was also studied and tested. A cross-sectional method was used to gather data from 377 Iranian manufacturing SMEs. The measures and hypotheses were analysed with the help of Structural Equation Modelling (SEM). The research supported the idea that information sharing within firms, communication methods, top management support and trust between trading partners have a positive influence on information sharing between firms. Further, the research conducted the positive effects of information sharing between firms on inventory management and product quality on buying firms. Also, the research showed the positive effect of supplier quality support on product quality improvement and financial performance. In addition, the study conducted also revealed that product quality improvement played a partial mediation effect on supplier quality support and financial performance of manufacturing SMEs.