Leveraging supply chain orientation for global supplier responsiveness. The impact of institutional distance

• Published date: 11 February 2019
• DOI: https://doi.org/10.1108/IJLM-09-2017-0225
• Date: 11 February 2019
• Pages: 39-56
• Author: Beth Davis-Sramek,Ayman Omar,Richard Germain
• Subject Matter: Management science & operations,Logistics

Leveraging supply

chain orientation for global

supplier responsiveness

The impact of institutional distance

Beth Davis-Sramek

Department of Systems and Technology, College of Business,

Auburn University, Auburn, Alabama, USA

Ayman Omar

International Business, American University, Washington,

District of Columbia, USA, and

Richard Germain

Department of Marketing, University of Louisville, Louisville, Kentucky, USA

Abstract

Purpose –The purpose of this paper is to utilize middle-range theorizing to examine whether a US

manufacturer can leverage supply chain orientation (SCO) to garner responsiveness from a global supplier.

To capture the interplay of macro-level institutional environments, the authors examine the moderating effect

of institutional distance on the SCO–supplier responsiveness relationship.

Design/methodology/approach –Primary survey data collected from US manufacturers are utilized to

measure SCO and supplier responsiveness. Two secondary data sets (EIU and GLOBE) capture formal and

informal distance at the institutional level and are used to test the moderating effect of institutional distance.

Findings –The research finds that SCO can facilitate global supplier responsiveness. A post hoc exploratory

analysis reveals a three-way interaction, where the SCO–supplier responsiveness relationship is strengthened

when formal and informal institutions are either very similar or very different.

Research limitations/i mplications –The researc h offers a more nuanced un derstanding of

manufacturer–supplier relationships in global supply chains by demonstrating how country-level (macro)

characteristics can influence firm-level (micro) supply chain phenomena. It extends research on SCO by

illustrating how institutional distance interacts with a manufacturer’s ability to leverage SCO to enable

supplier responsiveness.

Practical implications –Manufacturers should increase their attentiveness to institutional distance.

When both formal and informal distances are different (i.e. high distance), SCO can create a powerful lever to

improve global supplier responsiveness. Likewise, when formal and informal institutions are similar (i.e. low

distance), SCO reinforces joint efforts and collaboration to create additive benefits, whereby suppliers are

incentivized to be responsive to unexpected environmental changes.

Originality/value –This research addresses the growing call for more empirical studies that examine how

country-level institutions influence firm-level phenomena. It also utilizes secondary data to serve as a proxy

for formal and informal institutional distance.

Keywords North America, Survey, Europe, Asia, Buyer–supplier relationships, Supplier management,

Global logistics

Paper type Research paper

1. Introduction

A firm’s supply chain can have a profound effect on its performance dimensions related to

cost, quality and timeliness (Liao et al., 2010). Previous research highlights the need for firms

to leverage supply chain relationshipsin order to be more responsive to changing conditions

and increasing c ustomer demands ( Cao and Zhang, 2011; Davis-Sramek et al.,2007;Holweg,

2005). As such,a stream of research has focused onsupply chain orientation (SCO),which is a

multi-dimensional construct thatcaptures a firm’s strategic awarenessof the benefits created

The International Journal of

Logistics Management

Vol. 30 No. 1, 2019

pp. 39-56

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-09-2017-0225

Received 6 September 2017

Revised 23 May 2018

23 July 2018

18 October 2018

Accepted 4 November 2018

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

39

SCO for global

supplier

responsiveness

by strong relationships with other firms in the supply chain (Min and Mentzer, 2004; Mello

and Stank, 2005). Likewise, a critical outcome variable in modern supply chains is supplier

responsiveness(Sinkovics et al., 2011), which in this research reflects the ability of a supplier

to quickly adapt to changes in the environment (Zhou et al., 2008; Carr and Smeltzer, 2000).

Grounded in the relational exchange paradigm, this research examines how SCO can be

leveraged to improve supplier responsiveness. While this is an important relationship to

examine, the pervasiveness and significance of global supply chains point to an additional

need to examine its nuances in a global context. Literature examining SCO offers very little

insight into the added complexities that can exist when a manufacturer resides in

one country and a supplier resides in another (Dong et al., 2016). Given the current state of

the field and the reality of global supply chains, a significant contribution to the supply

chain literature includes embracing a more macro-level institutional perspective that

enhances understanding of SCO (Yang et al., 2012).

To frame the SCO–supplier responsiveness relationship in a global context, the research

incorporates the impact of macro-level institutions into the theorizing. Institutional theory posits

that a nation’s institutional environment creates durable social structures that shape a firm’s

expectations and inform its limits for business operations (Scott, 2001). The implications of the

theory are quite relevant to this research. When a manufacturer in one country establishes a

relationship with a supplier in another country, institutional distance, or the difference between

the two institutional environments, should be considered (Kostova, 1997). The amount or size of

institutional distance stems from differences in both formal institutions (e.g. formalized laws,

regulations and monitoring/enforcement approaches) and informal institutions (e.g. differences

in informal norms, values and beliefs between countries) (Bae and Salomon, 2010; Xu and

Shenkar, 2002). This is significant because greater distance between a manufacturer and its

supplier may exacerbate the risk of longer lead times, difficult on-time delivery and increased

concern about disruptions and security issues (Griffith and Myers, 2005).

Through middle-range theorizing (Stank et al., 2017), the purpose of this research is to

examine whether a US manufacturer can leverage SCO to garner responsiveness from a

global supplier. To capture the interplay of institutional environments, we examine the

moderating effect of institutional distance on the SCO–supplier responsiveness relationship.

(Busse et al., 2016; Peng, 2003) In short, we posit that when the two nations have very

different institutional environments (i.e. distance is high), SCO becomes more significant for

manufacturers that need responsive suppliers. The relevance of this research is pronounced

as companies continue to stretch their upstream supply chains into the global landscape.

More broadly, this research offers insight into how supply chain relationship phenomena

can be influenced by country-level frameworks.

We test this theoretical framework on a sample of 320 US manufacturer–global supplier

relationships by combining primary survey data on SCO and supplier responsiveness at the

firm level with two secondary, separate data sets that capture formal and informal

institutional distance at the country level. We cast the study at the relationship unit of

analysis, whereby a US-based manufacturer provides insight about its relationship with a

global supplier. The paper proceeds with a review of the literature and hypotheses

development, followed by an explanation of the method and the results. Finally, we offer a

discussion of the findings that outlines the implications and limitations of the research.

2. Theoretical framework and hypotheses development

Middle-range theorizing has been recently introduced in the logistics and supply chain

literature as a means to integrate contextual richness and specificity into the field’s

phenomena (Carter, 2011; Stank et al., 2017). Its aim is to combine knowledge from grand

theories to provide “theoretical contextualization”which ensures rigorous theorizing that is

closely tied to underlying industry contexts (Craighead et al., 2016). For this research,

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