The interplay of governance mechanisms in supply chain collaboration and performance in buyer–supplier dyads: substitutes or complements

Abstract

PurposeThis study seeks: (1) to identify whether the form of governance adopted (relational or contractual) drives suppliers' and buyers' collaboration in the same way; (2) to examine if both parties hold a similar view on the simultaneous use of both governance forms; and (3) to explore whether their perceptions on governance, collaboration and performance differ.Design/methodology/approachThe study used data from a survey of 150 matched buyer–supplier dyads from South Korea, using structural equation modeling (SEM) for the analysis.Findings(1) While governance mechanisms assist collaboration and affect operational and innovation outcomes, the significance and relative strength of the proposed relationships are perceived differently by buyers and suppliers. (2) Contrasting results are found regarding the interaction effect of the governance mechanisms on collaboration: a complementary relationship for the buyer and a substitutive relationship for the supplier.Originality/valueStudies on buyer–supplier relationships have yielded inconsistent results regarding whether the interactions of governance mechanisms function as substitutes or complements, because research has largely been conducted from the buyer's perspective, rather than the supplier's; this imbalanced view calls for integrated perspectives.

The interplay between digital transformation and governance mechanisms in supply chains: evidence from the Italian automotive industry

“…Different mechanisms adopted to manage buyer-supplier relationships in the SC context have been judged essential for the stability of such a relationship and the fulfilment of joint objectives (Cao and Lumineau, 2015;Liu et al, 2009). The governance of buyer-supplier interaction may also favour innovation and long-term collaborative actions (Um and Oh, 2020) and provide greater incentives for firms to engage in cost-reduction activities (Blome et al, 2013), especially when the complexity of the processes of designing, manufacturing and delivering within the dyadic relationship is high (Gimenez, 2012).…”

“…On one hand, contractual governance manages the buyer-supplier relationship mainly through formal and explicit agreements that specify mutual obligations and the roles of the partners involved in the exchange, thus preventing disputes and specifying penalties in predefined terms, e.g. with respect to quality, price, quantity and delivery reliability (Poppo and Zenger, 2002;Um and Oh, 2020). The drawing up of contracts can involve not only the sourcing of components and subsystems but also co-production arrangements between the buyer (the OEM) and the supplier (Ketokivi and Mahoney, 2020).…”

“…The more the design of components is firm-specific, the more car manufacturers need to reduce their possible exposure to opportunism and mistakes by suppliers, as well as to reduce the increase in design and production costs, with more binding agreements (Monteverde and Teece, 1982). In this sense, suppliers are more concerned about contractual governance, to ensure the security and reliability of the transactions, and may lower their commitment to innovative investments if the gain sharing is perceived unequal (Um and Oh, 2020). According to Zhaeer and Venkatraman (1995), contractual governance can involve multiple dimensions, such as duration, completeness and control levels (Artz and Norman, 2002).…”

“…product delivery) lower uncertainty and increase the frequency of transactions. In this case, formal contracts are needed ex ante to agree on the data exchange and level of in SCs transparency of digital product artefacts and development processes, to mitigate uncertainty, prevent opportunistic behaviour and improve the responsibilities of the parties in product co-development (Kallinikos et al, 2013;Um and Oh, 2020). By establishing roles, tasks and agreed goals, such contracts also facilitate the efficient ex-post monitoring and formal control of any exchange, and help to reinforce the relationship and the creation and exchange of highly specific information between the supplier and the buyer.…”

Omni-channel integration: the matter of information and digital technology

“…Governance is defined as the coordination and control of economic exchange among organizations (Mahapatra et al, 2019), and typically implemented through contractual and relational mechanisms (Um and Oh, 2020). Contractual governance focuses on determining the rights, responsibilities and control procedures in a relationship, and relational governance is mainly defined around collaboration, trust and joint problem solving (Cao and Luminea, 2015;Mahapatra et al, 2010).…”