9781839104497 - Handbook of Theories for Purchasing, Supply Chain and Management Research 2022

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©WendyL.Tate,LisaM.EllramandLydiaBals2022Coverimage:SusanQYinonUnsplashAllrightsreserved.Nopartofthispublicationmaybereproduced,storedinaretrievalsystemortransmittedinanyformorbyanymeans,electronic,mechanicalorphotocopying,recording,orotherwisewithoutthepriorpermissionofthepublisher.PublishedbyEdwardElgarPublishingLimitedTheLypiatts15LansdownRoadCheltenhamGlosGL502JAUKEdwardElgarPublishing,Inc.WilliamPrattHouse9DeweyCourtNorthamptonMassachusetts01060USAAcataloguerecordforthisbookisavailablefromtheBritishLibraryLibraryofCongressControlNumber:2022932711ThisbookisavailableelectronicallyintheBusinesssubjectcollectionhttp://dx.doi.org/10.4337/9781839104503ISBN9781839104497(cased)ISBN9781839104503(eBook)WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:53AMviaColumbiaUniversityLibrary

1ContentsListofcontributorsviii1IntroductiontotheHandbookofTheoriesforPurchasing,SupplyChainandManagementResearch1WendyL.Tate,LisaM.EllramandLydiaBals2Foundationsoftheory12BarbaraB.Flynn,MarkPagell,BrianFugateandDavidE.Cantor3Developingpurchasingandsupplymanagementtheory29MarkPagell,BarbaraB.Flynn,BrianFugateandDavidE.Cantor4Theoriesrelevanttopurchasingandsupplymanagementresearch:statusquoandfuturesuggestions48LarryGiuniperoandRehamEltantawy5Systemslevelsinpurchasingandsupplychainmanagement(PSCM)research:exploringestablishedandnoveltheoriestoaddressPSCMproblemsandchallenges63ChristineM.HarlandandJensK.Roehrich6Enhancingtheorizinginpurchasingandsupplymanagementthroughmiddle-rangetheories80JennyBäckstrandandÁrniHalldórsson7Transactioncosteconomics94WendyL.TateandLisaM.Ellram8Resource-basedview106LydiaBalsandEugeniaRosca9Theknowledge-basedview118TobiasSchoenherr10Resource-advantagetheory140DonnaF.DavisandTeresaM.McCarthy-Byrne11Resourceandnaturalresourcedependencetheoriesinsupplychains153LojainAlkhuzaim,MahtabKouhizadehandJosephSarkis12Resourceorchestration:managers’roleindevelopinganddeployingresourcestocreatedistinctiveadvantage168StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVegaandAmydeeM.FawcettvWendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:55AMviaColumbiaUniversityLibrary

2viHandbookoftheoriesforpurchasing,supplychainandmanagementresearch13Agencytheoryinpurchasingandsupplymanagement186GeorgeA.Zsidisin14Playingtowin:applyinggametheorytopurchasingandsupplymanagement199StevenCarnovaleandMylesD.Garvey15Paradoxtheory221SajadFayezi16Contingencytheoryandtheinformationprocessingview248VirpiTurkulainen17Socialexchangetheory267CarlMarcusWallenburgandRobertHandfield18Therelationalview283Feigao(Kelly)Huang,EugeniaRosca,LydiaBalsandWendyL.Tate19Supplynetworks:dyads,triadsandnetworks295ZhaohuiWuandThomasY.Choi20Stakeholdertheory310GyöngyiKovács21Institutionaltheory320KatriKauppi22Complexadaptivesystems335KevinJ.Dooley23Factormarketrivalry:ageneraltheoryofsupplychainmanagement345PeterM.Ralston,MatthewA.SchwietermanandJohnE.Bell24Theindustrialnetworkapproachandpurchasingandsupplymanagementresearch360BjörnAxelsson,Lars-ErikGaddeandFinnWynstra25Dynamiccapabilitiestheory378AnnaLand,TimGruchmann,ErikSiemsandPhilipBeske-Janssen26Supplychainsascomplexadaptivesystems399AnuragTewariandRichardWilding27Clustertheoryandpurchasingscience:geographicalproximityasastrategicdecisionfactorinsourcing412HolgerSchiele28Organizationallearningtheoryanditsapplicationtopurchasingmanagementandsupplychainmanagementresearch425ArashAzadeganandJavadFeizabadiWendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:55AMviaColumbiaUniversityLibrary

3Contentsvii29Signallingtheory445ChristianvonDeimling,MichaelEßigandAndreasH.Glas30Portfoliotheory471CeesJ.Gelderman31Supplychainsasdynamicsocio-technicalsystems491JohnGattornaandWilliamPasmore32Panarchytheory502AmandaBilleandAndreasWieland33Preferredcustomertheory:benefitingfrompreferentialtreatmentfromsuppliersthroughmeasuresonbuyerattractivenessandsuppliersatisfaction515HolgerSchiele34Ontheoriesforresearchingsustainability531ThomasE.JohnsenandFedericoCaniatoIndex550WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:55AMviaColumbiaUniversityLibrary

4ContributorsLojainAlkhuzaimisaPhDCandidateinOperationsManagementwithintheBusinessSchoolatWorcesterPolytechnicInstitute,USA.Herresearchfocusesontheapplicationsofemergyanalysisandsystemdynamicswithinthecontextofsustainablesupplychainmanagement.BjörnAxelsson,atthetimeofwriting,wasProfessorEmeritusoftheStockholmSchoolofEconomics(SSE),Sweden.HisresearchcenteredaroundB2Boperations,foremostprocure-ment,andmarketingandsales.HeearnedhisPhDdegreefromUppsalaUniversity,Sweden,in1981.Duringaperiodofalmost15yearsheservedasdirectorandteacherintheUppsalaExecutiveMBAProgram.HewasappointedhisfirstchairasprofessorattheJönköpingInternationalBusinessSchoolandmovedtoSSEin2002.HepublishedinjournalssuchasIndustrialMarketingManagement,theJournalofBusinessandIndustrialMarketingandtheJournalofPurchasingandSupplyManagement.Björnhasalsopublishedseveralbooks,thelatestpublishedin2018(editedtogetherwithAnderssonandRosenqvist).Earlyon,BjörnAxelssonwaspartoftheIndustrialMarketingandPurchasing(IMP)Group.Björnpassedawayon19April2021,shortlyafterheandhisco-authorsfinishedtheirchapterinthisbook.ArashAzadeganisanAssociateProfessoratRutgersBusinessSchool,USA,andtheDirectorofSupplyChainDisruptionResearchLaboratory(SCDrl).Hisresearchfocusesonsupplychaindisruptions,andtheeffectofinterorganizationalresponseandrecoveryefforttomitigatethem.Specifictohumanitariansupplychains,DrAzadeganhasseveralongoingprojectsonresponseandrecoveryfromhumanitariandisastersintheUnitedStates(forexample,hurri-canes)andhowcollaborationamongnon-governmentalorganizations(NGOs)andgovern-mentalentitiescanbestrengthened.DrAzadegan’sworkispublishedinseveraltopoperation/supplychainmanagementjournalsincludingtheJournalofOperationsManagement,JournalofSupplyChainManagement,ProductionandOperationsManagement,andtheDecisionSciencesJournalamongothers.DrAzadeganhasactedasanofficer(treasurer)oftheOMDivisionattheAcademyofManagement,andisanactivememberoftheDecisionSciencesInstitute.DrAzadeganisaboardmemberofSafe-AmericaFoundation,anNGOfocusedonsafetyandpreparednessintheUnitedStates.JennyBäckstrandisAssociateProfessorinSupplyChainandOperationsManagementattheSchoolofEngineeringatJönköpingUniversity,Sweden.Shehaspublishedarticlesonvarioustopicsrelatedtopurchasingandcustomizedproductsinatriadicsettingaswellasengagedresearchmethods.Hercurrentresearchinterestsincludeuniversity‒industryinteractionandinformationsharing,specificallyinsmallandmedium-sizedenterprisesandengineering-to-order(ETO)contexts.LydiaBalshasbeenFullProfessorofSupplyChainandOperationsManagementattheUniversityofAppliedSciencesMainz,Germanysince2014,andanexternalPost-DocResearchFellowatEBSUniversität,Germanysince2019.ShehasbeenaffiliatedwithCopenhagenBusinessSchool,Denmarkforresearchsince2008.Shealsoworksasaninde-pendentconsultant,moderatorandspeaker(https://source4future.de/).Untiltheendof2013viiiWendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

5ContributorsixshewasHeadoftheDepartmentGlobalProcurementSolutions(forexample,procurementstrategy,sustainability,controlling,Source2ContractandPurchase2Payprocesses,methods,toolsandsystems;benchmarkingandexcellence)atBayerCropScience(BCS)AG.PriortothissheworkedasaProjectManageratBayerBusinessConsulting,Germany,thein-houseconsultingunitofBayer.Sheteachespurchasingandsupplymanagement,operations,logis-ticsandsupplychainmanagementcourses.ShehaspublishedintheJournalofOperationsManagement,JournalofSupplyChainManagement,JournalofPurchasingandSupplyManagement,JournalofInternationalManagement,andotheracademicoutlets.JohnE.BellistheRatledgeEndowedAssociateProfessorofSupplyChainManagementandBartleyFamilyFacultyResearchFellowattheUniversityofTennessee,USA.HeholdsaPhDfromAuburnUniversity,USA,anMSfromtheAirForceInstituteofTechnology,andaBSfromtheUSAirForceAcademy.HeisanAssociateEditoroffourleadingsupplychainjournalsandhaspublishedover30peer-reviewedarticles.DrBelliscurrentlytheDirectoroftheSupplyChainPhDandAerospaceandDefenseMBAProgramsattheUniversityofTennessee(UT).BeforecomingtoUT,DrBellserved20yearsonactivedutyasaUSAirForceofficer.Hiscurrentresearchinterestsareinlastmiledelivery,strategicfacilityloca-tionandsustainability.HispublicationshaveappearedintheJournalofBusinessLogistics,EuropeanJournalofOperationalResearch,TransportationJournal,AdvancedEngineeringInformatics,ComputersandOperationsResearch,andothertopjournals.PhilipBeske-JanssenisanAssistantProfessorintheDepartmentforOperationsManagementattheCopenhagenBusinessSchool,Denmark.Hisresearchinterestsareprimarilysustainabil-ityinsupplychains,circulareconomyandsustainabilityaccounting.AmandaBilleisaPhDFellowattheDepartmentofOperationsManagement,CopenhagenBusinessSchool,Denmark.Bille’sresearchiscentredaroundprovidingpoliticalandethicalperspectivesonSCMthatmakeitpossibletoembracethecomplexityofthetwenty-firstcentury.Sheparticularlyinterestedincorporateresponsibilityaswellaspowerstructures.Sheisapartoftheresearchproject‘TheSupplyChainofthe21stCentury–TowardsEthical,SocialandCircularBusinessModels’,ajointresearcheffortbetweenNORDAKADEMIEUniversityofAppliedSciencesandCopenhagenBusinessSchool.BilleholdsanMScinInternationalBusinessandPoliticsaswellasaBScinBusiness,LanguageandCulture,bothfromCopenhagenBusinessSchool.SebastianBrockhausisanAssociateProfessorofSupplyChainManagementattheBolerCollegeofBusinessatJohnCarrollUniversity,USA.HereceivedhisDoctoraldegreefromtheHamburgUniversityofTechnology.HehaspublishedintheJournalofBusinessLogistics,InternationalJournalofOperationsandProductionManagement,andInternationalJournalofLogisticsManagement,amongothers.Heisinterestedinsupplychainsustainability,col-laboration,andproductdevelopment.FedericoCaniatoisFullProfessorofSupplyChainandPurchasingManagementattheSchoolofManagementofPolitecnicodiMilano,Italy,andisRector’sDelegateforLifeLongLearning.HeisthedirectoroftheInternationalMasterinDigitalSupplyChainManagementofMIPPolitecnicodiMilanoGraduateSchoolofBusiness.Hehasauthoredseveralinterna-tionalpublicationsonvariousoperationsandsupplychainmanagementjournals,andheisAssociateEditoroftheJournalofPurchasingandSupplyManagementandtheInternationalWendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

6xHandbookoftheoriesforpurchasing,supplychainandmanagementresearchJournalofOperationsandProductionManagement.TheresearchinterestsofFedericoCaniatoareinthefieldofsupplychainandpurchasingmanagement;inrecentyearshehasfocusedonsupplychainfinance,supplychainsustainabilityandsupplychainresilience.Hehasfocusedinparticularonthefoodandfashionindustries.DavidE.Cantor(PhD,UniversityofMaryland,USA)isProfessorofSupplyChainManagementandholdstheMarkandTerriWalkerProfessorshipinLogisticsandSupplyChainManagementattheDebbieandJerryIvyCollegeofBusinessatIowaStateUniversity,USA.Hissupplychainresearchinterestsincludemotorcarriersafety,environmentalmanagementandbehavioraloperationsmanagement.DrCantor’sresearchhasbeenawardedbestpaperawardsfromtheJournalofOperationsManagementandTransportationJournal.HisresearchhasbeenpublishedinmanyjournalsincludingtheJournalofBusinessLogistics,JournalofOperationsManagement,ProductionandOperationsManagementJournalandJournalofSupplyChainManagement.StevenCarnovale,PhDholdstherankofAssistantProfessorofSupplyChainManagement,andGraduateProgramsDirector(ManagementDepartment)attheSaundersCollegeofBusiness,RochesterInstituteofTechnology,USA.Inaddition,heservesasAssociateEditorofboththeJournalofSupplyChainManagementandtheJournalofPurchasingandSupplyManagement.Stevenspecializesinsupplychainstrategyfocusedoninterfirmnetworks,riskmanagementandglobalsourcingnetworks.HisresearchhasappearedintheJournalofSupplyChainManagement,JournalofBusinessLogistics,JournalofPurchasingandSupplyManagement,InternationalJournalofProductionEconomics,EuropeanJournalofOperationalResearchandAnnalsofOperationsResearch,amongothers.StevenearnedhisBSandPhDdegreesatRutgersUniversity,USA(SupplyChainManagementandMarketingSciences).Stevenfrequentlyspeaksontopicsrelatedtosupplychainanalytics/strategy,focusedonhowfirmscanusetheseconceptstoincreasevisibilityandperformancewithintheirsupplychains.ThomasY.ChoiisaProfessorofSupplyChainManagementattheW.P.CareySchoolofBusinessatArizonaStateUniversity,USA.Heleadsthestudyoftheupstreamsideofsupplychains,whereabuyingcompanyinterfaceswithmanysuppliersorganizedinvariousformsofnetworks.Hehaspublishedarticlesinnumerousleadingjournals.From2014to2019,heservedasHaroldE.FearonChairofPurchasingManagementandExecutiveDirectorofCAPSResearch.From2011to2014,heservedasCo-Editor-in-ChiefoftheJournalofOperationsManagement.Since2018,hehasbeenlistedasaHighlyCitedResearcherbyClarivateWebofScience.DonnaF.DavisisaProfessorofMarketingandSupplyChainManagementandservesasAcademicDirectoroftheMonicaWoodenCenterforSupplyChainManagementandSustainabilityintheMumaCollegeofBusinessattheUniversityofSouthFlorida,USA.SheholdsPhDandMBAdegreesfromtheUniversityofTennessee,USA.DrDavishaspresentedherresearchatnumerousdomesticandinternationalacademicandprofessionalconferences.Hercurrentresearchfocusesonlogistics-ledeconomicdevelopmentanddigitalsupplychaintransformation.ChristianvonDeimlingholdstheEndowedJuniorProfessorshipforGeneralBusinessAdministration,inparticularforIndustrialProcurement,attheDepartmentofEconomicsWendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

7ContributorsxiandManagementattheBundeswehrUniversityMunich,Germany.Inhisresearchandteach-ing,ChristianvonDeimlingfocusesonissuesinindustrialsupplymanagementandpublicprocurement.Heisinterestedinchangesandfuturedevelopmentsinsupplymanagement(understoodasafunctionincompaniesandorganizationswithasignificantinfluenceontheirmarketposition).Therefore,heisintensivelyconcernedwiththedevelopmentandsuccessfulintroductionofsupplyandprocurementstrategies,withtheinfluenceofinnovationonandthroughprocurementandonthemarketpositionofcompaniesandorganizations,withtheroleanduseoflifecyclecostsfordifferentdecisiongatesininvestmentprojectsaswellaswiththedesignandthesuccessofcooperativepurchasing.Hisappliedunderstandingofresearchisgroundedondata-basedobservations(bothqualitativeandquantitative)andcorrespondingdatatriangulation.KevinJ.DooleyisaDistinguishedProfessorofSupplyChainManagementintheW.P.CareySchoolofBusinessatArizonaStateUniversity,USA,ChiefScientistofTheSustainabilityConsortium,andaSeniorSustainabilityScientistintheJulieAnnWrigleyGlobalInstituteofSustainability.AtTheSustainabilityConsortium,Dooleyleadsaglobalresearchteamthatworkswithover100oftheworld’slargestretailersandmanufacturerstodeveloptoolsthatmeasureandtrackprogressoncriticalproductsustainabilityissues.Hehaspublishedmorethan100researcharticlesandhasprovidedtrainingorconsultationforover200companiesintheareasofsustainability,supplychainmanagement,quality,andtechnologyandinnovation.HeobtainedhisPhDinMechanicalEngineeringattheUniversityofIllinois,USA.LisaM.Ellram,PhD(OhioStateUniversity,USA)isUniversityDistinguishedProfessorandtheReesDistinguishedProfessorofSupplyChainManagementattheFarmerSchoolofBusiness,MiamiUniversity,Oxford,OH,USA.Herprimaryareasofresearchinterestincludesustainability;buyer‒supplierrelationships;servicespurchasingandsupplychainmanagement;offshoringandoutsourcing;andsupplychaincostmanagement.Shehaspub-lishedinnumeroustopjournalsspanningavarietyofdisciplines,andhaspresentedherworkonsixcontinentsandinmorethan30countries.ShehasbeenCo-Editor-in-ChiefEmeritusoftheJournalofSupplyChainManagement(2007‒2016),andisSeniorAssociateEditorforJournalofPurchasingandSupplyManagement.Sheisthe2019winneroftheDistinguishedScholarAwardfromtheSupplyChainandOperationsManagementDivisionoftheAcademyofManagement.RehamEltantawyistheCogginEndowedStrategicProfessor,ProfessorofMarketing,andChairoftheDepartmentofMarketingandLogisticsattheUnivesityofNorthFlorida,USA.Areasoffocusarepurchasingandsupplychainmanagement,strategicsourcing,andpurchas-ingandsupplymanagement.MichaelEßigholdstheChairforPurchasingandSupplyManagementattheBundeswehrUniversityMunich,Germany.Hisresearchfocusesontheareasofstrategicsupply(chain)management,publicprocurementanddefencesupplymanagement.Hehaspublishedexten-sivelyinmajorjournalsincludingtheJournalofPurchasingandSupplyChainManagement,SupplyChainManagement:AnInternationalJournalandIndustrialMarketingManagement,andworkswithmajorindustrialandpublic(buying)institutionssuchasAudi,FederalMinistryoftheInterior,FederalOfficeforDefenceAcquisition(amongstothers).HeservesasAssociateEditoroftheJournalofPurchasingandSupplyManagementaswellastheJournalofPublicProcurement;additionallyinseveralacademicandprofessionalorganizationssuchWendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

8xiiHandbookoftheoriesforpurchasing,supplychainandmanagementresearchastheManagementBoardandtheScientificBoardoftheGermanPurchasingAssociation(BME)andtheScientificAdvisoryBoardoftheAustrianMinisterofDefence.HeteachesinMunichandalsoattheUniversityofStGallen,SwitzerlandandtheViennaUniversityofEconomicsandBusiness,Austria.AmydeeM.FawcettistheChiefExecutiveOfficerofEngage2EandaProfessorofSupplyChainManagement.SheearnedherPhDattheUniversityofArkansas,USA.Herinterestsareinrelationaldynamics(thatis,teaming,trust,changemanagement,leadershipthroughpeopleandnegotiation)andcreatinganengagedlearningenvironment.Sinceenteringtheacademicworld,Deehasreceivedthreebestpaperawards(h-index:19,i10-index:23).StanleyE.Fawcett(PhD,ArizonaStateUniversity,USA)isamemberoftheLogistikumteamattheUniversityofAppliedSciences,UpperAustria.Hisinterestsareinsupplychaincollaborationandglobalsupplychaindesign.Anaward-winningteacher,StanhastaughtaroundtheworldinEnglish,GermanandSpanish.Stanhasdevelopedandledaction-learning,experiential-educationworkshopsthatdemonstratehowadeliberatepracticepedagogycanelevatelearning.Thewinnerofoveradozenbestpaperawards,Stanhaspublished200+articlesand12books(h-index:61;i10-index:122;RGScore:35.39).HealsoservedasCo-Editor-in-Chiefofoneofthesupplychainprofession’stopjournals,theJournalofBusinessLogistics,andisbehindtheinnovativeMyEducatoronlinesupplychaincurriculum.SajadFayezi,PhD(DeakinUniversity,Australia)isanAssociateProfessorofSupplyChainManagementintheFacultyofBusinessAdministrationatMemorialUniversityinStJohn’s,Canada.DrFayezihaspublishedinbothacademicandpractitionerjournalsinthefieldofsupplychainmanagement.Hismainresearchareasinvolvesocialissuesinthesupplychain,includingbusinesshumanrights,modernslaveryandresponsiblesourc-ing,sustainablesupplychainmanagement,andresilientsupplychains.Hehaspublishedresearchintop-tierinternationaljournals,includingtheInternationalJournalofOperationsandProductionManagement,InternationalJournalofManagementReviews,IndustrialMarketingManagement,SupplyChainManagementandInternationalJournalofPhysicalDistributionandLogisticsManagement.JavadFeizabadiisanAssociateProfessoratAsiaSchoolofBusiness,Malaysia(inCollaborationwithMITSloanSchoolofManagement).DrFeizabadi’sprimaryresearchinter-estfocusesondesigningandmanagingsupplychainsascomplexadaptivesystemsinahighlyvolatilebusinesslandscape.HehaspublishedinseveralinternationalreferredjournalssuchasStrategicManagementJournal,InternationalJournalofProductionEconomics,InternationalJournalofPhysicalDistributionsandLogisticsManagement,SupplyChainManagement:AnInternationalJournalandJournalofBusinessLogistics.BarbaraB.FlynnistheRichardM.andMyraLouiseBuskirkProfessorofManufacturingManagementattheKelleySchoolofBusiness,IndianaUniversity,USA.SheisaCo-Editor-in-ChiefoftheJournalofSupplyChainManagementandpastEditorofDecisionSciencesJournalofInnovativeEducationandQualityManagementJournal.HerresearchonoperationsstrategytopicshasappearedintopjournalsincludingJournalofSupplyChainManagement,JournalofOperationsManagement,ManagementScience,DecisionSciences,andAcademyofManagementJournal.HerresearchhasbeenfundedbytheNationalScienceFoundationandtheUSDepartmentofEducation.SheisPastPresidentoftheDecisionWendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

9ContributorsxiiiSciencesInstituteandwinneroftheDistinguishedScholarAwardfromtheoperationsman-agementdivisionoftheAcademyofManagement.BrianFugateistheChairoftheDepartmentofSupplyChainManagement,Professor,andOrenHarrisEndowedChairinTransportationattheUniversityofArkansasSamM.WaltonCollegeofBusiness,USA.HewasformerlyanMITFulbrightSeniorResearchScholarandCo-Editor-in-ChiefoftheJournalofSupplyChainManagement.Hisrecentpublicationsfocusonadvancingtheconsumer-orientedintegrationofdemandacrossthesupplynetworkthroughcollaborationandenablingtechnologies.DrFugatehaspublishedarticlesinpremierejournalssuchastheJournalofSupplyChainManagement,AcademyofManagementJournal,JournalofOperationsManagement,JournalofBusinessLogisticsandDecisionSciencesJournal.Lars-ErikGaddeisanEmeritusProfessorofIndustrialMarketingatChalmersUniversityofTechnologyinGothenburg,Sweden.Hisresearchinterestisdevotedtotwoaspectsofwhatisnowidentifiedassupplychainmanagement,butpreviouslylabelledchannelsofdistributionandpurchasingandsupply.WhentheIndustrialMarketingandPurchasing(IMP)Groupprojectwaslaunched,headoptedtheseconceptsandmodels,andsincethattimehisstudieshavereliedonthenetworkframing.ResearchoutletsincludeJournalofSupplyChainManagement,InternationalJournalofPhysicalDistributionandLogisticsManagement,JournalofManagementStudies,IndustrialMarketingManagementandInternationalJournalofResearchinMarketing.Heisalsoaco-authorofseveralIMPbooks.MylesD.Garvey,PhDisanAssistantTeachingProfessorofAnalyticsandMarketingattheD'Amore-MckimSchoolofBusinessatNortheasternUniversity,USA.PriortoreceivinghisPhDfromRutgersBusinessSchool,USA,DrGarveywasasoftwareconsultantforRedHat.Hisresearchinterestsarecurrentlywithintheareasofsocialmediaanalytics,naturallanguagegeneration,supplychainriskpropagation,socialnetworkanalytics,andgeneralmarket-inganalytics.HealsoiscurrentlytheCo-DirectoroftheDATAInitiativeatNortheasternUniversity,whosemainpurposeistohelporganizationsturndataintoinsightbywayofstudentengagementandtheapplicationofbusinessanalyticsmethodologies.JohnGattornaisExecutiveChairmanofGattornaAlignment,aSydney,Australia-basedfirmspecialisinginsupplychain‘thoughtleadership’.Hehasheldanumberofprofessorships,withthemostrecentbeingAdjunctProfessorattheUniversityofTechnology,Sydney,theSPJainSchoolofGlobalManagement,Australia,andFoundationProfessortoCIPSAustralia.CeesJ.GeldermanisAssociateProfessorofPurchasingandMarketingManagementattheOpenUniversityoftheNetherlands.Hehasdevelopedseveralcourses,allbasedontheprinciplesofdistanceeducation.Asleadingauthor,hepublishedtheDutch-languagebookProfessioneelInkopen(ProfessionalPurchasing)andthetextbookBusinessMarketing.In2003hecompletedhisPhDresearchprojectonpurchasingportfolioapproaches.Hisresearchisprimarilyfocusedonmanagingbuyer‒supplierrelationships,withaspecialinterestinpur-chasingportfoliomanagement,publicprocurement,contractingandgovernance,poweranddependence,opportunism,andsustainability.HehaspublishedinnumerousjournalsandhaspresentedmanycompetitivepapersatIPSERAconferences.HeisamemberoftheEditorialReviewBoardoftheJournalofPublicProcurement.WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

10xivHandbookoftheoriesforpurchasing,supplychainandmanagementresearchLarryGiunipero,CPSM,CPSD,CPMisaProfessorofSupplyChainManagementatFloridaStateUniversity,USA.Hisprimaryresearch,teachingandconsultinginterestsareintheareaofsupplymanagement.Currentinterestslieinstrategicandglobalsourcing,talentdevelop-mentandsupplychaintechnologies.AndreasH.GlasisAssistantProfessorforProcurementandSupplyManagementatBundeswehrUniversityMunich,Germany.Hisresearchinvestigatesthebuyer‒suppliercooperationandisinparticularrelatedtoperformance-basedcontractsandserviceinnova-tion.Heco-editedthebooksPerformance-basedLogisticsandEinkauf4.0andiscurrentlyworkingonseveralresearchtopicslinkedtoprojectsintheautomotive,manufacturingandaerospaceindustries.HisresearchfindingshaveappearedinanumberofacademicjournalsinthefieldincludingJournalofPurchasingandSupplyManagement,IndustrialMarketingManagement,JournalofSupplyChainManagement:AnInternationalJournal,InternationalJournalofPhysicalDistributionandLogisticsManagement,InternationalJournalofProductionEconomics,JournalofBusinessandIndustrialMarketing,InternationalJournalofOperationsandProductionManagement.Heisamemberofseveralreviewandeditorialboards,highlightingtheeditorialrolefortheJournalofDefenseAnalyticsandLogisticsManagement.TimGruchmannisaProfessorofLogisticsandSupplyChainManagementatWestcoastUniversityofAppliedSciences,GermanyandamemberoftheWestcoastInstituteofHumanResources(WinHR).Hisresearchinterestsliewithinemployeeandcustomer-centredlogisticsandsustainablesupplychainmanagement.Hisresearchcontributionshavebeenpublishedininternational,peer-reviewedjournalssuchasInternationalJournalofLogisticsManagement,SupplyChainManagement:AnInternationalJournal,JournalofBusinessEconomics,InternationalJournalofProductionEconomicsandJournalofIndustrialEcology.ÁrniHalldórssonisProfessorinSupplyChainManagementatChalmersUniversityofTechnology,Sweden.Hisresearchinterestsconcernsupplychainmanagement,sustain-abledevelopment,andadvancingservicesupplychainsinvarioussectors.Keyfocusareasincludelogisticsservices(energyefficiency,development,serviceblueprinting);supplychaindesign;buyer-supplierrelationships;logisticsservicesforenhancedcircularity;end-usersinthesupplychain;supplychainresilience;researchmethodologyandtheorydevelopment.RobertHandfieldistheBankofAmericaUniversityDistinguishedProfessorofSupplyChainManagementatNorthCarolinaStateUniversity,USA,andDirectoroftheSupplyChainResourceCooperative(http://scm.ncsu.edu/).Handfieldisconsideredathoughtleaderinthefieldofsupplychainmanagement,andisanindustryexpertinthefieldofstrategicsourcing,supplymarketintelligence,andsupplierdevelopment.Hehasspokenonthesesubjectsacrosstheglobe,includinginChina,Azerbaijan,Turkey,LatinAmerica,India,Europe,Korea,JapanandCanada,inmultiplepresentationsandwebinars.Handfieldhaspublishedmorethan120peer-reviewedjournalarticlesandisregularlyquotedinglobalnewsmediasuchastheWallStreetJournal,Bloomberg,NPR,CNBC,theFinancialTimes,theSanFranciscoChronicleandCNN.Hehasrecentlypublishedarticlesontheshortageofpersonalprotectiveequipment(PPE)intheHarvardBusinessReviewandtheMilbankQuarterlyJournal.WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

11ContributorsxvChristineM.HarlandistheGianlucaSpinaChairofSupplyStrategyatthePolitecnicodiMilano,Italy.Herresearchinterestsareinpolicyandpracticeinprocurementincomplexcon-federalpublicsectorsupplynetworks,notablyhealthcare.Asco-founderoftheInternationalResearchStudyofPublicProcurement(IRSPP),Christinehasresearchedpublicprocure-ment’sroleinrespondingtoglobalcrises,stimulatinginnovation,deliveryofcommunitybenefits,andsmallandmedium-sizedenterprisedevelopment.ChristineisaformerEditorandcurrentAssociateEditoroftheJournalofPurchasingandSupplyManagement.Widelypublishedinbooksandjournals,sheisleadeditoroftheSAGEHandbookofStrategicSupplyManagement(2013),co-authoroftheworld’sleadingtextandcasebookinoperationsman-agement,andco-editorofatextonpublicprocurement.In2019ChristinewasawardedtheLifetimeAchievementAwardbytheInternationalPurchasingandSupplyEducationandResearchAssociation(IPSERA).Feigao(Kelly)HuangisaDoctoralstudentintheDepartmentofSupplyChainManagementattheUniversityofTennessee,Knoxville,USA.PriortojoiningthePhDProgramin2018,KellyworkedinWalmartStores(China)forseveralyears.KellyholdsaMasterofArtsdegreeinEnglishLanguageandLiteraturefromBeijingForeignStudiesUniversity,China,andaBachelorofArtsdegreeinEnglishfromXi’anUniversityofArchitectureandTechnology,China.Kelly’sresearchinterestsincludesustainablesupplychainmanagement,baseofthepyramid(BoP)supplychains,andsociallyusefulsupplychains.Yao‘Henry’Jin,PhDisanAssociateProfessorofSupplyChainManagementatRichardT.FarmerSchoolofBusinessatMiamiUniversity,USA.HereceivedhisDoctoraldegreefromtheSamM.WaltonCollegeofBusiness,UniversityofArkansas,USA.Drawingonhisretailindustryexperience,hismainresearchinterestfocusesonretailsupplychainandoperationsconcerningissuesrelatedtocollaborationanddemandplanning.HehaspublishedhisresearchinjournalssuchastheJournalofOperationsManagement,JournalofRetailingandJournalofBusinessLogistics,amongothers.Currently,heisworkingonprojectsregardingcounterfeitproducts,andservicefailuresinomni-channelretailing.ThomasE.Johnsen(MSc,Phd,HDR)isProfessorofPurchasingandSupplyManagementatAudenciaBusinessSchoolinFranceandVisitingProfessoratCopenhagenBusinessSchool,Denmark.PriortothishewasGianlucaSpinaProfessorofSupplyChainManagementatPolitecnicodiMilanoinItaly,andhehasalsoheldfull-timeorpart-timepositionsatRennesBusinessSchool(France),UniversityofBath(UK),JönköpingInternationalBusinessSchool(Sweden)andtheUniversityofSouthernDenmark.HeisAssociateEditoroftheJournalofPurchasingandSupplyManagement.Hisbook(withM.HowardandJ.Miemczyk)PurchasingandSupplyChainManagement:ASustainabilityPerspective,publishedbyRoutledge,isnowinitssecondedition.KatriKauppi(néeKarjalainen)isanAssociateProfessorofLogistics(tenured)atAaltoUniversitySchoolofBusinessinFinland.Prof.KauppigotherPhDfromHelsinkiSchoolofEconomics,Finlandin2009andhassincethenalsoworkedatManchesterBusinessSchoolandatNottinghamUniversityBusinessSchoolintheUK.Hermainresearchinterestsareinpurchasingorganizationalbehaviour,publicprocurement,buyer‒supplierrelationshipsandsocialsustainabilityinsupplychains.Inparticularmuchofherresearchworkdealswithorganizationaltheoryapplicationsinapurchasingorsupplychaincontext,mostnotablyusingeitherinstitutionaltheoryoragencytheory.ShehaspublishedinseveralleadingjournalsinWendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

12xviHandbookoftheoriesforpurchasing,supplychainandmanagementresearchthesupplychainmanagement,operationsmanagementandpublicadministrationareas.SheteachespurchasingandsupplychainmanagementrelatedtopicsatAaltoUniversitySchoolofBusiness.MahtabKouhizadehisanAssistantProfessorofSupplyChainManagementattheUniversityofRhodeIsland,USA.Herresearchfocusesontheapplicationsofblockchaintechnologyinsupplychainmanagementandsustainability.Shehasco-authoredabookchapteron‘GlobalPerspectivesonGreenBusinessAdministrationandSustainableSupplyChainManagement’,publishedbyIGIGlobal.SheisamemberoftheAcademyofManagement,theInstituteforOperationsResearchandtheManagementSciences,ProductionandOperationsManagementSociety,andDecisionSciencesInstitute.GyöngyiKovácsistheErkkoProfessorinHumanitarianLogistics,andtheSubjectHeadofSupplyChainManagementandSocialResponsibilityattheHankenSchoolofEconomics,Helsinki,Finland.SheisafoundingEditor-in-ChiefoftheJournalofHumanitarianLogisticsandSupplyChainManagement(JHLSCM)andisontheeditorialboardofseveralotherjournals.ShewasthefirstDirectoroftheHumanitarianLogisticsandSupplyChainResearchInstitute(HUMLOGInstitute)andhaspublishedextensivelyintheareasofhumanitarianlogisticsandsustainablesupplychainmanagement.ShewasawardedHumanitarianLogisticsResearcheroftheYear2020bytheAmericanLogisticsAidNetworkALAN.Currently,sheisleadingaHorizon2020(EuropeanUnion)COVID-19projectcalled‘HERoS’(HealthEmergencyResponseinInterconnectedSystems).AnnaLandisanAssistantProfessorofSupplyChainManagementatBoiseStateUniversity,USA.Sheteachesvariousoperationsandsupplychainmanagementcoursesattheundergrad-uateandMBAlevels.Herresearchaddressessustainabilitytopicsinoperations,supplychainandlogisticsmanagement,suchassupplierrelationshipmanagementindevelopingcountriesanddataanalyticsinrailtransportationtoimprovefinancialandenvironmentalperformance.Shehaspublishedconceptual,empiricalandpedagogicalarticlesintheInternationalJournalofProductionEconomics,SupplyChainManagement:AnInternationalJournal,InternationalJournalofOperationsandProductionManagement,JournalofCleanerProduction,IEEEEngineeringManagementReviewandOperationsManagementEducationReview.TeresaM.McCarthy-ByrneisanAssociateProfessorofMarketingandGlobalSupplyChainManagement(GSCM)atBryantUniversity,USA.Shehasover30yearsofsupplychain-relatedexperienceinbothindustryandacademia.Hercurrentresearchtopicsincludesupplychainriskmanagementandomnichannelfulfillment.DrMcCarthy-Byrnehaspub-lishedinInternationalJournalofPhysicalDistributionandLogisticsManagement,JournalofForecasting,TransportationJournal,JournalofBusinessForecasting,Foresight:TheJournalofFutureStudies,StrategicThinkingandPolicy,IndustrialMarketingManagement,DecisionSciencesJournalofInnovativeEducation,andJournalofMarketingEducation.DrMcCarthy-ByrnereceivedherPhDfromtheUniversityofTennessee,USA;herMSfromtheUniversityofRhodeIsland,USA;andherBSfromtheUniversityofMassachusettsatAmherst,USA.MarkPagellholdsaChairinGlobalLeadershipandisaProfessorofSustainableSupplyChainManagementatUniversityCollegeDublin,Ireland.HeisalsotheCo-Editor-in-ChiefoftheJournalofSupplyChainManagementandanAdjunctScientistattheInstituteforWorkWendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

13ContributorsxviiandHealthinToronto,Canada.DrPagell’sresearchontopicssuchassustainablesupplychainmanagementandhumanresourceissues,includingemployeesafetyinoperationalenvi-ronments,hasappearedinanumberofpremieroutletsincludingtheJournalofSupplyChainManagement,ManagementScience,JournalofOperationsManagement,ProductionandOperationsManagement,SloanManagementReviewandJournalofManagementStudies.DrPagell’sresearchhaswonanumberofawardsincludingtwoEmeraldCitationofExcellenceAwards(2013and2016),bestpaperspublishedintheJournalofSupplyChainManagement(2009)andJournalofOperationsManagement(2002and2019).WilliamPasmoreisaProfessorofPracticeatTeachersCollege,ColumbiaUniversity,USA.Heistheauthororeditorof30booksandnumerousarticlesdealingwiththetopicsoforganizationdesignandchangeleadership.Healsoheadshisownconsultingfirm,AdvancedChange.PeterM.RalstonisanAssistantProfessorofSupplyChainManagementatIowaStateUniversity,USA.Hisresearchcentresaroundtwogeneralareas.Oneissupplychainrela-tionships,withsupplychaincollaborationandsupplychainintegrationbeingprimeinterests.Theotherresearchareafocusesonfactormarketrivalryandhowfirmscompeteforneededsupply-sideresources.HespentnearlysixyearsinthecosmeticsandofficeproductsindustriesasacustomerspecialistanddistributioncentremanagerbeforepursuingandearninghisPhD.JensK.RoehrichisaProfessorofSupplyChainInnovationattheUniversityofBath,SchoolofManagement,UK.Priortothis,JenswasaresearcheratImperialCollegeLondon,UK.Significantstrandsofhisresearchagendaexplorethelong-terminterplayofcontractualandrelationalgovernancemechanismsincomplexprojects,andthemanagementofpublic‒privaterelationships.Morerecently,hehasstartedtoexplorethedarksideofrelationshipsbyinves-tigatingcoordinationfailures,conflictsandtrustbreaches.Hisresearchismultidisciplinary,drawingtheoreticalinspirationandmethodologicalsupportfromoperationsmanagement,economics,strategy,innovationmanagement,healthcareandpolicymanagement.HisresearchhasbeenpublishedinjournalssuchasJournalofManagementStudies,InternationalJournalofOperationsandProductionManagement,BritishJournalofManagement,SocialScienceandMedicine,JournalofPurchasingandSupplyManagement,andIndustrialMarketingManagement.EugeniaRoscaisanAssistantProfessorofSupplyChainManagementattheTilburgSchoolofEconomicsandManagement,TilburgUniversity,theNetherlands.Hermainresearchinter-estsrevolvearoundsustainabilityandsocialissuesinvaluechainsinthecontextofsubsistencemarkets.Inparticular,sheisinterestedinvaluechaininclusionoflow-incomeproducersandconsumersindevelopingeconomies,andthemechanismsemployedbysocialenterprisesandmultinationalcompaniestoenablesocialimpact.Shehaspublishedarticlesinseveralpeer-reviewedacademicjournalssuchastheInternationalJournalofPhysicalDistributionandLogisticsManagement,JournalofCleanerProduction,InternationalBusinessReviewandTechnologicalForecastingandSocialChange.JosephSarkisisaProfessorofManagementwithintheBusinessSchoolatWorcesterPolytechnicInstitute,USA.HeearnedhisPhDfromtheUniversityofBuffalo,USA.Hisresearchandteachinginterestsincludesustainability,technology,operationsandsupplychainmanagement.Hehasauthoredover500publications.HeisanAT&TIndustrialEcologyWendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

14xviiiHandbookoftheoriesforpurchasing,supplychainandmanagementresearchFellowandhasservedasaresearchscholaratuniversitiesthroughouttheworld.HeisacoordinatoroftheFutureEarthCircularEconomyWorkingGroup;andalsoaninternationalprogrammecoordinatorfortheGreeningofIndustryNetwork.HeiscurrentlyEditor-in-ChiefofIEEEEngineeringManagementReviewandAssociateEditorforthejournalResourcesConservationandRecyclingonthetopicofsustainablesupplychains.Heholdseditorialpositionsforanumberofotherleadingjournals.Hehaseditedandpublishedbooksongreensupplychainmanagementandgreenermanufacturinganddesign.habilHolgerSchielehasheldthechairofTechnologyManagement–InnovationofPurchasing,ProductionandLogisticsattheUniversityofTwenteinEnschede(Netherlands)since2009.PriortothishewasatLeibnizUniversitätHannover,Germany,andJacobsUniversityinBremen,Germany,afterworkingfortenyearsinindustryandinconsulting(PricewaterhouseCoopers,andwiththepurchasingconsultancyh&z).HegainedhisPhDfromLeibnizUniversitätHannoverwithaworkonclustertheoryandstrategicmanagement.Hiscurrentresearchfocusesoninnovationfromandwithsuppliers,suppliersatisfactionandpreferredcustomership,andIndustry4.0(I4.0)inpurchasing.Heregularlyscoresamongthemostpublishedscholarsinthefield,withpapersappearinginpurchasingjournals(JournalofPurchasingandSupplyManagement,JournalofSupplyChainManagement,IndustrialMarketingManagement,amongothers)andininnovationmanagementjournals(ResearchPolicy,R&DManagement,amongothers).TobiasSchoenherristheHoagland-MetzlerEndowedProfessorofPurchasingandSupplyManagementintheEliBroadCollegeofBusinessatMichiganStateUniversity,USA.HeholdsaPhDinOperationsManagementandDecisionSciencesfromIndianaUniversity,Bloomington,USA.Hisresearchfocusesonbuyer‒supplierrelationships,especiallyattheintersectionofthethemesofinnovation,technology,sustainabilityandglobalization.Hehaspublishedmorethan75journalarticlesinoutletssuchasManagementScience,JournalofOperationsManagement,ProductionandOperationsManagement,DecisionSciences,JournalofMarketingResearchandJournalofSupplyChainManagement.HeisCo-Editor-in-ChiefoftheInternationalJournalofOperationsandProductionManagementandanAssociateEditorfortheJournalofOperationsManagement,DecisionSciencesandtheJournalofPurchasingandSupplyManagement.MatthewA.SchwietermanisanAssistantProfessorofSupplyChainManagementatMiamiUniversity,USA.HecompletedhisPhDinBusinessAdministrationatOhioStateUniversity,USA.PriortoJoiningMiamiUniversity,hewasanAssistantProfessorofSupplyChainManagementatMichiganStateUniversity,USA.Hisprimaryresearchinterestsincludecustomerandsupplierportfoliostructure,andfirmgrowthanddiversification.Priortohisacademiccareer,heheldvariouspositionswithinlogisticsandoperationsmanagement.ErikSiemsisaResearchAssistantattheChairofSupplyChainManagementattheUniversityofKassel,Germany.Hisinterestsandresearchareasfocusspecificallyonbusinessstrategy,operationsresearchandsustainablesupplychainmanagement.WendyL.Tate,PhD(ArizonaStateUniversity,USA,2006)istheTaylorProfessorofBusinessandtheRayandJoanMyattFacultyResearchFellowattheUniversityofTennessee,HaslamCollegeofBusiness,DepartmentofSupplyChainManagement,USA.Sheteachesstrategicsourcingtoundergraduate,MBA,ExecutiveandPhDstudents.Herresearchinter-WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

15Contributorsxixestsrevolvearoundstrategicsourcingandincludethefinancialimpactsofdecisionsonthesupplychain,sustainablesupplychaindesign,andthesupplierlocationdecision.Sheisco-Editor-in-ChiefoftheJournalofPurchasingandSupplyManagement.ShehaspublishedintheJournalofOperationsManagement,JournalofSupplyChainManagement,JournalofPurchasingandSupplyManagement,JournalofBusinessLogistics,andotheracademicoutlets.AnuragTewariisaLecturerofLogistics,ProcurementandSupplyChainManagementatCranfieldUniversity,UK.HeearnedhisMScinsupplychain,MasterofResearchinman-agementandaPhDincomplexsystem’sresearchfromCranfieldUniversity.PriortojoiningCranfield,heearnedaBachelorofTechnologyinChemicalEngineeringfromSirHarcourtButlerTechnologicalInstitute,Kanpur,India,andhasextensiveindustrialexperience.Hiscurrentresearchinterestliesinthestudyandmodellingofsupplychaininformationflowsandmachinelearning-drivensupplychainanalytics.Hisexpertiseisinmodelling,visualizing,andinterpretinglargecomplexsystemsandnetworks.VirpiTurkulainenworksatHaaga-HeliaUniversityofAppliedSciencesinFinland.InthepastshehasworkedattheUniversityCollegeDublin,SchoolofBusinessinIreland,andAaltoUniversity,SchoolofScienceinFinland,amongothers.Herresearchinterestsareinareasoforganizationdesign,organizationalintegration,managementandorganizationofproject-basedoperations,andoperationsstrategy.DrTurkulainenhaspublishedinJournalofOperationsManagement,JournalofSupplyChainManagement,InternationalJournalofOperationsandProductionManagement,JournalofPurchasingandSupplyManagementandProjectManagementJournal,amongothers.DiegoVegaisanAssistantProfessorofSupplyChainManagement,SocialResponsibilityandHumanitarianLogisticsatHankenSchoolofEconomics,Finland;andDirectoroftheHumanitarianLogisticsandSupplyChainResearch(HUMLOG)Institute,Finland.In2013,DiegocompletedhisDoctoralstudiesatAix-MarseilleUniversity,France,incollaborationwithMédecinsSansFrontières(MSF)France;hehasovertenyearsofexperienceinconduct-ingresearchinthehumanitariancontext.Hiscurrentresearchinterestsincludelogisticsser-vicesinhumanitariansupplychains,shelterandtemporarysettlements,strategicmanagementandqualitativemethods.CarlMarcusWallenburgisaProfessorofSupplyChainManagementandholdstheChairofLogisticsandServiceManagementofWHU–OttoBeisheimSchoolofManagement,Germany.HeistheEuropeanEditoroftheJournalofBusinessLogisticsandCo-ChairoftheCouncilofSupplyChainManagementProfessionals(CSCMP)EuropeanResearchSeminaronLogisticsandSCM.Hisresearchfocusesononlineandomnichannelretailing,logisticsservicesandthird-partylogistics(3PL),differentsupplychainmatters(forexample,riskmanagementandlogisticsinnovation),andhowtheyareinfluencedbyverticalandhorizontalrelationships.Hisworkhasappearedinvariousjournals,includingEuropeanJournalofMarketing,InternationalJournalofOperationsandProductionManagement,InternationalJournalofPhysicalDistributionandLogisticsManagement,JournalofBusinessLogistics,JournalofPurchasingandSupplyManagement,JournalofSupplyChainManagement,JournalofServiceManagementandTransportationJournal.WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

16xxHandbookoftheoriesforpurchasing,supplychainandmanagementresearchAndreasWielandisanAssociateProfessorofSupplyChainManagementatCopenhagenBusinessSchool,Denmark.Hiscurrentresearchreinterpretsglobalsupplychainsassocial-ecologicalsystems.HisarticleshaveappearedinjournalssuchastheInternationalJournalofLogisticsManagement,InternationalJournalofPhysicalDistributionandLogisticsManagement,JournalofBusinessLogistics,JournalofInternationalManagement,JournalofSupplyChainManagementandSupplyChainManagement:AnInternationalJournal.HeistheEuropeanCo-EditoroftheJournalofBusinessLogisticsandCo-ChairoftheCouncilofSupplyChainManagementProfessionals(CSCMP)EuropeanResearchSeminar.Heisalsotheeditoroftheblogscmresearch.org.ProfessorRichardWildingisFullProfessorandChairinSupplyChainStrategyattheCentreforLogistics,ProcurementandSupplyChainManagement,CranfieldSchoolofManagementUK.RichardworkswithEuropeanandinternationalcompaniesonlogisticsandsupplychainprojectsinallsectorsincludingpharmaceutical,retail,automotive,hightechnology,food,drinkandprofessionalservicestonameafew.HewasappointedaNationalTeachingFellowin2019andisrecognizedbytheBBCandDHLasoneof‘theworld’sforemostsupplychainexperts’.Heisachampionforencouragingevidence-baseddecisionmakingwithinthelogis-ticsindustry,andisanadvocateforensuringknowledgecancreateactionandimpactwithintheorganizationsheworkswith.HisDoctoralresearchinthe1990spioneeredtheapplicationofchaostheorytosupplychainmanagement.ZhaohuiWu,PhD(ArizonaStateUniversity,USA)isaProfessorofSupplyChainManagementatOregonStateUniversity,USA;andanHonoraryProfessorattheUniversityofExeter,UK.HehasreceivedmultipleresearchgrantsfromtheNationalScienceFoundation(US),AgricultureoftheMiddle(US)andtheLeverhulmeTrustVisitingProfessorship(UK).Heiscurrentlyteachingandconductingresearchonsupplynetworks,alternativefoodsystems,agriculturalco-operatives,andtheinformaleconomyconcerningmigrantworkersandrefugees.FinnWynstraisaProfessorofPurchasingandSupplyManagementatRotterdamSchoolofManagement,ErasmusUniversity(Netherlands).HeconductedhisPhDtrainingatEindhovenUniversityofTechnology(Netherlands)andUppsalaUniversity(Sweden),wherehehadbeenanexchangestudentearlier(tostudytheindustrialnetworkapproach,INA).Hisresearchfocusesonpurchasingandsupplymanagement,inparticulartheinterplayofsupplyandinnovationprocessesandbuyer‒supplierrelationsinbusinessservicecontexts.Hisworkhasappearedinjournalsspanningdifferentdisciplines,includingJournalofOperationsManagement,InternationalJournalofResearchinMarketing,JournalofProductInnovationManagementandAccounting,OrganizationsandSociety.GeorgeA.Zsidisin,PhD(ArizonaStateUniversity,USA),CPSM,CPM.,istheJohnW.BarrigerIIIProfessorandDirectoroftheSupplyChainRiskandResilienceResearch(SCR3)InstituteattheUniversityofMissouri–StLouis,USA.ProfessorZsidisin’sresearchfocusesonhowfirmsassessandmanageriskassociatedwithsupplydisruptionsandpricevolatilityintheirsupplychains.Hisresearchhasbeenfundedbyand/orreceivedawardsfromorgan-izationsincludingtheAT&TFoundation,IBM,InstituteforSupplyManagement,DeutschePost,theCouncilofSupplyChainManagementProfessionalsandtheDecisionSciencesInstitute.Further,heisoneofthefoundingmembersoftheInternationalSupplyChainRiskManagement(ISCRiM)network;teachesandleadsdiscussionswithvariousexecutiveeduca-WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

17ContributorsxxitionprogrammesandnumerouscompaniesintheUSAandEurope;isCo-EditorEmeritusoftheJournalofPurchasingandSupplyManagementandservesontheeditorialreviewboardsofseveralacademicsupplychainjournals.WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

18WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:09:57AMviaColumbiaUniversityLibrary

191.IntroductiontotheHandbookofTheoriesforPurchasing,SupplyChainandManagementResearchWendyL.Tate,LisaM.EllramandLydiaBalsINTRODUCTIONTherehasbeenastrongcallfortheoryapplicationandtheorydevelopmentinthepurchasingandsupplymanagement(PSM)andsupplychainmanagement(SCM)literature(Carter,2011;vanWeeleandvanRaij,2014).However,itisnotalwayscleartoresearcherswhichtheoriesareappropriatetoapply,andhowtobestapplysuchtheories,orwhenitisadvisabletobuildtheory(SmithandHitt,2007).ThegoalofthiseditedbookistopresentsomebackgroundonthedevelopmentandapplicationoftheoryinPSMandSCMtodate,andprovideamappingofmajortypesoftheoriestogiveguidanceonwhichtheorymightbeappropriatetoapply,andwhennewtheorydevelopmentisneeded.MostofthesetheoriesthatareincorporatedinthisHandbookarealsorelevanttomanagementresearch,andsomedevelopedprimarilyoutofthestrategicmanagementarea.Theaspirationoftheeditedbookwastocompileavaluableoverviewoftheoriesthatcanserveasthefoundationformanagementresearch.Thiscollectionofchaptersprovideshigh-quality,state-of-the-artoverviewsoftheoriesrelevanttoPSM,SCMandothermanage-mentfields,andcreatesastandardreferenceforresearchersandstudentsinthisandrelatedfields.SeniorscholarsinPSMandSCMwerecontactedtocontributechaptersonkeytheoriesandtheorydevelopmentinthefield.ExpertsontheorieswithinandoutsidethefieldofSCM/PSMwerealsocontactedandaskedtocontributeandreviewchapters.Thechaptersconsistentlyprovideunderstandingoftheassumptionsofagiventheoryorfamilyoftheories(forexample,theresource-basedviewasafamilyoftheories),includingappropriatelevelsofanalysis,unitofanalysis,variablesandrelationshipsaswellaskeyfindings.Eachchapterincludesreferencestoselectedseminalliteratureapplyingthattheory,andapplicationsofthetheoryinthePSM,SCMandrelatedfieldssuchasmanagementandmarketingliterature.TheideatocreateabookontheoriesaroseoutofaseriesofmeetingsthatbeganwithconversationsamongscholarsgloballyregardingwhytherangeoftopicsseeminglyunrelatedtoPSMwerebeingpresented,applyinganincreasingarrayoftheories.Theterm‘identitycrisis’wasusedinnumerousconversationsassomebegantoquestiontheidentityofourfield.Toexplorethisfurther,agroupofPSMscholarsmetintheautumnof2017todiscussanddebatetheevolutionofPSM’sidentityinresearchandpractice.ThisincludedarangeofPSMacademicsprimarilyfromWesternEuropeandtheUnitedStates;somemorepractice-basedandapplied,otherspushingforPSMtobecomeadistinctacademicdiscipline.ThediversityofviewspresentedduringthemeetingsparkedenoughinterestbytheparticipantsthatameetinginvolvingmorePSMscholarswasheldthefollowingautumn(Ellrametal.,2020).1WendyL.Tate,LisaM.Ellram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:10:00AMviaColumbiaUniversityLibrary

202Handbookoftheoriesforpurchasing,supplychainandmanagementresearchItwasinterestingthatamongthisrelativelysmallgroupofestablishedPSMscholars,includingnumerouspastandcurrentjournaleditors,thereweresomanydifferingviewsonPSMasanappliedfieldofstudyversusanacademicdiscipline,aswellasdifferencesinwhatthenatureofresearchandidentitybuildingshouldbeinthefuture.AlmostanentiredaywasspentdebatinganddiscussingtheroleoftheoryinPSM,whetherPSMneededitsowntheory,andwhatwouldconstitutegoodPSMtheory.Thisissuewasnotsettled,butparticipantsgainedinsightfromthevarietyofpositionsdiscussed.OnethingthatwasagreeduponwastheimportanceofgroundingPSMresearchintheory;eitherinexistingtheory,orbuildingdiscipline-specifictheory.Theoryisimportanttopresentacommonframeworkandbodyofknowledgeforadiscipline.Itcreatesanunderstandingofthephenomenonbeingstudied,andacommonlanguageandunderstandingofadiscipline.Itcanhelptostrengthenadisciplinefrombothanacademicandapracticalperspective.Itfacil-itatesthesystematicgeneration,accumulation,extensionanddisseminationofknowledge.Itcreatesacommonlanguageforadiscipline.ThosewhowerepresentatthemeetingsofPSMscholarsagreedthattheoryisoftenimproperlyappliedandmisunderstood,andthatitissometimesdifficulttodeterminewhetheratheoryisappropriateinagivensituation.Ifresearchershadastartingpointinunderstandingtheassumptions,levelsandunitsofanalysisandkeyvariablesconsideredinatheory,theycouldbetterdecidewhichtheoriesaremostappropriateandinvestigatethosetheoriesfurther.Outofthisdiscussion,theideaforthisbookwasborn.Wesawtheissueoftheorybuildingandapplicationasrelevanttoallareasofsupplychainmanagement:purchasing,logistics,operations,andthesupplychainprocessesandinterfaces.Webelievethatthisbookisalsorel-evanttootherdisciplinessuchasmanagementandmarketing,whichoftenstudysimilarissuesfromdifferentperspectives.Theearlychapters(Chapters2to6)focusonthefundamentalsoftheorybuildingandtheoryapplication.Thefollowingchaptersprovideanoverviewofspecifictheories(Chapters7to33),whilethefinalchapterlooksatpotentialtheoriesforthesustain-abilityresearcharea.Afterathree-yearjourneyfromthefirstcallforcontributions,weareconfidentthatwiththehelpofagreatadvisoryboardandafantasticgroupofchapterauthors,wearedeliveringahigh-qualityguidebookthatwillbeusedbyPSMandSCMscholars,aswellasinotherdisciplines.THEORIESCOVEREDTheoriginalscopeofwhichtheoriestoincludeinthiscollectionreliedonsystematicliteraturereviewsthathadbeenconducted,forexample,GlockandHochrein(2011),Spinaetal.(2013),Spinaetal.(2016),Johnsenetal.(2017)andGiuniperoetal.(2019).Theoriesintersectingbetweenthosereviews,suchastheresource-basedview,wereincludedintheinitialscope.Inaddition,well-recognizedtheoriesonlycoveredinoneoftheliteraturereviews,suchastheIndustrialMarketingandPurchasing(IMP)Groupperspective,wereinitiallyincludedonthelonglist.Duringtheprocessofcontactingpotentialauthors,andfromtheadvisoryboard,therewereadditionaltheorysuggestionssuchassocio-technicaltheoryandpanarchytheory.CreatingabroadscopewasseenasparticularlyfruitfulforthisendeavourofcreatingaHandbook,astheintuitionwasbothtoencouragebetterunderstandingandfurtherappli-cationofestablishedtheories,aswellastobringadditionaltheoriesintothefieldofvision.WendyL.Tate,LisaM.Ellram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:10:00AMviaColumbiaUniversityLibrary

21Introduction3Moreover,someoverarchingtopicsofinterestemerged,suchastheorydevelopmentingeneral,whichledtothecreationoffivemoregeneralchapters.BeginningwithChapter7,eachchaptercoversaspecifictheory.Tofulfillthegoaloftheeditedbooktoprovideastandardresourceforresearchers,eachchapterrelatedtotheoriescoversthefollowingbasicelements:●abriefhistoryofhowthetheorydeveloped;●(meta)unitofanalysis,1aswellasexamplesofappliedunitsofanalysis;forexample,theresourcesandprocessesengagedinproducinggoodsandservices,orthesocialexchangesinadyadicrelationship;●level(s)ofanalysisappropriateforthattheory:individuallevel,functionallevel,organi-zationlevel,dyadiclevel,supplychainlevel,supplynetworklevel,supplysystemslevel.FollowingWacker(1998,2008)fourelementsoftheorywerealsoincorporated:(1)defini-tionsoftermsorconstructs;(2)identificationofthedomain(s)wherethetheoryapplies;(3)descriptionofkeyset(s)ofrelationshipsofconstructs;and(4)specificpredictions(factualclaims).Eachtheorychapteralsocovershowthetheoryhasbeenappliedinthefollowingdisci-plines,ifapplicable:purchasingandsupplymanagement;anotheraspectofsupplychainmanagement,includinglogistics,operationsorotheraspectsofsupplychainmanagement;managementifrelevant;marketingifrelevant.Finally,eachofthechapterslistsseminalorimportantpapersandbooks.Thebookcloseswithachapterfocusedonsustainability,discuss-inganumberoftheoriestospurfutureresearchinthisarea;seeTable1.1foranoverview.Somechaptersevolvedinunexpectedways.Forexample,Chapter26wasoriginallyaboutchaostheory.Astheauthorswrotethatchapter,andduringtheevolutionofthatwork,itulti-matelyconvergedtowardscomplexadaptivesystems,whicharealsocoveredinChapter22.APPLICATIONSOFTHISHANDBOOKThisHandbookisnotmeanttobetheprimaryreferenceforeachofthetheories,sinceitisalwaysgoodpracticetogobacktotheoriginalsources.However,thisisanexcellentreferenceforfutureresearchideasintheindividualtheorychapters,andforthecontentofthemoregeneralarticles(forexample,onmid-rangetheory)intheHandbook.Thisshouldbea‘go-to’resource,forthosewritingtheses(bachelor,master,doctoral),andforthepostdoctoralleveltobroadenscopebeyond‘favourite’theories,andtounderstandappropriatetheoriesfortheirresearch.TheHandbookcanhelptoexpandknowledgeofthefieldtobettercomprehendotherpeople’sresearch,andunderstandhowvarioustheoriesandtheapplicationofthosetheoriesisevolving,includingmid-rangetheorybuilding.Itcanprovideinsightintowhentheorybuild-ingisappropriate,andanintroductiontosomemethodsoftheorybuilding.Fromaneducationalstandpoint,thisisanexcellentadditiontoagraduateseminarwhereitcanbeusedtodiscusstheorieswithrespecttostudentprojects,publishedresearchorcurrentresearchprojects.TheHandbookcanhelptoidentifykeyworkinthefieldthatusesaparticu-lartheory,andtodiscussdifferentapplications.Itprovidesdifferentlensesthatmightbeusedtoviewnewandinterestingproblems.Foreditors,associateeditorsandreviewerswhomaynotbewellversedinaparticulartheory,theHandbookcanbeusedtovalidatethelevelandunitofanalysisandtheappropriatetenetsofthetheories.WendyL.Tate,LisaM.Ellram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:10:00AMviaColumbiaUniversityLibrary

224Handbookoftheoriesforpurchasing,supplychainandmanagementresearchCreatenewtheoreticalpropositionsthatmakeinterestingandimportantcontributionstotheextanttheory.Melddisciplinewithimaginationtoenhanceandbuildpurchasingandsupplymanagementtheory.Utilizenewsourcesofdataandanalyticalapproachesfortheorydevelopmentincludingdarkdata,datamining,datavisualization,ethnography,datavirtualization,‘live’bigdata,meta-analysis,predictiveanalytics,operatingandsensingdata,andthickdata.UseattributiontheorytounderstandhowmanagersinterpretPSMoutcomes.Useofreverseauctionsinthesourcingcycleoffermultipleopportunitiesforresearcherstoapplyauctiontheory.Increaseusageofinformationprocessingtheory(IPT)alongwiththegrowthofartificialintelligence,machinelearningandroboticsinPSM.UtilizeinstitutionaltheorytoinformPSMresearchexploringboundedrationalityandtimeconstraintsleadingtosolutionswherenoefficiencygainshavebeenrealized.Takeamulti-leveltheoreticalperspectivetoexplorehowaPSMparticipant,suchasabuyerorsupplier,decisionsandbehaviourfosterorganizationallearning.IntegratetheconceptofpowerwithincomplexdynamicstoincreasetheutilityofstudiesofpowerinPSMtobetheoreticallymeaningfulandusefulinpractice.StudyrelationalgovernanceinthePSMcontext.Useresourceorchestrationtheorytohighlighttheimportanceofsupplymanagementactionsfortheorganizationtorealizethefullvalueofitsresources.ApplysocialnetworktheoryinPSMtoinvestigatehowbuyer‒supplierfirmsinteractwitheachother,describethemanyinformalconnectionsthattietheirexecutivestogether,aswellasassociationsandconnectionsbetweenindividualemployeesatpartnerfirms.Considernovel(atleasttoPSCM)theoreticalapproachestoexploringandunderstandingkeybusinessandsocietalchallenges.Elaborate,testanddeveloptheory.PerformacomprehensiveliteraturereviewtopopulateagreaterlistofMRTinPSMtocomplementtheexamplespresented.ConceptualizetherelationshipbetweenengagedscholarshipandMRTisencouraged.Suggestionsforfutureresearch●●●●●●●●●●●●●●●●FutureresearchbychapterChaptertitleFoundationsoftheoryDevelopingpurchasingandsupplymanagementtheoryTheoriesrelevanttopurchasingandsupplymanagementresearch:statusquoandfuturesuggestionsSystemslevelsinpurchasingandsupplychainmanagement(PSCM)research:exploringestablishedandnoveltheoriestoaddressPSCMproblemsandchallengesEnhancingtheorizinginpurchasingandsupplymanagementthroughmiddle-rangetheoriesTable1.1Chapter#Chapter2Chapter3Chapter4Chapter5Chapter6WendyL.Tate,LisaM.Ellram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:10:00AMviaColumbiaUniversityLibrary

23Introduction5Combinethefrequencyoftransactionswithincreasinguncertaintyandmeasurementproblemsanddeterminehowitinfluencesthemakeversusbuydecision,oreventhelocationdecision.Understandtheroleofopportunisminmarketversushierarchydecisions.Determinetheinfluenceofbigdataandblockchainontransactioncostswithincreasedinformationavailabilityandtransparency.Explorethestrategiccapabilitiesneededtoenablefirmstosucceedinnewcontextssuchasbaseofthepyramid(BoP)marketswhicharecharacterizedbyinstitutionalvoids.Identifynaturalresource-basedview(NRBV)contingencieswhichaffecttheenvironmental‒financialperformancerelationship.Extendthescopeinthesocialresource-basedview(SRBV)farbeyond‘typical’businessstakeholderstoincludenon-governmentalorganizations(NGOs),butalsolocalcommunitiesandthenaturalenvironment.Explorethenecessaryandsufficientconditionsforachievingtriplebottomline(TBL)value,inparticulartheroleofsocialcapabilitiesandwhethercapabilitiesfromallviewsareneededtocreateintegratedTBLvalue.Understandtheinterrelationsbetweentheeconomic,environmentalandsocialperformanceoutcomesespeciallyinthecontextofabroadstakeholdernetwork.Build,recombineandintegrateknowledgeincomplexsettings(comparedtothestaticsupplychain).Financialperformanceneedstobefurtherexploredandtested.Examinewhenandhoworganizationallearningspursincrementalinnovationinadoptingbestpracticesofcompetitorsversusmajorinnovationthatdisruptsthestatusquoandsetsanewbenchmarkfortheindustry.Understandtheexternalfactorsthatmoderateormediatetherelationshipsamongthekeyvariablesofresource-advantage(R-A)theory.Examinenon-resourcesandcontra-resourcestoprovideinsightintothedynamicnatureofcompetition.DeterminewhetherR-Atheoryprovidesaframeworkforunderstandingsuperiorperformanceinthecompetitionforsuppliers.Integrateresourcedependencetheory(RDT)andothertheoreticallensestoinvestigateorganizationalinterdependencies.Exploreupdatedmechanismstomanagedependenciesandorganizationalpowerthatwouldbemoretailoredtodealwithrecentchallengesofanextremelyuncertainenvironment.InvestigatetheroleofintegratedandinterorganizationaltechnologiessuchasthosefromIndustry4.0andotherdigitalizationtechnologies.Understandhoworganizationsmanagetheirecosystemservicesandenvironmentalrents.Explorethewhy,whenandhowquestionsrelatedtomanagers’influenceonthedevelopmentoftruecorecompetencies.Providemorenuancedinsightintohowspecificmanagerialskillsandorganizationroutinesaffectstructuring,bundlingandleveragingresources.Suggestionsforfutureresearch●●●●●●●●●●●●●●●●●●●●ChaptertitleTransactioncosteconomicsResource-basedviewTheknowledge-basedviewResource-advantagetheoryResourceandnaturalresourcedependencetheoriesinsupplychainsResourceorchestration:managers’roleindevelopinganddeployingresourcestocreatedistinctiveadvantageChapter#Chapter7Chapter8Chapter9Chapter10Chapter11Chapter12WendyL.Tate,LisaM.Ellram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:10:00AMviaColumbiaUniversityLibrary

246Handbookoftheoriesforpurchasing,supplychainandmanagementresearch-Applyagencytheorytocontinueextendingbeyondthedyadsofbuyerandsupplierfirms.Studytheintersectionofartificialintelligence,andpurchasingbehaviourinthepresenceof‘smart’machines.Researchthecompetitivedynamicsbetweendifferent(levelsof)actorsinthesupplychain(i.e.,peoplecompetingwithmachines).Considerthestructureofcompetitivedynamicsbetweensmartmachines.Studytheimplicationsofaparadoxicalresponsetothecontradictoryandcompetingdemandsofsocial,environmentalandeconomicstakeholdersinvarioustiersofthesupplychain.Explorehowpowerregimesinterplaywithparadoxicalthinkingwhencreatingsystem-widechanges.Integrateandleverageresearchfrombehaviouraloperationsmanagementwithpsychological,sociologicalandorganizationalparadoxtostudythemicro-foundationsoftheparadoxicalmindset/cognitioninthesupplychain.Engageintheory-basedempiricalresearchtodevelopelaboratedandmoredetailedunderstandingofavarietyofmanagerialpracticesinPSMorothertopicareas.Engageinanin-depthconversationofconceptualizingandempiricallyassessingeffectivenessinthatspecificPSMsetting.Considerdifferentformsoffit.Researchinternaldynamicsthatrequirepurchasingtomediatetheinternalrelationshipswithstakeholdersandexternalrelationshipswithsellers.Mappingandunderstandtherelativeformsofvalueamongmultipleengagedparties.Viewglobalbuyer‒sellerrelationships,espousingaviewthatinterpersonallinksbetweenfirmboundaryspannersandtheconcomitantlinksbetweenfirmsaremutuallyaffected.StudytheRVinnewlyemergingresearchcontextssuchasalliancesandpartnershipsinthecontextoforganizationsundergoingdigitaltransformations.Explorehowdigitaltechnologiesandnewsoftwaresolutionsreshapealliances,collaborationsandtheresultingrelationalrents.ApplytheRVtonewcontexts,namely,differenttypesofpartners(e.g.,NGOs,communityassociations)anddifferenttypesofrelationalrents(e.g.,socialimpact,environmentalvalue).Incorporatesustainabilityconsiderationswithnoveldefinitionandconceptualizationof‘relationalrents’beyondtraditionaleconomicmeasuresandmightunravelnewvariables.Exploretheinterrelationshipsbetweenthefoursourcesofrelationalrents.Developnetworkperspectivesandsuggestthatsocialnetworkconceptssuchasego-networkstructure,structuralholes,nodecentrality,networkcohesionandstructuralequivalencemightbeappliedtosupplychainmanagement.Understandnetworkstructureandstructuring,collaborationandnetworkgovernancegainsurgencyaswetacklenewchallenges.Suggestionsforfutureresearch●●●●●●●●●●●●●●●●●●●●ChaptertitleAgencytheoryinpurchasingandsupplymanagementPlayingtowin:applyinggametheorytopurchasingandsupplymanagementParadoxtheoryContingencytheoryandtheinformationprocessingviewSocialexchangetheoryTherelationalviewSupplynetworks:dyads,triadsandnetworksChapter#Chapter13Chapter14Chapter15Chapter16Chapter17Chapter18Chapter19WendyL.Tate,LisaM.Ellram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:10:00AMviaColumbiaUniversityLibrary

25Introduction7Combinestakeholdertheorywithothertheories.Usestakeholdertheorybeyondstakeholderclassificationinsupplychainmanagementtoembraceitsfullpotentialwhenanalysingglobalsupplychains.Lookattherelationshipsbetweenstakeholderstounderstandhowtheyinfluenceoneanother,andhowthatinfluencecontributestothedynamicsoftheirsalience.Includeuncertaintyasavariableinempiricalstudiesoninstitutionaltheory.Examinethethreepressuresandtheirlinkages.Understandtheroleofoperationsandsupplychainmanagement(OSCM)academicsasasourceofinstitutionalpressure.Partnerwithresearchersfromotherdisciplineswhohaveskillsrelatedtocomplexityscience.Developprocesstheoriesofsupplynetworkevolutionandadaptation.Builduponthetemporalnatureofresourcescarcity.Examinetherolefactormarketrivalry(FMR)playsinthedevelopmentofexclusivityagreementsbetweentradingpartners.Researchmergersandacquisitions(M&A)activities,andverticalandhorizontalintegrationinthesupplychaintobetterunderstandhowcompetitionforresourcesisexecutedusingM&Ainthesupplychain.UseFMRasaguidingtheorycouldextendintotheacademicareaoflegalscholarshipwhereantitrustlawsandthelitigatedcompetitionoverresourcesisdocumentedinlawsuits.DefendfirmsfromFMR,bymakingthemlessreliantonscarceresources.Examinetherolethatpreferredresourcesplayinthedevelopmentofrivalryandresourcecompetition.ConsiderwhichfactorscanbreakdownFMRandlessenthenegativeimpactofFMRactivities.DevelopthestrategiccompetitionaspectofFMR.Applytheindustrialnetworkperspectiveinpurchasingandsupplymanagement(PSM)researchrelatedtothestrategicroleofprocurement,supplierrelations,supplierbaseconfigurations,organizingprocurement,offshoringandinternationalsourcing,serviceprocurement,logisticsanddistributionchannels,collaborativeinnovation,publicsectorprocurementandresearchmethods.Shiftfromconceptualworktoempiricalstudiesinvestigatingthevalidityofthedynamiccapabilitiestheory,forexample,throughlongitudinalresearch.Investigatenetworklevelcascadingprocessesordiscussedsupplychainphenomenalinkedtoagentadaptation.Assesshowlocalinteractions,drivenbyasimplesetofrules,couldalternetworkproperties.Establishindirectcausalitieslinkedtosupplychainperformance.Expandtheunderstandingof‘entropy’inasupplynetworkcontext.Suggestionsforfutureresearch●●●●●●●●●●●●●●●●●●●●●●ChaptertitleStakeholdertheoryInstitutionaltheoryComplexadaptivesystemsFactormarketrivalry:ageneraltheoryofsupplychainmanagementTheindustrialnetworkapproachandpurchasingandsupplymanagementresearchDynamiccapabilitiestheorySupplychainsascomplexadaptivesystemsChapter#Chapter20Chapter21Chapter22Chapter23Chapter24Chapter25Chapter26WendyL.Tate,LisaM.Ellram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:10:00AMviaColumbiaUniversityLibrary

268Handbookoftheoriesforpurchasing,supplychainandmanagementresearch--toacontractualrelationship.exanteTestthegeneralizabilityofclusterrelevance.Researchtheintersectionofpurchasingandstrategicmanagementusingaclustertheorylens.Explorehowgovernmentsfostertheformationofregionalclusters.Investigatetheoreticallyandempiricallytheimplicationsofartificialintelligenceandmachinelearningadoptionbyfirmsandsupplychainsfororganizationallearninganddevelopingintelligentorganizations.Questionwhetherandhowsignalsarepassedandtreatedinasupplychain.Involveadditionalstakeholders(othersthanalreadyinvolvedinthesupplychain)andtheirpotentialinfluenceonsignalling.Expandthelevelofanalysisfromdyadictonetwork-likearrangements(supplychains),includingsignallinginbuyer‒buyerrelationshipsorinsupplier‒supplierrelationships.Understanddecisionsrelatedtomake-or-buy,globalversuslocalizedsourcing,supplierrelationshipmanagement,supplierinvolvement(alsoinnewproductdevelopment),supplierdevelopmentorstrategiccostmanagement,throughasignallingtheorylens.AssesstopicsthatoccurLookatenablersforsuccessfulpurchasingandsupplymanagementactivities.Questionhowtoensuretherealizationoftheseprioritiesbyalsousingsupplier-inducedsignals.Investigateeachoftheconstructsinmoredetailinthecontextofpurchasingandsupplymanagementinabusiness-to-business(B2B)environment.Assesstheselectionandmeasurementofpurchasingportfoliovariables.Understandtheimpactofthecontextwhichcompaniesworkin.Understandtheeffectivenessofpurchasingportfoliomodels.Performlongitudinalstudiestoprovideinformationaboutthelong-termimpactandusefulnessoftheportfolioapproach.Learnhowtominimizedesignfeaturesthatproduceless-than-optimalsupplychainoperations.Investigatedesignfeaturesthatallowmorereadyadaptationtoturbulentbusinessconditions.Researchthedesignofsupplychainsthatoperateunderconditionsofextremevolatilitytoaddtoourunderstandingofthefactorsthataremostimportanttoconsideraswewitnesstheever-increasingturbulenceandconnectednessofglobalbusinessconditions.Investigatethepossibilitiesofusingpanarchytheoryasameanstoaddresssustainabilityissues.ResearchhowtodeterminethenumberofscalesandlevelsnecessarywhenusingpanarchytheoryinSCM.ApplydifferentmethodologicalapproachesandtheiruseofpanarchytheoryinSCM.Suggestionsforfutureresearch●●●●●●●●●●●●●●●●●●●●●●ChaptertitleClustertheoryandpurchasingscience:geographicalproximityasastrategicdecisionfactorinsourcingOrganizationallearningtheoryanditsapplicationtopurchasingmanagementandsupplychainmanagementresearchSignallingtheoryPortfoliotheorySupplychainsasdynamicsocio-technicalsystemsPanarchytheoryChapter#Chapter27Chapter28Chapter29Chapter30Chapter31Chapter32WendyL.Tate,LisaM.Ellram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:10:00AMviaColumbiaUniversityLibrary

27Introduction9Mapthecyclestagesasonedimensioninpreferredcustomerresearch.Identifyopportunitiesforfutureresearchattheselevelsofanalysis:micro(individual),meso(buyer‒supplier)andmacro(country).Extendthescopeofanalysistothemultipletiersofthesupplychainandtherelationshipswithrelevantstakeholders,thusbroadeningtheperspectiveofstakeholderandinstitutionaltheoriesbycombiningthemwiththeIMPapproach.Identifyandcomparereactiveandproactivestrategiestorespondandmanagethemultiplepressuresbyactorsandstakeholderstoachievesustainablecompetitiveadvantageatnetworklevel.ExtendtheNRBVapproachtoincludesocialandethicalperspectives,tounderstandhowtheycanbecomesourcesofcompetitiveadvantage,whilebroadeningthescopefromfocalfirmstothesupplychainornetwork.TheSRBVisafirstandverypromisingattemptinthisdirection.Suggestionsforfutureresearch●●●●●ChaptertitlePreferredcustomertheory:benefitingfrompreferentialtreatmentfromsuppliersthroughmeasuresonbuyerattractivenessandsuppliersatisfactionOntheoriesforresearchingsustainabilityChapter#Chapter33Chapter34WendyL.Tate,LisaM.Ellram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:10:00AMviaColumbiaUniversityLibrary

2810Handbookoftheoriesforpurchasing,supplychainandmanagementresearchCONCLUSIONSANDOUTLOOKWeapplaudthecollectiveeffortthatmadethisHandbookpossible;fromtheinitialdiscussiontothecommitmentofaverydiverseandinternationalsetof65authorsfrom11countries(35authorsfromoutsidetheUnitedStates;andalmostathirdfemaleauthors).WewouldalsoliketorecognizetheactiveadvisoryboardthathelpedustomanagethechallengesinherentinasignificantendeavoursuchasthisHandbook:ChristineM.Harland,FinnWynstra,ErikvanRaaij,CraigCarter,MichaelEßig,FrankRozemeijerandStefanSeuring.Atheoreticalcontributionisexpectedinempiricalresearchtoday.Thisbookprovidesaresourceforsupportingtheoryapplicationanddevelopment.Fortunately,thisHandbookisintendedtobe(mostly)timeless.Whilethefutureapplicationssectionsareamirrorofthecurrentissuesatthetimethisiswrittenin,suchastheongoingCovid-19pandemic,wehopetohavemanyfutureeditions.Therearesometheoriesthatarenotyetwellintegratedintopurchasingandsupplychainresearchtodateandneedfurtherdevelopment.Oneexampleispanarchytheory.Itsfocusistohelpexplaincomplexchangesthatoccurintheprocessesandstructuresofecosystems,explor-ingthe‘continualadaptivecyclesofgrowth,accumulation,restructuring,andrenewal’thatarepartofdynamicenvironmentswefaceintherealworldeveryday.Thisfitswellwithmanypurchasingandsupplychainchallenges:fromhowwecaneffectivelydealwithadaptingtochangesduetothespreadofCovid-19,tohowtoimplementsustainabilitygoalsandactiontomovetowardsscience-basedtargetsinordertoslowandevenstopglobalclimatedisruption.Othertheories,suchastransactioncosteconomics,havebeenappliedinpurchasingandsupplychainresearchforseveraldecades.However,thesegrandtheoriesarestillrelevanttostudyingandunderstandingemergingareasofsupplychainresearch.Theseincludeareassuchasblockchain,cryptocurrencies,supplychainfinanceandtheimplicationsofgreaterdigitalizationonsupplychaingovernance.TherearemanysuggestionsforfutureresearchrelatedtothevarioustheoriesinthechaptersandinTable1.1.Theseideasaremeanttoinspireyou,nottolimityou.Wehopethatyoucanusethistableasajumping-offpointforexploringnewtheoriesandsupportingfutureresearch.Wewisheachofyouthebestinthejourneyofresearchanddiscoverythatliesahead.Editingthisbookhasbeenagreatexperience.Wewouldliketothanktheauthorsbothfortheirchaptersandfortheirfeedbackinthepeerreviewprocess;theadvisoryboardfortheirinput;andEllenPearceandSarahBrownfromEdwardElgarPublishingfortheirthorough-nessandthoughtfulnessthroughoutthisprocess.NOTE1.Unitofanalysisinformationandlevelofanalysisinformationcanoftenbefoundinseminalworksinthefield.REFERENCESCarter,CraigR.(2011).Acallfortheory:thematurationofthesupplychainmanagementdiscipline.JournalofSupplyChainManagement,47(2),1523–2409.WendyL.Tate,LisaM.Ellram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:10:00AMviaColumbiaUniversityLibrary

29Introduction11Ellram,L.M.,Harland,C.M.,vanWeele,A.,Essig,M.,Johnsen,T.,etal.(2020).Purchasingandsupplymanagement’sidentity:Crisis?Whatcrisis?JournalofPurchasingandSupplyManagement,25thAnniversaryIssue,26(1),1‒8.Giunipero,L.C.,Bittner,S.,Shanks,I.,&Cho,M.H.(2019).Analyzingthesourcingliterature:overtwodecadesofresearch.JournalofPurchasingandSupplyManagement,25(5),100521.Glock,C.H.,&Hochrein,S.(2011).Purchasingorganizationanddesign:Aliteraturereview.BusinessResearch,4(2),149–191.Johnsen,T.E.,Miemczyk,J.,&Howard,M.(2017).Asystematicliteraturereviewofsustainablepurchasingandsupplyresearch:TheoreticalperspectivesandopportunitiesforIMP-basedresearch.IndustrialMarketingManagement,61,130–143.Smith,KenG.,&Hitt,MichaelA.(eds)(2007).GreatMindsinManagement:TheProcessofTheoryDevelopment.Oxford:OxfordUniversityPress.Spina,G.,Caniato,F.,Luzzini,D.,&Ronchi,S.(2013).Past,presentandfuturetrendsofpurchasingandsupplymanagement:Anextensiveliteraturereview.IndustrialMarketingManagement,42(8),1202–1212.Spina,G.,Caniato,F.,Luzzini,D.,&Ronchi,S.(2016).Assessingtheuseofexternalgrandtheoriesinpurchasingandsupplymanagementresearch.JournalofPurchasingandSupplyManagement,22(1),18–30.vanWeele,ArjanJ.,&vanRaaij,ErikM.(2014).Thefutureofpurchasingandsupplymanagementresearch:Aboutrelevanceandrigor.JournalofSupplyChainManagement,50(1),1523–2409.Wacker,J.G.(1998).Adefinitionoftheory:researchguidelinesfordifferenttheory-buildingresearchmethodsinoperationsmanagement.JournalofOperationsManagement,16(4),361–385.Wacker,J.G.(2008).Aconceptualunderstandingofrequirementsfortheory‐buildingresearch:Guidelinesforscientifictheorybuilding.JournalofSupplyChainManagement,44(3),5–15.WendyL.Tate,LisaM.Ellram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:10:00AMviaColumbiaUniversityLibrary

302.FoundationsoftheoryBarbaraB.Flynn,MarkPagell,BrianFugateandDavidE.CantorINTRODUCTIONTheoryisanimportantpartofresearchinalldisciplines.Althoughsometimesviewedonlyasasubmissionrequirementtobesatisfied(Hambrick2007;SuttonandStaw1995),theoryisanessentialpartofdevelopinghigh-qualityresearch.Infact,‘nothingisaspracticalasgoodtheory’(VandeVen1989),becauseitguidesresearcherstowardimportantresearchquestionsthatcanbeusedtoscientificallyadvancerelatedknowledge(Wacker1998).Animportantgoalofanyresearchendeavouristhesystematicaccumulationofknowledgetobetterunderstandaphenomenonandmakepredictionsaboutit.Theory-drivenresearchallowssystematicallyaddressingaresearchproblem,tohelpresearchersdevelopnewknowl-edgerelatedtoit,reinforceexistingknowledge,anduncoveropportunitiesfornewtheoreticaldirections.Inaway,theoryislikearoadmapforinvestigatinganinterestingresearchquestion.Ittellswhattherelevantconstructsare,describesexpectedrelationshipsbetweenthem,artic-ulatesthedomaininwhichtheyareapplicable,andpredictshowtheconstructswilloperate(Hambrick2007).Withoutthisroadmap,researcherswouldruntheriskofaccumulatingstatisticallysignificantrelationshipswithoutunderstandingthebigpictureorwhyrelation-shipsweresignificant(Wacker2008).Thiscanleadto‘falsetheories’(Huff2009)thatcauseresearcherstodrawconclusionswithoutadequateknowledge,synthesisoranalysis.Falsetheoriesarenotunusual,particularlyinlightofthespeedwithwhichtheycanbedisseminatedbysocialandtraditionalmedia.Considerthedevelopmentandspreadofthemanyfalsethe-oriesaboutCovid-19’sorigins,treatments,preventionandpotentialcauses.Usingtheoryasaresearchroadmapisawayofcombatingfalsetheoryandmakingsenseofempiricalfindings,togeneratecoherentexplanationsthatcontributetotheknowledgeaboutaphenomenon.Alternatively,theorycanemergefromempiricalobservationofqualitativeorquanti-tativeevidence.Forexample,muchoftheseminaloperationsstrategytheory,suchastheproduct‒processmatrix(HayesandWheelwright1979),stagesofmanufacturingeffectiveness(WheelwrightandHayes1985),focus(Skinner1974)andorderwinners/orderqualifiers(Hill2000),wasbasedontheauthors’observationsintheirconsultingexperience.Thinkingabouttheirobservationstheoreticallyhelpedthemtomovefromsimplydevelopingpracticestothinkingaboutwhythepracticesworked,andavoidingseeminglyplausibleconstructsandrelationshipsthatwereactuallyextraneous.Thus,thinkingtheoreticallyiscriticalindevel-opingacoherentexplanationforfindingsresultingfromempiricalevidence(Hambrick2007;Weick1989,1995;Whetton1989).Tosummarize,theoryprovidesresearcherswithawaytogeneratecoherentexplanationsforempiricalfindings,inordertocontributetothesystematicaccumulationofknowledge,whetherthegoalofaresearchprojectistotesttheoryortodeveloptheory.Employedeffec-12BarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

31Foundationsoftheory13tively,theoryprovidesaroadmapfordesigningahigh-qualityempiricalresearchprojectandaframeworkforpositioningthefindingsintheextantknowledge.WHATISTHEORY?Theory‘isabouttheconnectionsamongphenomena,astoryaboutwhyactions,events,struc-ture,andthoughtsoccur’(SuttonandStaw1995,p.378).AccordingtoWeick(1995),agoodtheorypredicts,explainsanddelights.Theoryoperatesthroughdevelopmentandaccumulationofasystemofcoherent,disciplinedandrigorousknowledgeandexplanation(Huff2009).Itiscoherentinthatterminologyisclearlydefinedanddoesnotoverlapwithexistingterminology.Theoryseekstosystematicallyaccumulateknowledgeandexplanationtoprovideafoundationfortheworkofotherresearchers.Whetherthatknowledgeisgeneratedbyquantitativeorqualitativeempiricaldataoranalyticalmathematicalmodelling,themethodsusedtogatheritaredisciplinedandrigorous,providingassurancethatotherresearchersapproachingthephenomenoninthesamewaywouldarriveatsimilarconclusions.Theoryisinformedbypractice,anditinformsfocused,disciplined,empiricalresearchinquiry.Althoughpurchasingandsupplymanagementiscloselylinkedwithpractice(Ellrametal.2020),theoryprovidesawayofelevatingresearchtoalevelthatpredictsandexplainsphenomenathatcutacrossspecificapplications.Indevelopingabetterunderstandingofwhattheoryis,wecontrastitwithwhattheoryisnot(Suddaby2006;SuttonandStaw1995;Weick1995).Whilealiteraturereviewpositionsaresearchstudyintheextantliteratureandisanecessarypartofagoodresearchpaper,aliteraturereviewdoesnotprovidearoadmapforaddressingtheresearchproblem,specifykeyconstructsandrelationshipsbetweenthem,ordescribehowtheresearchadvancessci-entificknowledge(SuttonandStaw1995).Further,pointingoutthelimitationstoatheory’srangeofapplication,althoughimportant,isnotthesameasmakingatheoreticalcontribu-tion(Hambrick2007;Whetton1989).Althoughamodelisimportantinguidingdeductiveresearch,andtheoriesalmostalwaysincorporatemodels,amodelisasmallerelementofatheorythatgraphicallyportraysproposedrelationshipsbetweenvariablesandoutcomes(Huff2009);models‘shouldbeconsideredasstageprops,ratherthanastheperformance,itself’(SuttonandStaw1995,p.376).Finally,whilegoodtheoryalwaystellsaninterestingstory,tellinganinterestingstoryisnotthesamethingasinductivelydevelopinggoodtheory.Qualitativedatathatdescribeswhichpatternsofbehaviour,butnotwhytheywereobservedoraretobeexpected,isnottheory(SuttonandStaw1995).Thekeyistobeabletohearthestorythattheempiricalevidenceistelling,andframeitinawaythatisgeneralizableandrobust.Developingtheoryissomethingthatsomepurchasingandsupplychainresearchersmaybereluctanttotackle,becausetheyaremorecomfortablewithapproachesthatapplythescientificmethodtodeveloplawsforpredictingoutcomes.Yet,thereisawealthofexcitingnewsourcesofempiricalevidencefordevelopingtheory,providingresearcherswiththeopportunitytodeveloprelevanttheoryspecifictothepurchasingandsupplymanagementcontext(Flynnetal.2020;Melnyketal.2018).BarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

3214Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable2.1OverviewofphilosophicalorientationsPositivismInterpretivismCriticaltheoryFoundation●Scientificmethod●Real-worldproblems●ObstaclespresentedbyideologyApproach●Hypothesistesting●Searchforpatternsofmeaningand●Overturntheorythatisfalse,dog-symbolicactsmatic,orcannotbeproven●ReplaceitwithscientificinsightsthatbetterinformtheoryViewofreality●Objective●Sociallyconstructed●DisguisedbyideologiesandexploitationGoal●Establishuniversallawstopredict●Developadeepunderstanding●ChangetheworldoutcomesofkeyconstructsandhowtheyrelatedtoeachotherResearch●Experiments●Ethnography●Fieldresearchmethods●Surveys●Engagedresearch●Dialecticalanalysis●Secondaryanalysisofarchivaldata●Interviews●Historicalanalysis●Contentanalysis●Deconstruction●Textualanalysis●Textualanalysis●Casestudies●GroundedtheorydevelopmentEvaluation●Abilitytopredict●Trustworthiness●Theoreticalconsistency●Rigour●Authenticity●Implicationsforaction,mobiliza-●Internalvaliditytionandchange●Externalvalidity●Historicalinsights●Reliability●TranscendentinterpretationsTYPESOFTHEORYTheoriescanbedescribedbytheirphilosophicalorientationandtheirlevelofabstraction.Thereisno‘right’typeoftheory;eachoftheseisavalidperspectiveforpurchasingandsupplytheory.Thetypeoftheoryemployedordevelopedinaparticularresearchprojectshouldbealogicaloutcomeoftheresearchquestion.PhilosophicalOrientationTheorydevelopmentisnotlimitedtoaparticularphilosophicalorientation.Differentphilo-sophicalorientations(Table2.1)areusefulinguidingdifferentphasesofthetheorydevelop-mentprocess,aswellasinapplyinganddevelopingtheoryindifferentcontexts(Huff2009).PositivismApositivistorientationisbasedonthescientificmethod(Huff2009);itisreflectedinthehypothesistestingapproachofmuchofthepurchasingandsupplymanagementresearch.Positivismviewsrealityasobjective,andthetaskoftheresearcherisestablishinguniversallawstopredictoutcomes,inthewaythatthenaturalsciencesdo.However,sincepurchasingandsupplymanagementresearchfocusesonpeople,relationshipsandorganizations,trulyuni-versallaws,akintotheboilingorfreezingpointofwater,arenotpossible.Rather,researchersfocusonpredictingrelationshipsbetweenconstructsandoutcomeswithinaspecificdomain.BarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

33Foundationsoftheory15Researchbasedonapositivistorientationusestheorytogeneratehypotheses,operation-alizeskeyconstructs,andcollectsdatafortestinghypotheses.Forexample,BlountandLi(2021)surveyed277buyersinlargeUnitedStates(US)andUnitedKingdompurchasingorganizationsabouttheirwillingnesstopurchasefromminoritybusinesses.Skiltonetal.’s(2020)studyofabsorptivecapacity’ssupportfordifferentproductdevelopmentstrategiesusedarchivaldatafromtheUSpharmaceuticalindustry.Luetal.(2020)usedascenario-basedexperimenttostudytheimpactofinformalinteractionsbyboundary-spanningsupplymanag-ersonlaterformalsourcingcollaborations.Becausepositivismseekstouncoverquantitativerelationshipsamongconstructs,apositiv-isttheory’svalidityisevaluatedintermsofitsabilitytopredict,itsrigour,internalandexter-nalvalidity,andreliability.Researchmethodsassociatedwithapositivistorientationincludeexperiments,surveysandsecondaryanalysisofarchivaldata(Huff2009).InterpretivismInterpretiveresearchphilosophiesviewhumanbehaviourastoocomplextobedescribedbytheuniversallawsandrelationshipssoughtbypositivisticresearch(Huff2009).Interpretivismcapitalizesonthemessy,cross-disciplinarynatureofreal-worldproblems,ratherthanattempt-ingtoreducethemtomanageableconstructsandrelationships.Itusesnuancedinterpretationofrichdatasourcestodevelopadeepunderstandingofkeyconstructsandhowtheyrelatetoeachother.Thus,ratherthanviewingrealityasobjectiveandquantifiable,aninterpretivistorientationviewsrealityasasocialconstruction.Interpretivistresearcherssearchforpatternsofmeaningtounderstandhowpeople’sper-ceptionsofasituationinfluencetheirreality.Ratherthanvariables,interpretivismfocusesonsymbolicactsandmeaning.Researchiscomprisedofdevelopingabstractdescriptionsofmeaningsandsituationsastheyoccurintheirnaturalsetting.Interpretivisttheoryisassessedbyitstrustworthinessandauthenticity,usingresearchmethodssuchasethnography;engagedresearch;interviews;contentandtextualanalysisofdescriptions,documentsandconversa-tions;casestudies;andgroundedtheorydevelopment(Huff2009).Forexample,theengagedresearchapproachactivelyinvolvesresearchersintheresearchcontext,ratherthanadheringtopositivism’sunbiased,disengagedorientation(Touboulicetal.2020).Researchersdrawupontheirparticipationindecisionmakingandactiontoengageindisciplinedreflection,tosearchforinsightsthatlaythefoundationfortheorybuilding.ExamplesincludeTouboulicandWalker’s(2016)studyofsupplychainsustainability,Coughlanetal.’s(2003)examinationofcollaborativerelationshipsduringperiodsofdis-continuity,HarlandandKnight’s(2001)longitudinalengagedresearchonsupplynetworkstrategy,andEltantawayetal.’s(2015)examinationofinformationflowsinamulti-tiersupplychain.Interpretivism’sprimarychallengeforresearchersismakingthetransitionfromreportingobservationstodevelopingthemintoasystemofcoherent,disciplinedandrigorousknowledge.CriticaltheoryMovingfromagoalofunderstandingandexplainingtheworld,acriticaltheoryorientationfocusesonchangingtheworld(Huff2009).Itviewsideologyasamajorobstacletochangingsociety.Thus,acriticaltheoryorientationseekstooverturntheorythatisfalse,dogmatic,orcannotbeproven,challengingprocessesandpoliciesthatreinforcethestatusquo,removingtacitideologicalbiases,andexposingprocessesandpoliciesthatpreventpeoplefromrealizingBarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

3416Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtheirfullpotential.Althoughmuchcriticaltheoryresearchisbasedonadvancingapoliticalagenda,itsfundamentalquestioningofallassumptionsbybreakingtraditionalthoughtpara-digmsisimportanttobuildingtheoryinanydiscipline.Acriticaltheoryorientationfocusesonsearchingfordisguisedcontradictions(PooleandVandeVen1989)hiddenbyideologiesandincidentsthatrevealexploitation.Byexposingthem,itseekstoreplaceideologywithscientificinsightsandenablebetter-informedthinking.Becauseofcriticaltheory’sfocusoncontradictionsinstructuralorhistoricalthinking,keyassessmentcriteriaincludetheoreticalconsistency,implicationsforaction,mobilizationandchange,historicalinsightsandtranscendentinterpretations.Researchmethodsassociatedwithcriticalthinkingincludefieldresearch,dialecticalanalysis,historicalanalysis,deconstructionandtextualanalysis(Huff2009).ExamplesofapplyingacriticaltheoryorientationtotopicsrelevanttopurchasingandsupplymanagementareSpringett’s(2013)analysisofstakeholderpowerandhegemonyinsustainabledevelopment,Reed’s(1999)criticaltheoryanalysisofstakeholdertheory,andHilt’s(1995)applicationofcriticaltheorytovulnerablepopulations.Thereissubstantialopportunityformoredirectapplicationofcriticaltheoryandrelatedapproachestopurchasingandsupplymanagement.Althoughthepositivist,interpretivistandcriticalthinkingorientationsareverydifferentfromeachother,theycanpotentiallyinformeachotherindevelopingandtestingtheory.Forexample,researchwithacriticaltheoryorientationmightexposethewaythattraditionalthinkingleadstoexploitationofvulnerablelocalcommunitiesthatgathernutsandberriesintheAmazonregiontosupplytheproductionoflotionsandcreams.Interpretivistresearchersmightbuildonthisinconductingin-depthexaminationoflocalcommunitiesthatsupplylotionsandcreamsmanufacturersversuscosmeticsmanufacturersinseveralregions,com-paringandcontrastingthemonimportantdimensionstorefinekeyconstructs.Buildingonthesefindings,positivistresearchersmightthencollectdatafromalargenumberoffirmsthatsourcerawmaterialsfromlocalcommunities,toisolatekeyantecedentstoexploitation.Bybeingopentoresearchwithdifferentphilosophicalorientations,researcherscangeneratemorecoherentexplanationstomakeameaningfulcontributiontothesystematicaccumulationofknowledge.LevelsofAbstractionTheorythatfocusesatdifferentlevelsofabstractionalsocontributestothesystematicaccu-mulationofknowledge.Acamerametaphorisusefulinunderstandingdifferentlevelsoftheoreticalabstraction(Huff2009):eachgeneratescoherentexplanationsthatcontributetothesystematicaccumulationofknowledge,butinadifferentway(Table2.2).GrandtheoryGrandtheoryislikeaphotographtakenusingawide-anglelens.Itprovidesabroad,comprehensiveviewofthebigpicture,whilethedetailsarefuzzy.Grandtheoryisatthehighestlevelofabstraction,withagoalofestablishinguniversallyapplicablepredictionsandprinciples.Itisfrequentlyemployedinpurchasingandsupplymanagementresearchwithapositivistorientation,anditisoftenborrowedfromotherdisciplinesduetoitsbroadapplicability.Manyexamplesofgrandtheoryarecoveredinotherchaptersofthisbook,includingtheresource-basedview(Barneyetal.2001),transactioncosteconomicstheoryBarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

35Foundationsoftheory17Table2.2LevelsoftheoryGrandtheoryMiddle-rangetheoryLocaltheoryLevelofHighestMiddleLowestabstractionBigpictureBroad,comprehensive,LessemphasizedBlurredormissinggeneralizableDetailsFuzzyClearerVeryclearGoalEstablishuniversallyapplicable●Systematicaccumulationof●Understandunexpectedorcoun-predictionsandprinciplesknowledgeterintuitivefindings●Predictionofoutcomesfor●Generateinsightsaboutuniquealimitedsetofphenomenaphenomenonorevent●PredictionofoutcomeswithinalimiteddomainSourceOftenborrowedfromotherDevelopedormodifiedbyDevelopedbyresearcherdisciplinesresearcherExamples●Resource-basedviewDomainswithuniqueUniquephenomenaorevents:●Transactioncosteconomicscharacteristics:●Post-Covidbuyer‒supplierrela-●Socialnetworktheory●Healthcaretionshipsinspecificindustry●Behaviouraleconomics●Logisticsandtransportation●Emergencysupplychainsfollow-●Agencytheory●Regulatedindustriesing2011earthquake,tsunamiandnuclearpowerplantmeltdowninJapan(Williamson(1975,1985),institutionaltheory(DiMaggioandPowell1983),socialnetworktheory(Granovetter1973),complexadaptivesystemstheory(Pathaketal.2007),behaviouraleconomics(TverskyandKahneman1974)andagencytheory(JensenandMeckling1976).Theseandothergrandtheorieshaveguidedpurchasingandsupplymanagementresearchthathasledtoimportantinsights,despitebeingoriginallydevelopedforotherdomains,includingeconomics,strategicmanagement,marketing,computerscienceandpsychology.Careshouldbetakeninadaptinggrandtheoriestopurchasingandsupplymanagementduetounitofanalysisissues,sincemanypotentiallyrelevantgrandtheoriespredictandexplainthebehaviourofindividuals,ratherthaninterorganizationalrelationships(Flynnetal.2020;Melnyketal.2018).Grandtheoriesaresometimesappliedbypurchasingandsupplyman-agementresearchersusinga‘onesizefitsall’approach,droppinginafavouritetheoryasanexplanationforalmostanyphenomenon.Thistypeofresearchischaracterizedbyaparagraphortwodescribingatheory,thenfailingtouseittoguidedevelopmentofthekeyconstructs,relationships,domainandpredictions(Boeretal.2015).These‘boltedon’(Boeretal.2015)theoryand‘ceremonialcitations’(Weick1995)approachesfailtoaccomplishthegoalsofadvancingthesystematicaccumulationofknowledge,articulatingkeyconstructs,orprovid-ingacompellingargumentforexpectedrelationshipsbetweenthem.Middle-rangetheoryMiddle-rangetheoryisanalogoustoaphotographtakenwithanintermediate-rangelens.Itrevealsrichdetails,withlessemphasisonthebigpictureand,thus,lessgeneralizabilitytootherdomains.Middle-rangetheorysystematicallyaccumulatesknowledgeandpredictsout-comesforalimitedsetofphenomena(Wacker1998)orphenomenawithinalimiteddomain,functioningatthemiddlelevelofabstraction.BarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

3618Handbookoftheoriesforpurchasing,supplychainandmanagementresearchInpurchasingandsupplymanagementresearch,middle-rangetheoryiscommonwithindomainswithuniquecharacteristics.Forexample,healthcarepurchasingandsupplymanage-mentresearchsometimesdevelopsmiddle-rangetheorytoincorporatetheuniquechallengesassociatedwiththird-partypayers(government,employers),fiscalintermediaries(insurancecompanies,healthmaintenanceorganizations),theUSAffordableCareAct,physicianprefer-enceitemsandgrouppurchasingorganizations(GPOs).Anotherdomainwheremiddle-rangetheoryissometimesdevelopedislogisticsandtransportation.Thisindustry’suniquechal-lengesincludeequipmentthatisconstantlyinmotionandoperationalpersonnel(truckdrivers)makingimportantdecisionswithlimitedsupervision.Anexampleofmiddle-rangepurchasingandsupplymanagementtheoryisprovidedbyDavisetal.’s(2019)surveyofownersandmanagersofover5000wineriesintheUS.Theysoughttodevelopadeepunderstandingofbuyer‒supplierrelationshipsinanindustrywhereregulationsvarybystate,oftenlimitingchoiceofsupplypartners.Indoingso,theydevelopedmiddle-rangetheoryaboutthenuancesandcomplexitiesofpurchasingandsupplymanagementintheuniquecontextofthisindustryanditsregulatoryinstitutions.LocaltheoryAlocaltheoryisanalogoustoaclose-uporcutawayphotograph.Whilethedetailsareveryclear,the‘scene’isblurredormissing.Thus,localtheoriesaretheleastabstract,identifyingrelationshipsthatleadtoempiricalgeneralizationofverylimitedscope(Wacker1998).Often,localtheoryisdevelopedasresearchersattempttounderstandanunexpectedorcounterintui-tivefinding,orgenerateinsightsaboutauniquephenomenonorevent(Huff2009).Forexample,Marquesetal.(2020)usedasinglecasestudyapproachtodeveloplocaltheorytoextendprevailingtheoryonknowledgediffusionthatisbasedonlong-term,trust-based,collaborativerelationships.Theypointedoutthatinagloballydispersedsupplynetwork,relationshipsareoftenatarm’slength,characterizedbycompetitivetensionsandweakties.Thus,Marquesetal.(2020)extendedextanttheorytoacontextmorerealisticforaglobalsupplynetwork.Theyexaminedknowledgediffusioninaclosed-networkplatformusedbymembersofthesinglefocalfirm’sgloballydispersedsupplynetwork,examiningwrittendiscussionforumpostsovertwoyears,supplementedwithsemi-structuredinterviews,demographicdataaboutnetworkmembers,validationworkshopsandobservationofsupplynetworkwebinars.Marquesetal.’s(2020)focusisclearlylocaltheorydevelopment,yetitspositioninginthecontextofglobalsupplynetworksmakesiteasytoseeitspotentialforfutureresearchtodemonstrateitsgeneralizability.BUILDINGBLOCKSOFTHEORYTherearefourbuildingblocksoftheory:constructs,relationship,domainandpredictions(Wacker1998).Wedescribetheminthefollowingsections,adoptingWhetton’s(2009)terminology.BasicBuildingBlocksWebeginwiththebasicbuildingblocksofconstructsandrelationships,whichcanbelinkedtoformtheoreticalpropositions.DevelopingmeaningfultheoreticalpropositionsgivesBarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

37Foundationsoftheory19aresearchertheabilitytoenterthetheoreticaldiscourseonaphenomenon(Huff2009).Astheoreticalpropositionsarerefined,theybecomethefoundationforafull-blowntheory(Weick1995).ConstructsAconstructisthe‘who’or‘what’ofatheory(Whetton1989),portrayedinagraphicmodelbyabox.Ifatheorywereaplay,constructswouldbethecentralcharacters(Whetton2009).Itisimportantthatconstructsarenamedtoreflecttheconceptsunderlyingthem(Osigweh1989).Constructsshouldbenamedasbroadlyaspossible,whileavoidingstretchingthemsobroadlythattheyaremeaninglessintheoreticalpropositions(Osigweh1989);forexample,broadnamessuchas‘supplychainrelationships’,‘sustainability’or‘environmentalcondi-tions’arenotveryusefulinatheoreticalproposition.Rather,constructsshouldbenamedfol-lowingthesameconventionsasvariables,connotingarangefromlowtohigh,suchas‘supplychainrelationshipquality’,‘sustainabilitystandards’or‘environmentalcompetitiveness’.Further,constructsshouldbecapableofactingorbeingactedupon;theyshoulddescribeacauseoraneffect.Constructnamesshouldbetheoretical(notcompletelydefinedbyempir-icalmeasures),inordertoallowextensiontootherdomains(Osigweh1989);aconstructshouldretainitsmeaningwhenitisusedatvariouslevelsofabstraction.Constructnamesshouldbethesameasintheextantliterature,toavoidconfusion.Ifaconstructisunique,itshouldbecarefullydifferentiatedfromrelatedconstructs(Wacker1998).Whetton(2009)describestwotypesofconstructs.Thefocalconstructisthecentralinter-estofaresearchproject,likethecentralcharacterinaplay.Forexample,aresearchermaybeinterestedindevelopingmiddle-rangetheoryrelatedtogrouppurchasingorganizations(GPOs)thataggregatedemandfrommultiplehospitals.Ontheotherhand,complementaryconstructsareconstructsthatseemrelatedtothefocalconstructinsomeway,basedontheliteraturerevieworpreliminaryempiricalevidencefrominterviews;theyarelikethesupport-ingcharactersinaplay.Whetton(2009)recommendsconsideringuptosevencomplementaryconstructsindevelopingtheoreticalpropositionsaboutafocalconstruct.Forexample,indevelopingtheoryaboutGPOs(thefocalconstruct),complementaryconstructsmightincludecostofpurchaseditems,physicianpreferenceitems,purchasinggrouppower,clinicalout-comes,patientsatisfaction,hospitalsize,physicianpreferenceitemsandgovernmentfinancialsupport.Combinationsofcomplementaryandfocalconstructsarethebasisofformingtheo-reticalpropositions.Clarificationoftheroleoffocalandcomplementaryconstructsisimportantinframingatheory.ForaresearcherinterestedincontributingtothetheoreticaldiscourseaboutGPOs,abasicX-focusedtheoreticalpropositionisthatGPOuse(X)isinverselyrelatedtothecostofpurchaseditems(Y);itisX-focusedbecausethefocalconstructexplainsthe(lower)costofpurchaseditems.Ontheotherhand,abasicY-focusedtheoreticalpropositionisthathospitalsize(X)isrelatedtoGPOuse(Y);itisY-focusedbecausethefocalconstructistheoutcome.RelationshipsRelationshipsareexplanationsbetweentwoormoreconstructs,portrayedinagraphicmodelasarrows.Eacharrowsignifiesatestableproposition;thus,relationshipsarethe‘hows’and‘whys’ofatheory(Whetton1989).Inaplay,relationshipswouldbethestorylinethatcon-nectsthecentralcharacters(Whetton2009).BarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

3820Handbookoftheoriesforpurchasing,supplychainandmanagementresearchEveryconstructshouldbeconnectedbyoneormorearrowsthatproposerelationshipsbetweenthem.Eacharrowsignifiesanexplanation,ratherthansimplyadescriptivepredictionorastatisticalrelationship.Adirectrelationshiplinksoneconstructtoanotherwithoutanyintermediatelinks(X→Y),whileanintermediaterelationshipbetweentwoconstructsismediatedbyanotherconstructZ,suchthatX→Z→Y.Ausefultipforensuringthateveryarrowservesatheoreticalpurposeistowriteabriefexplanationoneacharrowinagraphicmodel,suchas‘X→Ybecause…).Forexample,fortherelationshipbetweenexternalcollaborationandlowersupplyexpenseinahospitalsetting,thebriefexplanationmightbe:‘Asaformoflateralrelations,informationprocessingtheorypredictsthatexternalcollabora-tionwillincreaseahospital’sinformationprocessingcapacity.Thisreducessupplyexpensebecauseinformationprocessingoccursclosertothesource,avoidingmovingbetweenhierar-chicallevelsforprocessing.’UsingbasicbuildingblockstocreatetheoreticalpropositionsRelationshipsbetweenconstructsaredescribedbytheoreticalpropositions(Bacharach1989).Atheoreticalpropositioniscomprisedofatleasttwoconstructsandonerelationship.Developingtheoreticalpropositionsallowsaresearchertomakeauniquecontributiontoanongoingtheoreticaldiscourse(Huff2009).Repeatingabasictheoreticalpropositionthatisalreadywellestablisheddoesnotcontributetotheory,thusanimportantfirststepistobecomefamiliarwithexistingresearchonthefocalconstructandtonoteestablishedtheoreticalprop-ositions.ThebasicX-focusedandY-focusedtheoreticalpropositionsdescribedabovearealreadywellknownandwouldnotmakeameaningfulcontributiontotheoreticaldiscourseonGPOs.However,thereareseveralwaysinwhichabasictheoreticalpropositioncanbeenhancedtocreatenewtheoreticalpropositionsthatmakeinterestingandimportantcontribu-tionstotheextanttheory;thesearesummarizedinTable2.3.ChangeanantecedentoroutcomeOnewaytocontributetothetheoreticaldiscourseonGPOsisbyproposingadifferentanteced-entoroutcometoabasicX-focusedorY-focusedtheoreticalproposition,inordertoimproveitsaccuracy(Whetton2009).Aresearchercouldproposenewdimensionsofanexistingcon-struct(forexample,publicversusprivatehospitals,orlargeversussmallhospitals),broadenornarrowthescopeofanexistingconstruct(forexample,teachinghospitalsonly),orsubstituteadifferentconstructfortheoriginalantecedentoroutcomeinthebasictheoreticalproposition(forexample,clinicaloutcomesorpatientsatisfaction).Forexample,aresearchercouldcon-tributetothemiddle-rangetheoryonGPOsbyproposingthatthesizeofaGPO(X)explainsαthecostofhospitals’purchaseditems(Y),becauseGPOsthataggregatedemandacrossmorehospitalsorpurchasegreatervolumeshavegreaterpurchasingpower,substitutingXforXinαbasictheoreticalproposition[1].Anotherchangetobasictheoreticalproposition[1]wouldbetoexaminetheeffectofahospital’suseofsingleversusmultipleGPOs(X)onthecostofpur-αchasedsupplies(Y),becausehospitalsmightselectthemixofGPOsofferingthegreatestben-efitsforcertainproductgroups,forexamplegenericsuppliessuchasgauzeandcottonversusspecializeditemssuchasimplantabledevicesorsurgicalinstruments.BychangingthefocalconstructinanX-focusedtheoreticalproposition,aresearchercancontributetothetheoreticaldiscourseonGPOsbyrefiningtheGPOconstructandexaminingitsuseindifferentways.AsecondwaytomakeatheoreticalcontributionthroughmodifyingabasictheoreticalpropositionisthroughdevelopingadifferentY-focusedproposition,wherethefocalcon-BarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

39Foundationsoftheory21Table2.3BasicandadvancedtheoreticalpropositionsTypeNotationPurchasingandsupplychainexamplesBasictheoreticalpropositionX-focusedX*→YAhospital’sGPOuseexplainsitscostofpurchaseditems[1].Y-focusedX→YTheAffordableCareActexplainshospitals’useofGPOs[2].ChangeantecedentoroutcomeconstructChangeantecedentconstructX→YThesizeofahospitalexplainsitsuseofGPOs[3].αChangeoutcomeconstructX→YAhospital’sGPOuseexplainsitsclinicaloutcomes[4].αAddmoderatorormediatorconstructAddmoderatorconstructX→YTheextenttowhichahospital’sGPOuseexplainsitscostofpurchased↑itemsdependsonwhetheritisacomprehensiveorspecializedhospital[5].ZAddmediatorconstructX→Z→YThesizeofahospitalexplainsitsuseofGPOsthroughtheintermediateimpactofthepowerofitspurchasinggroup[6].AddantecedentoroutcomeconstructAddantecedentconstructX(Boththesizeofahospitalanditsextentofspecializationexplainitsuseof1YGPOs[7].X&2AddoutcomeconstructYAhospital’sGPOuseexplainsbothitscostofpurchaseditemsandits1X&clinicaloutcomes[8].(Y2Note:*Ineachmodel,thefocalconstructisshowninboldtype.structexplainsadifferentoutcome.Bychangingtheoutcome,theresearcherisaskinganewresearchquestion.WhiletherelationshipbetweenGPOuse(X)andahospital’scostofpur-chaseditems(Y)inbasictheoreticalproposition[1]isalreadyknown,howisGPOuserelatedtopatientclinicaloutcomes(Y)?DoestheuseofGPO-provideditemshaveanimpactontheαspeedwithwhichapatientrecovers?ThismayberelatedtothemorelimitedproductselectionandavailabilityofferedbyGPOs,butitmayalsoreflectmoresubtleconditions.Forexample,Ngayaetal.(2015)estimatethathospitalclinicalpersonnelspendupto50percentoftheirtimelocatingandorderingitemsneededtoprovidecare;ifusingGPOsfreesupsomeofthistime,clinicaloutcomesmightimprove(TuckerandEdmondson2003).Thus,byexaminingdifferentoutcomespotentiallyassociatedwiththefocalconstruct(GPOs),aresearchercon-tributestothetheoreticaldiscourseonGPOs.Theimportanttakeawayisthatmakingatheo-reticalcontributionneednotbeintimidating;itcanbeassimpleaschangingtheantecedentoroutcomeconstructinabasictheoreticalrelationship.AddamoderatorormediatorAbasictheoreticalpropositioncanbeenhancedthroughtheadditionofathirdconstructthatfunctionsasamoderatorormediator.Amoderatordescribesaconditionthatalterstherelationshipbetweentheantecedentandoutcomeproposedinabasictheoreticalproposition,improvingitsaccuracy(Whetton2009).Amoderatorisappropriateinsituationswherethebasictheoreticalpropositionistrueinsomeconditions,butnotinothers,suchascontingencytheoriesthatspecifywhen,whereandwithwhomatheoryapplies(Whetton2009).Thus,theadditionofamoderatorenhancesabasictheoreticalpropositionbyaddressing‘when’BarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

4022Handbookoftheoriesforpurchasing,supplychainandmanagementresearchand‘where’questions,inadditiontothe‘what’and‘why’questionsaddressedbythebasictheoreticalproposition.Becauseamoderatordescribesthecontextinwhichatheoreticalrelationshipholds,contextmovesfromthetheory’sdomaintoitscoretheoreticalpropositions.Agoodwaytothinkabouttheeffectofaddingamoderatorislikean‘on‒off’switch(Whetton2009).Whenthemoderatoris‘on’,theproposedrelationshipisexpectedtohold,butnotwhenitis‘off’.Thus,amoderatorisoftenmeasuredasanominalvariable,whichclassifiesobservationsintonominalgroups(maleversusfemale)oranordinalvariable,whichclassifiesobservationsintogroupsthatcanbeplacedinorder(highversuslow).Forexample,aresearchermightenhancemiddle-rangetheoryrelatedtoGPOsbyproposinghospitalscope(comprehensiveversusspecialized)asamoderator.Inotherwords,theresearcherexpectsthatthebasicinversetheoreticalrelationshipbetweenGPOuseandthecostofpurchaseditemswillbestrongerforacomprehensivehospitalsuchastheMayoClinicorClevelandClinicintheUS(McDermottandStock2011)thanitwillbeforaspecializedhospitalsuchasMDAndersonCancerCenterorShouldiceHospital(Plsek2003).Anotherexamplewouldbeusingregionalversusnationalhospitalsystems(BurnsandDeGraaff2002)asamoderator.Incontrast,amediatorimprovesunderstandingofhowabasicX→Yrelationshipoccurs,throughfunctioningasanintermediary.Thus,abasicX→YrelationshipischangedfromadirecttoanindirectrelationshipconveyedthroughZ,whichfunctionsasbothanoutcomeofXandanantecedenttoY(Whetton2009).Addingamediatorimprovesthetheoreticalspecificityofatheoreticalproposition,addressing‘how’,inadditiontothe‘what’and‘why’questionsaddressedbythebasictheoreticalproposition.AddingamediatortransformsabasicX→Ytheoreticalpropositionintoacompoundpropositioncomprisedoftwodirectrelation-ships,X→ZandZ→Y(Whetton2009).ConsideringtheadditionofamediatorisusefulwhenitisnotobvioushowXexplainsY,typicallyinanX-focusedproposition(Whetton2009).Thus,addingamediatorisawayofjustifyinganunprovenX(Whetton2009).Forexample,purchasinggrouppowercouldbeaddedasamediatortotheX→Ytheoreticalproposition[1]toexplainhowthisrelationshipoperates.Becausemosthospitalsarestruc-turedasaprofessionalservicesorganizationsuperimposedonabureaucraticorganization(Abdulsalametal.2018),thegoalsofphysicians(intheprofessionalservicesorganization)andthepurchasinggroup(inthebureaucraticorganization)maybemisaligned.Physiciansinthisenvironmentsometimesfunctionas‘surrogatebuyers’(Abdulsalametal.2018),whomakeindependentpurchasingdecisions.Amorepowerfulpurchasinggroupmaybeabletooverrulethesedecisionsandshiftmoreordersawayfrom‘surrogatebuyers’toGPOs.Further,alargerhospitalismorelikelytohaveamorepowerfulpurchasinggrouptocoordinatepur-chasingforitslargenumberofprofessionalsanddepartments.Thus,proposingpurchasinggrouppowerasamediatorbetweenhospitalsizeandGPOusemakesaninterestingcontribu-tiontothetheoreticaldiscourseaboutGPOs.AddanantecedentoroutcomeAddingadirectantecedentoroutcometoabasictheoreticalpropositionexpandsthescopeoftheproposition,inordertolearnmoreaboutthefocalconstructbyexpandingitstheoreticaldomain(Whetton2009).AsingleXcanbechangedintoavectorofXs,orasingleYcanbechangedintoavectorofYs,toimprovetheirabilitytoexplain,orbeexplainedby,thefocalconstruct.Inordertoavoid‘downgrading’thefocalconstruct,expansionshouldoccuronthesideofthetheoreticalpropositionthatcontainsthecomplementaryconstruct,byaddingaconstructthatprovidesanalternativeexplanation,shiftingthefocusfromindividualtocat-BarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

41Foundationsoftheory23egoriesofantecedentconstructs,populatingcategoriesofantecedentswithspecificinstances,ornestingantecedentswithincategories(Whetton2009).Forexample,addingtheextentofahospital’sspecializationtobasictheoreticalproposition[3]wouldresultinthetheoreticalpropositionthatboththesizeofahospitalanditsextentofspecializationexplainitsGPOuse.Becauseamorespecializedhospitalconcentratesahighamountofitspatientvolumeinasmallnumberofclinicalservices(Sampsonetal.2015),itmayhavehighenoughvolumesofrelatedpurchasesthatitwouldnotbenefitsubstantiallyfromusingGPOs.Comprehensivehospitals,ontheotherhand,mustaccommodateamuchbroadersetofpatientneeds,requiringnumerousmedicalspecialtiesandprotocols(Sampsonetal.2015);thus,theymaybenefitmorefromaggregatingtheirdemandwiththatofotherhospitalsthroughaGPO.Theexplanatorypowerofthefocalconstructcanalsobeimprovedbyaddinganoutcome.Forexample,aresearchermightproposethatahospital’sGPOuseexplainsbothitscostofpurchaseditemsanditsclinicaloutcomes.AlthoughthewaythatGPOuseexplainscostisknown,clinicaloutcomescouldbeimprovedbytheconsistentqualityofitemsprovidedbyGPOs,aswellasfreeingupthetimethatnursesusetolocatematerials,sothattheycanfocusmoreonclinicalcare(TuckerandEdmondson2003).CreateachainoftheoreticalpropositionsAlthoughpurchasingandsupplymanagementresearchersseemtobefondofcomplexgraph-icalmodels,awell-craftedtheoreticalpropositioncanfunctionasatheoryinandofitself(Melnyketal.2018);thereisoftennoneedtodevelopatheorybasedonacomplexcollectionofboxesandarrows.However,atheorycanalsobecreatedbygraftingwell-thought-outpropositionstogether(Wacker2008).Thiswillresultinanantecedentoroutcomebeingreformulatedasamediatorlinkingtwotheoreticalpropositionsintoanemergentcompoundproposition.Aswithaddinganantecedentoroutcome,theexistingtheoreticalpropositionshouldbeexpandedonthesideoppositethelocationofthefocalconstruct(Whetton2009).Forexample,combiningtheoreticalpropositions[6]and[7],wecouldproposethatboththesizeofahospital(mediatedbythepowerofitspurchasinggroup)anditsextentofspecializa-tionexplainitsuseofGPOs.Itcouldbefurtherexpandedbyaddingantecedentstopurchasinggrouppower,whilethefocalconstruct(GPOuse)remainsasabookendattherightsideofthemodel.Similarly,theoreticalproposition[8]couldbeexpandedbyaddingmoderatorsormediatorstoitstwobasicpropositions,keepingthefocalconstructastheleftbookend.AdvancedBuildingBlocksAlthoughthe‘what’and‘how’ofthebasicbuildingblocksareimportantindevelopingthe-oreticalpropositions,strongertheoreticalcontributionsareoftenmadethroughdomainandpredictions,whichfocusonwhen,whereandwho.Importantenhancementstoatheoryresultfromitsapplicationindifferentdomainsandfromreflectiononsurprisingresultsrelatedtoitspredictions(Whetton1989).DomainAtheory’sdomainisthesetofassumptionsitisbasedupon,indicatingwhenandwhereitcanbeapplied(Boeretal.2015)andwhereitdoesnotapply(Huff2009).Thedomainplaceslim-itationsonatheory(Whetton1989)byaddressingquestionsaboutwhen,whereandtowhomBarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

4224Handbookoftheoriesforpurchasing,supplychainandmanagementresearchatheoryapplies(Wacker1998).Itisliketheowner’smanualforacomplexpieceofmachin-ery,listingthetermsandconditionsthatgovernitssafeuse(Whetton2009).Explicitlylistingtheseassumptionsispartofthethoughtprocessthatpushesaresearchertothinkcriticallyaboutthetheoreticalargumentsbeingposed.Bothcontextualandconceptualassumptionsareincludedinthedomainofatheory.Contextualassumptionsareboundaryconditionsthatcanmodifyornullifyatheory’spredictions(Whetton2009).Contextualassumptionsareimportant,becausetheyidentifytheconditionsunderwhichatheoryisexpectedtohold(Melnyketal.2018);readersdevelopanunderstandingofwhatisgoingonthroughtheirappreciationofwhereandwhenithap-pened(Whetton1989).Thus,contextualassumptionsareimportantfortheoriesincontext.Contextualassumptionsincludepolitical,culturalandeconomicfeaturesoftheenvironment.Levelofanalysisisanotherimportantcontextualfactorthatpurchasingandsupplymanage-mentresearchersneedtobecognizantofwhenborrowinggrandtheoryoriginallydevelopedinotherdisciplines.Fortheoriesincontext,contextualassumptionsareincorporatedintohypoth-esistestingascontrolvariables.Contextualassumptionsarealsoimportantintheorizingaboutcontext;thesearetheoriesofcontext.Theoriesofcontextarecommonincomparativeresearch,suchaspurchasingandsupplymanagementresearchthattakesacross-culturalorcross-industryperspective.Contextualfeaturesofatheoryareusedtoexplaincross-contextsimilaritiesanddifferencesinpractices,valuesandbeliefs(Whetton2009).Intheoriesofcontext,contextisincorporatedintotheoreticalpropositionsaspredictorsormoderators.Ontheotherhand,conceptualassumptionsaretheboundaryconditionsofatheorythatarebasedontheresearcher’sperspective,includingtheresearcher’sphilosophicalorientation,valuesandchoiceofparadigm;positivist,interpretivistandcriticaltheoryorientationsarebasedondifferentconceptualassumptions.Thus,conceptualassumptionsreflectaparticularresearcher’smindset.Theyshouldbesharedwithreaders,inordertohelpthetheoreticalpropositionsmakesense.Conceptualassumptionsareoftendescribedbypurchasingandsupplymanagementresearchersinthelimitationspartofamanuscript’s‘Discussion’section.Limitationsdonotnecessarilyindicateweaknesses;rather,theyprovideinformationaboutwhenandwhereatheoryisrelevant.Testingatheoryindifferentdomainscanleadtobothverificationandrefinementthroughthefeedbackloopprovided(VanWeeleandVanRaaij2014;Whetton1989).PredictionsBecausethegoalofanytheoryistomakepredictions,assessinghow‘good’atheoryisshouldbebasedontheextenttowhichitisabletomakeaccuratepredictions(Huff2009).Theextenttowhichatheoryisabletomakepredictionsisitsgeneralizability;themorephenomenathatatheorycanbeappliedto,thebetterthetheoryis(Wacker1998,2008).Arelatedcriterionisatheory’sfecundity,whichisatheory’sabilitytogeneratenewhypothesesthatexpandfutureresearchintonewconceptualareas(Wacker1998,2008).Generalizabilityandfecundityaretypicallyaddressedinthe‘Discussion’sectionofapurchasingandsupplymanagementmanuscript.ThegeneralizabilityandfecundityofatheorycanbeimprovedbyseveralstrategiesdescribedbyWhetton(2009).First,outcomesshouldbebroadenoughthattheirmeasureswillexhibitsufficientvariancetodemonstratetheeffectssuggestedbythetheory.Second,atheorythatisassociatedwithreasonabledatacollectionrequirementsismorelikelytobeappliedinfutureresearchprojects.Forexample,cross-sectionalpurchasingandsupplymanagementBarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

43Foundationsoftheory25dataiseasierforresearcherstocollectthanlongitudinaldata.Similarly,monadic(fromtheperspectiveofasinglerespondent)relationshipshaveeasierdatacollectionrequirementsthandyadicorpolyadicrelationships(Flynnetal.2018).Third,theoriesthatincludesomestandardconstructsforwhichreliableandvalidmeasuresalreadyexistaremorelikelytobeappliedinfutureresearchprojects.Finally,thedifficultyofoperationalizingnewconstructsisrelatedtoatheory’susebyotherresearchers.Indescribingnewconstructs,usingexamplesthathintattheirpotentialoperationalizationishelpful.Thesesuggestionsarenotmeanttoimplythattheorydevelopmentshouldbelimitedtoconstructsthatareeasytomeasure,orrelationshipsthatareobvious,butrathertoprovideguidelinesforresearchersseekingtoimprovethegener-alizabilityandfecundityoftheirtheories.Anotherimportantfactortoconsideristheextenttowhichatheorycausestheoreticaltensionsthatresultinawarenessofcontradictionsbetweendifferenttheoriesthatexplainthesamephenomenon(PooleandVandeVen1989).Althoughresearchersaretrainedtovalueinternalconsistency(logicalcompatibilityoftheconstructsandrelationshipswitheachother)andparsimony(allotherthingsbeingequal,thefewertheassumptions,thebetter)(Wacker1998,2008),obsessionwithdevelopingaperfecttheorymaycause‘lessandlesscorrespondencetothemultifacetedrealityitseekstoportray’(PooleandVandeVen1989,p.563).Alternatively,less-perfecttheorymaystimulatedevelopmentofmoreencompassingtheories,asotherresearchersseekwaystoenhanceorintegratethem.Thus,intentionalpursuitoftheoreticalinconsistenciescanstimulatedevelopmentofadditionaltheory.Focusingonthisparadoxprovidesawaytoincreasethetheoreticaldiscourseonaphenomenonbyshiftingitsperspective(Melnyketal.2018).Assessingtheaccuracyoftheoreticalproductionsisdifficulttoaddressintheshortterm.Accuracyisultimatelyprovenovertime;eachapplicationofatheoryislikeanexperimentthatdemonstratesorrefutesatheory’saccuracyandindicatesareasforrefinementinfutureapplications.Moreapplicabletheoriesadvanceknowledgewithinadiscipline,guideresearchandenlightenpractice(VandeVen1989).Researcherscanhelptoimprovethepredictiveaccuracyoftheirtheoriesbyexplicitlydescribingdomainissues.Thereshouldbesufficientinformationaboutcontextualandconceptualassumptionsthatotherresearcherswillbeabletodesignappropriateteststopreciselyreflecttheaccuracyofthetheory’spredictions.Further,accuracyoftheoreticalpredictionscanbeenhancedbydevelopingtheoriesthatareempiri-callyrisky,allowingaclearpathtorefutation(Wacker1998,2008).Obvioustheoriesarenotinterestingandnotlikelytoundergofurtherempiricaltesting,whilenon-obviousrelationshipsaremoreinterestingandpotentiallymoreimportant.Thus,themorecounterintuitiveatheo-reticalpropositionis,thebetterthetheoryis.Finally,thesubstantivesignificanceofatheoryisimportantintheaccuracyofitspredictions(Wacker2008).Relyingonlyonstatisticalsignificancecanallowinclusionofvariablesthatareonlysignificantduetochance.Thus,theconceptualimportanceoftheconstructsandrelationshipsisacriterionforsubstantivesignificance.CONCLUDINGTHOUGHTSPurchasingandsupplymanagementtheoryexistsatmultiplelevelsofabstractionandcanbeborrowedfromotherdisciplinesordevelopedspecificallyforthepurchasingandsupplymanagementcontext.ThecommonthreadthatcutsacrossthisdiversityoftheoryisthatitisBarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

4426Handbookoftheoriesforpurchasing,supplychainandmanagementresearchcomprisedofconstructs,relationships,domainandpredictions.Understandingthesebuildingblocksisessentialtoeffectivelydevelopingortestingpurchasingandsupplymanagementtheory.REFERENCESAbdulsalam,Y.,Gopalakrishnan,M.,Maltz,A.,andSchneller,E.(2018),‘Theimpactofphysician‒hospitalintegrationonhospitalsupplymanagement’,JournalofOperationsManagement,57,11–22.Bacharach,S.B.(1989),‘Organizationaltheories:somecriteriaforevaluation’,AcademyofManagementReview,14(4),496–515.Barney,J.,Wright,M.,Ketchen,D.J.Jr.(2001),‘Theresource-basedviewofthefirm:tenyearsafter1991’,JournalofManagement,27(6),625–641.Blount,I.,andLi,M.(2021),‘Howbuyers’attitudestowardsupplierdiversityaffecttheirexpenditureswithethnicminoritybusinesses’,JournalofSupplyChainManagement,56(4),3‒24.Boer,H.,Holweg,M.,Kilduff,M.,Pagell,M.,Schmenner,R.,andVoss,C.(2015),‘Makingameaning-fulcontributiontotheory’,InternationalJournalofOperationsandProductionManagement,35(9),1231–1352.Burns,L.R.,andDeGraaff,R.A.(2002),‘Importanceofthehealthcarevaluechain’,inBurns,L.R.andWhartonSchoolColleagues(eds),TheHealthCareValueChain:Producers,Purchasers,andProviders.Hoboken,NJ:JosseyBass,pp.27–40.Coughlan,P.Coglan,D.,andLombard,F.(2003).‘Managingcollaborativerelationshipsinaperiodofdiscontinuity’,InternationalJournalofOperationsandProductionManagement,35(6),1246–1259.Davis,D.F.,Davis-Sramek,B.,Golicic,S.L.,andMcCarthy-Byrne,T.M.(2019),‘Constrainedchoiceinsupplychainrelationships:theeffectofregulatoryinstitutions’,InternationalJournalofLogisticsManagement,30(4),1101–1123.DiMaggio,J.,andPowell,W.W.(1983),‘“Theironcagerevisited:”institutionalisomorphismandcol-lectiverationalityinorganizationalfields’,AmericanSociologicalReview,48,147–160.Ellram,L.M.,Harland,C.M.,vanWeele,A.,Essig,M.,Johnsen,T.,etal.(2020),‘Purchasingandsupplymanagement’sidentity:Crisis?Whatcrisis?’,JournalofPurchasingandSupplyManagement,26,1–8.Eltantawy,R.,Paulraj,A.,Guinipero,L.,Naaslune,D.,andThute,A.A.(2015),‘Towardsupplychaincoordinationandproductivityinathree-echelonsupplychain’,InternationalJournalofOperationsandProductionManagement,35(6),895–924.Flynn,B.B.,Pagell,M.,andFugate,B.(2018),‘Surveyresearchdesigninsupplychainmanagement:theneedforevolutioninourexpectations’,JournalofSupplyChainManagement,54(1),1–15.Flynn,B.B.,Pagell,M.,andFugate,B.(2020),‘Introductiontotheemergingdiscourseincubatoronthetopicofemergingapproachesfordevelopingsupplychainmanagementtheory’,JournalofSupplyChainManagement,56(2),3–6.Granovetter,M.S.(1973),‘Thestrengthofweakties’,AmericanJournalofSociology,78(6),1360–1380.Hambrick,D.C.(2007),‘Thefieldofmanagement’sdevotiontotheory:toomuchofagoodthing?’,AcademyofManagementJournal,50(5),1346–1352.Harland,C.M.,andKnight,L.A.(2001),‘Supplynetworkstrategy:roleandcompetencerequirements’,InternationalJournalofOperationsandProductionManagement,21(4),476–489.Hayes,R.H.,andWheelwright,S.C.(1979),‘Linkmanufacturingprocessandproductlifecycles’,HarvardBusinessReview,January–February,133–140.Hill,T.(2000),ManufacturingStrategy:TextandCases,3rdedn.Boston,MA:IrwinMcGraw-Hill.Hilt,R.P.(1995),‘Researchingsensitivetopicsinmarketing:thespecialcaseofvulnerablepopulations’,JournalofPublicPolicyandMarketing,14(1),143–155.Huff,A.S.(2009),DesigningResearchforPublication.LosAngeles,CA:SAGE.Jensen,M.C.,andMeckling,W.H.(1976),‘Theoryofthefirm:managerialbehavior,agencycosts,andownershipstructure’,JournalofFinancialEconomics,3(4),305–360.BarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

45Foundationsoftheory27Lu,J.,Kaufmann,L.,andCarter,C.R.(2020),‘Howinformalexchangesimpactformalsourcingcollab-oration(andwhatsupplymanagerscandoaboutit)’,JournalofSupplyChainManagement,56(4),26–62.Marques,L.,Yan,T.,andMatthews,L.(2020),‘Knowledgediffusioninaglobalsupplynetwork:anetworkofpracticeview’,JournalofSupplyChainManagement,56(1),33–53.McDermott,C.M.,andStock,G.N.(2011),‘Focusasemphasis:conceptualandperformanceimplica-tionsforhospitals’,JournalofOperationsManagement,29(6),616–626.Melnyk,S.A.,Flynn,B.B.,andAwaysheh,A.(2018),‘Thebestoftimesandtheworstoftimes:empiricaloperationsandsupplychainresearch’,InternationalJournalofOperationsandProductionManagement,56(1–2),164–192.Nyaga,G.N.,Young,G.J.,andZepeda,E.D.(2015),‘Ananalysisoftheeffectsofintra-andinteror-ganizationalarrangementsonhospitalsupplychainefficiency’,JournalofBusinessLogistics,36(4),340–354.Osigweh,C.A.B.(1989),‘Conceptfallibilityinorganizationalscience’,AcademyofManagementReview,14(4),579–594.Pathak.D.D.,Day,J.M.,Nair,A.,andSawaya,W.J.(2007),‘Complexityandadaptivityinsupplychains:buildingsupplynetworktheoryusingacomplexadaptivesystemsperspective’,DecisionSciences,38(4),547–580.Plsek,P.(2003),‘Complexityandtheadoptionofinnovationinhealthcare’,AcceleratingQualityImprovementinHealthCare:StrategiestoAcceleratetheDiffusionofEvidence-BasedInnovations.Washington,DC:NationalInstituteforHealthcareManagementFoundationandNationalCommitteeforQualityinHealthCare.Poole,M.S.,andVandeVen,A.H.(1989),‘Usingparadoxtobuildmanagementandorganizationaltheories’,AcademyofManagementJournal,14(4),562–578.Reed,D.(1999),‘Stakeholdermanagementtheory:acriticaltheoryperspective’,BusinessEthicsQuarterly,9(3),453–483.Sampson,S.E.,Schmidt,G.,Gardner,J.W.,andVanOrder,J.(2015),‘Processcoordinationwithinahealthcareservicesupplynetwork’,JournalofBusinessLogistics,36(4),355–373.Skilton,P.F.,Bernandes,E.,Li,M.,andCreek,S.A.(2020),‘Thestructureofabsorptivecapacityinthreeproductdevelopmentstrategies’,JournalofSupplyChainManagement,56(3),47–65.Skinner,W.(1974),‘Thefocusedfactory’,HarvardBusinessReview,52(3),113–121.Springett,D.(2013),‘Criticalperspectivesonsustainabledevelopment’,SustainableDevelopment,21(2),73–82.Suddaby,R.(2006),‘Whatgroundedtheoryisnot’,AcademyofManagementJournal,49(4),633–542.Sutton,R.K.,andStaw,B.M.(1995),‘Whattheoryisnot’,AdministrativeScienceQuarterly,40(3),371–384.Touboulic,A.,McCarthy,L.,andMatthews,L.(2020),‘Re-imaginingsupplychainchallengesthroughcriticalengagedresearch’,JournalofSupplyChainManagement,56(2),36–51.Touboulic,A.,andWalker,H.(2016),‘Arelational,transformativeandengagedapproachtosustainablesupplychainmanagement:thepotentialofactionresearch’,HumanRelations,69(2),301–343.Tucker,A.L.,andEdmondson,A.C.(2003),‘Whyhospitalsdon’tlearnfromfailure:organizationalandpsychologicaldynamicsthatinhibitsystemchange’,CaliforniaManagementReview,45(2),54–72.Tversky,A.andKahneman,D.(1974),‘Judgmentunderuncertainty:heuristicsandbiases’,Science,185,1124–1130.VandeVen,A.H.(1989),‘Nothingisquitesopracticalasgoodtheory’,AcademyofManagementReview,14(4),486–489.VanWeele,A.J.,andVanRaaij,E.M.(2014),‘Thefutureofpurchasingandsupplymanagementresearch:aboutrigorandrelevance’,JournalofSupplyChainManagement,50(1),56–72.Wacker,J.G.(1998),‘Adefinitionoftheory:researchguidelinesfordifferenttheory-buildingresearchmethodsinoperationsmanagement’,JournalofOperationsManagement,16,361–385.Wacker,J.G.(2008),‘Aconceptualunderstandingofrequirementsfortheory-buildingresearch:guide-linesforscientifictheorybuilding’,JournalofSupplyChainManagement,44(3),5–15.Weick,K.E.(1989),‘Theoryconstructionasdisciplinedimagination’,AcademyofManagementReview,14(4),516–531.BarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

4628Handbookoftheoriesforpurchasing,supplychainandmanagementresearchWeick,K.E.(1995),‘Whattheoryisnot,theorizingis’,AdministrativeScienceQuarterly,40(3),385–390.Wheelwright,S.C.,andHayes,R.H.(1985),‘Competingthroughmanufacturing’,HarvardBusinessReview,63(1),99–110.Whetton,D.A.(1989),‘Whatconstitutesatheoreticalcontribution?’,AcademyofManagementReview,14(4),490–495.Whetton,D.A.(2009),‘Modelingtheoreticalpropositions’,inHuff,A.S.(ed.),DesigningResearchforPublication.LosAngeles,CA:SAGE,pp.217–247.Williamson,O.E.(1975),MarketsandHierarchies.NewYork:FreePress.Williamson,O.E.(1985),TheEconomicInstitutionsofCapitalism.NewYork:FreePress.SUGGESTEDFURTHERREADINGDevelopmentofInterestingResearchQuestionsBarley,S.R.(2000),‘WhenIwritemymasterpiece:thoughtsonwhatmakesapaperinteresting’,AcademyofManagementJournal,49(1),16–20.Bartunek,J.M.,Ryner,S.L.,andIreland,R.D.(2006),‘Whatmakesresearchinterestingandwhydoesitmatter?’,AcademyofManagementJournal,49(1),9–16.Davis,M.S.(1971),‘That’sinteresting!Towardsaphenomenologyofsociologyandasociologyofphenomenology’,PhilosophyoftheSocialSciences,1(4),309–344.Weick,K.E.(1999),‘That’smoving!’,JournalofManagementInquiry,8,134–142.Middle-RangeTheoryCalantone,R.,Whipple,J.M.,Wang,J.F.,Sardashti,H.,andMiller,J.W.(2017),‘Aprimeronmoder-atedmediationanalysis:exploringlogisticsinvolvementinnewproductdevelopment’,JournalofBusinessLogistics,38(3),161–169.Craighead,C.W.,Ketchen,D.J.Jr.,andCheng,L.(2016),‘“Goldilocks”theorizinginsupplychainresearch:balancingscientificandpracticalutilityviamiddle-rangetheory’,TransportationJournal,30(1),241–257.TheoryDevelopmentSuddaby,R.(2006),‘Whatgroundedtheoryisnot’,AcademyofManagementJournal,49(4),633–542.Whetton,D.A.(2002),‘Modeling-as-theorizing:asystematicmethodologyfortheorydevelopment’,inPortingtor,J.D.(ed.),EssentialSkillsforManagementResearch.London:SAGEPublications,pp.45–71.BarbaraB.Flynn,MarkPagell,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:02AMviaColumbiaUniversityLibrary

473.DevelopingpurchasingandsupplymanagementtheoryMarkPagell,BarbaraB.Flynn,BrianFugateandDavidE.CantorINTRODUCTIONWhyTheory?Imagineaworldwithouttheory.Atoneextreme,researchwouldconsistofdiggingthroughempiricaldatainsearchofstatisticallysignificantrelationships.Whiletheoutcomecouldbeaplethoraofsignificantresults(orperhapsasetofobservationswithnocoherence),research-erswouldnotdevelopanunderstandingofwhytheyoccurred,thedynamicsunderlyingrelationshipsbetweenkeyconstructsorwhythoserelationshipsareimportant.Attheotherextreme,researcherswouldcompilepracticeswithoutguidanceastowhytheywork;whileeffectiveinalocalcontext,thisisnotgeneralizabletoothercontexts.Theorythatdevelopsacoherentexplanationforfindingsresultingfromempiricalevidenceiswhatmakespurchas-ingandsupplymanagementresearchascience,ratherthanasetofpractices.TheNeedforTheoryUniquetoPurchasingandSupplyManagementGrandtheory,suchasresource-basedtheory,transactioncosteconomicstheory,institutionaltheoryoragencytheory,hasbeenimportantinguidingpurchasingandsupplymanagementresearch.Itiswidelyunderstood,anditsconstructsandrelationshipsareclearlyarticulatedandsupportedbypriorempiricaltesting.However,mostgrandtheoriesweredevelopedfordomainsotherthanpurchasingandsupplymanagement,includingeconomics,strategicman-agement,marketing,computerscience,psychology,andotherdisciplines.Thereareopportu-nitiestodevelopnewinsightsthroughdevelopingtheoriesthatareuniquetothepurchasingandsupplymanagementdomain,whichdiffersfromthedomainswheregrandtheorieshavetheirroots,inseveralimportantways.First,asCarteretal.(2017)describe,althoughmanyresearchersareconductingpurchasingandsupplymanagementresearch,wehavefailedtoagreeonwhatasupplychainis.Supplychainsdonotexistphysically;thus,theyareasociallyconstructed,sometimesill-definedconstruct.Thisleadstoawidevarietyofdefinitionsandlackoftheagreementonkeycon-structsandproblemsthatcharacterizesotherfields.Thereisasteadystreamofnewresearchquestions(Durachetal.,2017),causingawiderangeofpotentialtheoreticalboundariesandperspectivestoberelevant.Second,theunitofanalysisinpurchasingandsupplymanagementvarieswidely,fromindividualpurchasingmanagerstosupplychaindyads,networks,andextendednetworksthatincludeallactorsthatcontributetotheflowofproducts,services,moneyandinformation(Durachetal.,2017).However,thefocusofmuchgrandtheoryisonindividualsandinterper-29MarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

4830Handbookoftheoriesforpurchasing,supplychainandmanagementresearchsonalrelationships.Althoughorganizationsarecomprisedofindividualsworkingasagentsrepresentingthem,asingleindividual’sthoughtsoracollectionofindividuals’thoughtsmaynotbeindicativeoforganizationaldecisions.Althoughpurchasingmanagersareindividuals,theyoperatewithindecisionparameterssetbytheirorganizations,whichmeansthatpurchas-ingandsupplymanagementresearchersareabletoapplyonlyasubsetoftheassumptionsofvariousgrandtheories(Durachetal.,2017).Third,bytheirverynature,buyersandsuppliershaveconflictinggoals;theyaresimulta-neouslyindependentandinterdependent.Forinstance,suppliersseekthehighestpricetheyareabletochargetocovertheirexpensesandgeneratesomeprofit,whilebuyersseekthelowestpricesforacceptablequalitylevelstobeprofitable.Thisindependenceinevitablyleadstobuyer‒supplierconflict.However,buyersandsuppliersarealsonecessarilyinter-dependent,withindividualprofitabilitydepending,inpart,onthesuccessofallmembersoftheirsupplychain.Thisbecomesevenmorecomplicatedwhensupplyrelationshipsincludenon-governmentalorganizations(NGOs)(Johnsonetal.,2018),socialenterprises(Longonietal.,2019;Pullmanetal.,2019)orgovernments(QuarshieandLeuschner,2020),eachwiththeirowngoals.Fourth,manypurchasingandsupplymanagementresearchersfocusonasimplifiedrep-resentationofasupplychainasadyadicbuyer‒supplierrelationship.Althoughpurchasingrelationshipsarebetweenabuyerandsupplier,supplychainsextendwellbeyondarelation-shipbetweentwoentities,withimportantimplicationsforbuyingcompanies.Complexsupplychainsmaylacktransparencybeyondatierortwo,yetconsumersareincreasinglyholdingcompaniesresponsibleforbehaviourintheirextendedsupplychains(Lund-ThomsenandLindgren,2014).Thus,thereisincreasingrecognitionthat‘theexpectedlineofresponsibilityneedstoextendalongthefullextentofafirm’ssupplychainsintoitsproducts,processes,andrelationships’(Ashbyetal.,2012,p.497),andthatsupplychainsaremoreappropriatelycon-ceptualizedasnetworksratherthanasdyadicrelationships.Socialnetworktheory(BorgattiandFoster,2003)andcomplexadaptivesystemstheory(Holland,2001)areexpresslydesignedfornetworksandmaybetterincorporatesomeofthesechallenges.Finally,asglobalsupplynetworksbecomeincreasinglydynamic,andcontainmanyhet-erogeneousactors,notallofwhomhaveaprofitmotive(forexample,Pagelletal.,2018),theirbehaviourisdrivenbycomplexinteractionsandtheneedforinformationtocoordinateoperationsbetweenindependent,yetinterdependent,supplychain(SC)membersincreases.Althoughthesecharacteristicsmayalsoapplytomarketing,anadditionalcharacteristicthatdifferentiatespurchasingandsupplymanagementisthatitoperateswithafinite,diminish-ingsetofresources.Incontrast,marketinghastheabilitytocreateandstimulatedemand.Understandinganddealingwithsupplymarketsandresourceconstraintsiscentraltopurchas-ingandsupplymanagement.Theseuniquecharacteristicsdrivetheneedfortheoryspecifictothepurchasingandsupplymanagementdomain.Applyinggrandtheorydesignedforadifferentcontextandlevelofanal-ysismayseemlikepoundingasquarepegintoaroundhole,leadingtoreferencestotheorythataredroppedintomeetpublicationrequirements,ratherthaneffectivelyguidingresearchtorevealimportantinsights.Further,purchasingandsupplymanagementhasthepotentialfordevelopingtheorythatcaninformotherdisciplines.MarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

49Developingpurchasingandsupplymanagementtheory31TheoryDevelopmentasDisciplinedImaginationWeick(1989)famouslydescribedtheorydevelopmentas‘disciplinedimagination’.Itisdis-ciplinedthroughconsistentapplicationofcriteriaandanalysistoqualitativeandquantitativedata,anditisimaginativebecauseitisbasedondiversethoughtprocessesandintentionalbroadeningofperspectivestodiscernthestorythatthedatatells.Itcombinesdeepobserva-tion,creativityandemotionwithdiscipline,rigourandtechnique(Caniatoetal.,2020).Inthefollowingsections,weprovideanoverviewofseveralapproachesthatmelddisciplinewithimaginationtodeveloppurchasingandsupplymanagementspecifictheory(seeFigure3.1).Wedescribeboththeoryenhancementandtheorybuildingapproaches,movingroughlyfromthosewherethediscipline‒imaginationmixisontheimaginationsidetothosethataremoredisciplined,withineachsection.Theoryenhancementbeginswithestablishedtheory,thenmodifiesit(forexample,byrefiningconstructsorrelationships)orelaboratesuponit(forexample,byapplyingitinadifferentdomain).Ontheotherhand,theorybuildinginductivelyextractsmeaningfromempiricalobservations,movingfromlocalobservationtodevelopinggeneralizableconstructs,relationshipsandpropositions.Figure3.1ExamplesoftheoryenhancementandtheorybuildingapproachesasdisciplinedimaginationTHEORYENHANCEMENTAPPROACHESTheoryenhancementstartswithanestablishedtheory,notesempiricalfindingsthatdonotfit,thenusesimaginationtoresolvetheapparentparadox(AlvessonandKärreman,2007).Theoppositionsandcontradictionswithinaparadox(PooleandVandeVen,1989)allowresearch-erstoplaydifferentperspectivesoffagainsteachother,highlightingopportunitiestodeveloptheorythatisabetterfit(AlvessonandKärreman,2007).Oneapproachtoresolvingaparadoxistoapplyspatial,temporalanddomainseparation.PooleandVandeVen(1989)recommendusingspatialseparationtoresolveatheoreticalparadoxbyclarifyinglevelsofanalysis.Forexample,Reimannetal.(2017)extendedthedomainofextanttheoryonsupplier-inducedMarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

5032Handbookoftheoriesforpurchasing,supplychainandmanagementresearchdisruptionsfromsingle-leveltomultiple-levelanalysis,whereindividualcognitivedecisionmakingisnestedinorganizationaldecisionmaking.TheyappliedfuzzysetanalysistoanalyseresponseprocessesfromdyadicinterviewsofdecisionmakersinWesternbuyingfirmsandtheirChinesesupplierstodevelopfivetheoreticaltypes.Similarly,temporalseparationcanbeeffectiveinresolvingaparadoxbyunderstandingthatone‘horn’(PooleandVandeVen,1989)oftheparadoxholdsatonepointintime,whiletheotherholdsatadifferentpointintime.Forexample,Nietal.(2015)studiedshippers’voluntaryadoptionoftheCustoms‒TradePartnershipAgainstTerrorism(C-TPAT)standard,whichgivesthemaccesstothefastlaneatinternationalbordersandports,inexchangeforsubmittingtoCustomsandBorderProtectioninspectionoftheirfacilitiesanddevelopingSCsecurityplans.Usingprospecttheory,theyfoundthatearlyC-TPATadoptersweremotivatedbyavoidingthepotentialreputationaldamageofaSCbreach(lossaversion),whilelateradoptersweremotivatedbytheeconomicbenefitsofaccessingthefastlaneatinternationalbordercrossings.Thus,Nietal.(2015)enhancedprospecttheorybyapplyingittothedomainofSCshippingandtemporallyseparat-ingtheearlyadoptersofavoluntarystandardfromlateradopters.ConceptualTheoryEnhancementAthirdapproachtoresolvingatheoreticalparadoxisthroughdomainseparation,whereonehornoftheparadoxholdsinonedomain,whiletheotherholdsinadifferentdomain.Thisapproachhassignificantpotentialforthedevelopmentofpurchasingandsupplymanagementtheory,duetotheuniquecharacteristicsofthisdomain.Carteretal.(2017)usedthisapproachtoenhanceexistingtheoryonthepractice-basedview(PBV)(BromileyandRau,2014),avariantofresource-basedtheory(RBT)(Barney,2012),inordertomakeitrelevanttoaSC.ThePBVfocusesonthedomainofpracticesthatareimitableandtransferable,andwhoseuseresultsinarangeofperformanceoutcomes,unlikeRBT’sfocusonthedomainofresourcesthatarevaluable,rare,inimitableandnon-substitutable(VRIN).Thus,thedependentvariableinthePBVisperformance,ratherthanRBT’ssustainedcompetitiveadvantage(limitedtothetopperformerinanindustry).IndependentvariablesinthePBVareimitable,transferablepractices,ratherthanRBT’sVRINresources.Thus,thebasicrelationshipinthePBVisthatdifferencesinfirmperformanceareexplainedbythepracticestheyemploy,movingfromRBT’sresourcedomaintothePBV’spracticedomain.Carteretal.(2017)poserelationalper-formanceasthefocalconstruct.Itisdefinedasperformancebenefitsgeneratedbytwoormorefirmsbeyondthosetheycouldgenerateindividually.Ratherthanfirmperformance,theSCpracticeview(SCPV)focusesonrelationalperformance,whichisattheinterorganizationallevel.LikethePBV,however,theSCPVusesperformanceasthedependentvariable,ratherthansustainedcompetitiveadvantage.AlsolikethePBV,theSCPVexplainsperformanceacrossitsentirerange,ratherthanonlyforSCleaders.Thus,theSCPV’sfocalconstruct(relationalperformance)includesboththeintra-organizationalperformanceofeachfirminaSCrelationshipanditsappropriatedrelationalperformanceattheintersectionbetweenthefirms.Abuyer’sperformanceisthusafunctionofitsintra-organizationalpracticesplustheinterorganizationalSCmanagementpracticesthatthebuyerappropriatesfromitsrelationshipwithasupplier.Asthebuyerbundlesitsownintra-organizationalpractices,whicharecomplementaryinterorganizationalpracticesthatspanorganizationalboundaries,performancegainsaremade.Thesameargumentscanbemadeforasupplier,membersofatriad,ormembersofanextendedsupplynetwork.Thus,theMarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

51Developingpurchasingandsupplymanagementtheory33valueofrelationalperformancecomesfromtheuseofinterorganizationalpracticesbeyondwhatanindividualbuyerorsuppliercoulduse.Thus,bystartingwiththeexistingPBVandenhancingitbyconsideringitinaninterorganizationaldomain,Carteretal.(2017)provideanexampleofpurchasingandsupplymanagementtheoryenhancement.TypologiesMovingfromthecreativeapproachofconceptualtheoryenhancement,buildingatypologyprovidesasomewhatmoredisciplinedapproachtotheoryenhancement.Atypologyisasetofconceptuallydevelopedidealtypesthatconstituteatheory(DotyandGlick,1994).Ratherthanprecise,measurableoperationalizations,typologiesuserichdescriptionstogivea‘feel’foreachidealtype(DotyandGlick,1994).1Typologies,likealltheories,canbedescribedintermsofconstructs,relationships,domainandpredictions.Therearetwotypesofconstructsinatypology.Anidealtypeisacomplex,abstractconstructdescribedusingmultipleattributes.IdealtypescanbeindependentmultidimensionalprofilessuchasPorter’s(1980,1985)lowcost,differentiationandfocusstrategies;endpointsonacontinuumsuchasCameronandQuinn’s(2005)competingvaluestypologyoforganizationalculture;oracontinuumofidealtypessuchastheproduct‒processmatrix(HayesandWheelwright,1979).Whileanidealtypedescribesaphenomenonthatmightexist,empiricalexamplesoforganizationsthatembodyallthedimensionsofanidealtypearerareornon-existent;thus,anidealtypeisanabstractconstruct.Thesecondtypeofconstructinatypologyistheindividualunidimensionalconstructsthatcompriseeachidealtype.Theyarefirst-orderconstructs,whiletheidealtypesaresecond-orderconstructs.Typologyrelationshipsprimarilyfocusoninternalconsistencyamongthefirst-orderconstructsthatcompriseanidealtype.Combined,theyexplainwhyanidealtypeexplainsthedependentvariable;‘greatersimilaritytoanidealtypeispositedtoresultingreatereffectiveness’(DotyandGlick,1994,p.234).Thedomainofatypologyexistsattwolevels,correspondingtothetypeoftheoryassociatedwithit.Grandtheoryexistsattheleveloftheidealtypes,generalizabletoallorganizations.Forexample,anyassemblylineisexpectedtobeefficient,comparedwithanyjobshop(HayesandWheelwright,1979).Mid-rangetheoryexistsattheleveloftheindividualdimensionsthatcomprisetheidealtypes;anassemblylineinacafeteriahasverydifferentcharacteristicscomparedtoanassemblylineinanautomotiveplant.Atypology’spredictionsarerelatedtoitsdomain.TypologiesareY-focusedtheories,explainingthedependentvariable(Y);thus,theproduct‒processmatrixisatheoryofefficiencyandcustomization,ratherthanatheoryofassemblylinesandjobshops.Predictionsaremadeaboutthedependentvariableofatypology,basedonhowsimilarorganizationsaretotheidealtypes(DotyandGlick,1994).KimandChoi(2015)provideanillustrationofdevelopingpurchasingandsupplyman-agementtheoryusingatypology.Theystartedwiththewidelyusedrelativeposture(coop-erativeversusadversarial)typologyofbuyer‒supplierrelationships,whichtheydescribedasincomplete,becauseitignoresrelationalintensity(amountandstrengthoftransactions).SCmemberswhoseoperationsaretightlylinkeddonotnecessarilyengageinmutuallyaccom-modatingpractices,andarm’slengthbuyer‒supplierrelationshipsarenotalwaysadversarial.Positioningrelationalpostureandrelationalintensityastheaxes,KimandChoi(2015)developeda2x2matrixthatdescribesfouridealtypesofbuyer‒supplierrelationships.A‘sticky’buyer‒supplierrelationshipiscloselytied,butadversarial.AlthoughtheiroperationsMarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

5234Handbookoftheoriesforpurchasing,supplychainandmanagementresearcharesynchronized,buyersandsuppliersconsidertheirrelationshipasa‘necessaryevil’(KimandChoi,2015).Theyengageinpowergames,wherethemorepowerfulpartytriestoshapetherelationshiptoitsadvantage,andtheweakerpartyengagesincovertactionsto‘geteven’.Incontrast,a‘deep’buyer‒supplierrelationshipiscloselytiedandcooperative.Thebuyerandsupplierrespondtoeachother’sneeds,jointlydevelopingefficientcommunicationsmechanismsforcoordinatingproductionactivitiesandwillinglybecomingoperationallyandstrategicallyinterdependent.A‘transient’buyer‒supplierrelationshipisadversarialandshort-term.Mosttransactionsarediscrete,establishedthroughcompetitivetenderingandaggressivepricenegotiations.Thebuyerandsupplierarewillingtoenforceoradheretothetermsoftheircontracttoavoidtheopenmarket,buttheirrelationshipis,atbest,indifferentandmorelikelyconfrontational.Finally,a‘gracious’buyer‒supplierrelationshipisatarm’slength,butcooperative.Althoughthebuyerandsupplierholdeachotherinhighregard,theircollaborativeactivitiesaresporadic,perhapsbecauseofonlyoccasionalneedforacertainpartormaterial.Whilethebuyerandsupplierretainautonomyintheirrelationshipandneitherishighlydependentontheother,theyarepositivetowardeachotherandmaintaingoodwill.Inthisexample,thekeyconstructsarethefirst-ordermultidimensionalsticky,deep,tran-sientandgraciousidealtypes,aswellasthepotentialoutcomes.Therearealsounidimensionalsecond-orderconstructs,includingthelengthofabuyer‒supplierrelationship,theintensityofexchange,thetypeofcontractgoverningtherelationship,trust,collaboration,cooperation,andsoon.Thekeytheoreticalrelationshipsarebetweenthesecond-orderconstructscompris-ingtheidealtypes;thestrongertheyare,themorecloselyanorganizationresemblesanidealtype.Thedomainofthistheoreticaltypologyisabuyer‒supplierrelationship.Predictionsarerelatedtospecificoutcomes;forexample,agraciousbuyer‒supplierrelationshipisassociatedwithfasterdeliveries,productinnovationorSCintegration.Thus,typologydevelopmentofferssubstantialpotentialforenhancingpurchasingandsupplymanagementresearch.SystematicLiteratureReviewAthirdapproachtotheoryenhancementisthroughuseofasystematicliteraturereview(SLR).Whileliteraturereviewsoftenapplycreativewaystosynthesizetheextantliterature,searchforparadoxesorunexploredquestions,andextractopportunitiesfortheoryenhancement,systematicliteraturereviewsprovideamoredisciplinedapproachtostructuringthisprocess.Originallydevelopedinmedicineasameansofknowledgedevelopment,Durachetal.(2017)arguethatsystematicliteraturereviewsarealsoapowerfulapproachforenhancingpurchasingandsupplymanagementtheory.AtheoreticalSLRisbasedonanalysis,integrationandsyn-thesisoftheextantliterature;itis‘morethanadescription(stocktaking)ofexistingliterature;instead,itisaimedatrefiningorrevisingpredeterminedtheoreticalframeworks’(Durachetal.2017,p.78).Durachetal.(2017)refinedtheSLRprocessusedinfieldssuchasmedicineandmanagementtoreflecttheuniquecontextofpurchasingandsupplymanagementtheory;Table3.1describesthestepsinthisprocess.ZimmermannandFoerstl(2014)provideanexampleofusingaSLRwithinthedomainofpurchasingandsupplymanagement.Theybuiltonresource-basedtheory,whichassumesthatfirmshavelimitedaccesstostrategicresourcesthatareassociatedwithperformance.Barney(2012)describesthepotentialofsupplychainmanagementtoserveasastrategicresourcethatcontributestotheperformanceofabuyingfirm,throughhelpingbuyersandsuppliersworktogethertodevelopdistinctattributesthataredifficulttoimitateandwouldbetime-consumingMarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

53Developingpurchasingandsupplymanagementtheory35Table3.1StepsinconductingasystematicliteraturereviewStepDescriptionDefinepurposeDevelopaninitialtheoreticalframeworkspecifyingunitofanalysis,context,andconstructdefinitions.Limittheliteraturereviewedtooneortwoperspectives.ArticulatecharacteristicsofprimaryDefinecriteriaforinclusionandexclusionofprimarystudies,basedontheresearchstudiesquestion,purposeandinitialtheoreticalframework.SelectbaselinesampleofliteratureUsekeywordstosearchforpotentiallyrelevantpublishedandunpublishedprimarystudies,ensuringtheycoverallaspectsoftheinitialtheoreticalframework,researchpurposeandinclusion/exclusioncriteria.Theyshouldalsoaddresspotentiallimitationsoftheinitialtheoreticalframeworkandthebreadthofconstructdefinitionsandterminologyusedintheliterature.DevelopsynthesissampleApplytheinclusionandexclusioncriteriatoselectprimarystudieswithstrongpotentialtoinformtheinitialtheoreticalframework.Itisnotnecessarytogeneratealargevolumeofprimarystudies;asmallersamplethatmakesastrongercontributionisideal.Thisstepispronetobothinclusioncriteriabiasandselectorbias.Durachetal.(2017)recommendapplyingexclusioncriteriatotitlesandinclusioncriteriatoabstractsandhighlightingfactorsexplainingdifferencesinprimarystudyfindings.CodedatainsynthesissampleDevelopcodesreflectingtheextractiontemplatebasedontheinitialtheoreticalframework,aswellasthemesthatemergeduringthecodingprocess.Summarizetheevidenceusingcontingencystatements(‘if…then’,‘when’and‘forwhom’).Constructsmaybesplittoreflectmorerefineddefinitionsandultimatelytransitiontoanimprovedtheoreticalframework.DevelopnarrativepropositionsDevelopnarrativepropositionsreflectingmechanisms,contextandoutcomes.Theyshouldcombineinsightsfromdifferentmethodologicalapproachesandresearchsettings.Identificationofcontradictoryempiricalresults,outliersandreal-worldparadoxesreflectedintheliteratureplaysacentralroleinthisstep.CompileresultsintomanuscriptWriteamanuscriptdescribinghowtheprimarystudieswereidentifiedandanalysed,aswellashighlightingthethematictheoreticalknowledgeresultingfromtheanalysis.Itshoulddescribetheinitialframeworkandcontrastitwiththeresultingrefinedframework,todeveloptheoreticalpropositionsbasedonconceptual,contextualandtemporalcontingencies.Source:AdaptedfromDurachetal.(2017).forthebuyingfirmtodevelopbyitself.ZimmermannandFoerstl’s(2014)researchsoughttoenhanceresource-basedtheorybyextendingBarney’s(2012)domainfromsupplychainmanagementtopurchasingandsupplymanagement.Theirresearchquestionwaswhetherpurchasingandsupplymanagement(PSM)practicesinfluencebuyerperformance,inotherwords,whetherPSMservesastrategicpurpose.TheirinitialtheoreticalframeworkgroupedPSMpracticesintotwogroups.Supplier-facing(exter-nal)PSMpracticesincluderelationalPSMpractices(deploymentofresourcesbyboththebuyerandthesupplier)andnon-relationalPSMpractices(deploymentofresourcesbyjustthebuyer;forexample,supplierselectionorsupplybasereduction).InternalPSMpracticesincludeverticallyalignedPSMpractices(alignedwithcorporatestrategy),cross-functionalintegrationpractices(jointpracticeswithotherinternalfunctions,suchasmanufacturing,researchanddevelopment,ormarketing),within-PSMpractices(negotiationpreparation,orderprocessing,andsoon),andenablingPSMpractices(informationtechnology,skilldevelopment,employeeevaluation,andsoon).ThetwogroupsofPSMpracticeswereMarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

5436Handbookoftheoriesforpurchasing,supplychainandmanagementresearchhypothesizedtoberelatedtobuyingfirmperformance,includingoperational,marketandfinancialperformance.Inthesecondstep,ZimmermannandFoerstl(2014)articulatedthecharacteristicsoftheprimarystudiestobereviewed,toinformtheaspectsoftheirinitialtheoreticalframework.Theirinclusionandexclusioncriteriawerebasedonmethodologicalapproach,scopeoftheirtopic,andavailabilityofthetypeofdatatheysoughttoanalyse.Methodologically,theysoughttoincludeempiricalresearchstudies,excludingcasestudies,conceptualpapers,conceptualliteraturereviews,mathematicalmodellingandsimulationresearchstudies.Thescopeofthefindingstheysoughtwasdefinedasincludingspecificperformanceresultsasso-ciatedwiththeuseofPSMpractices,ratherthanmoregeneralstudies.Becausetheirintentwastouseameta-analysisapproachtoanalysethedata,athirdinclusioncriterionwasthatthestudieswererequiredtoincludecorrelationsbetweenvariousPSMpracticesandtypesforperformance.InthethirdstepoftheirSLR,ZimmermannandFoerstl(2014)selectedtheirbaselinesampleofpotentiallyrelevantliterature.Theydevelopedacomprehensivelistofkeywordsincluding‘suppl*’,‘purchasing’,‘sourcing*’,‘vendormanag*’,‘procur*’,‘verticalalliance*’and‘performance’.Theyappliedthemtosearch17leadingpeer-reviewedjournalsthatwereknowntohavepublishedPSMresearch,usingtheEBSCOBusinessSourceComplete,ScienceDirectandEmeraldManagementXtradatabases.TheyalsoobtainedarticlesrecommendedbyknowledgeablePSMresearchersandsearchedthereferencelistsofthemostfrequentlycitedPSMstudiestoobtainadditionalstudiesthathadnotbeenfoundinthedatabasesearch.Thisprocessresultedinabaselinesampleof659potentiallyusableprimarystudies.ZimmermannandFoerstl(2014)thenappliedtheinclusionandexclusioncriteriatodevelopthesynthesissample.Startingwiththebaselinesampleof659studies,244wereeliminatedbecauseoftheirmethod,andanother269wereeliminatedbecausetheirdefinitionofPSMpracticeswasnotconsistentwithZimmermannandFoerstl’s(2014)initialtheoreticalframe-work.Anadditional41studiesdidnotincludethecorrelationdatathatwasrequired;theauthorswerecontacted,andsomewereabletoprovidetheneededdata.Thefinalsynthesissamplecontained108articlesabout99independentstudiesofatotalof22971buyingfirms.Inthefifthstep,thedatainthesynthesissamplewascodedbythetwoauthors,usingcodesbasedontheinitialtheoreticalframework.Toensureconsistencybetweenthem,theycodedthefirsttenstudiestogether,thencomparedcodesafterevery20studieshadbeencoded.Theyachievedaninter-raterreliabilityscoreof94percent,resolvinganyinconsistenciesthroughfurtherdiscussion.Theauthorsalsoevaluatedwhetherthemeasurestheyevaluatedwereconsistentwiththedefinitionsassociatedwiththeinitialtheoreticalframework,exceedingthethresholdvalueof75percentcontentvalidity.ZimmermannandFoerstl(2014)usedmeta-analysistechniqueswithartifactdistributiontocorrectforsamplingormeasurementerror.Finally,ZimmermannandFoerstl(2014)usedtheresultofthemeta-analysistodevelopnar-rativepropositions.TheyfoundthatPSMpracticeswererelatedtobuyingfirmperformance,andthatthiseffectwasgreaterthantheeffectonperformanceofotherpracticegroups,suchashumanresourcepracticesorresearchanddevelopment(R&D)practices.Morespecifically,theyfoundthatbothrelationalandVRINPSMpracticeshadthestrongestimpactonbuyingfirmperformance.Thus,theywereabletoenhanceresource-basedtheorytoincludethecontextofpurchasingandsupplymanagement.MarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

55Developingpurchasingandsupplymanagementtheory37AsSLRsbringdisciplinetotheliteraturereviewprocess,itisimportanttoconsiderseveralpotentialsourcesofbias(Durach,2017).Samplingbias,whichreferstofailingtocaptureallstudiesrelevanttotheinitialtheoreticalframework,canbeaddressedbyconsultingdatastructureexperts,suchaslibrarians,indevelopingthelistofsearchkeywords.Selectionbiasisrelatedtoproperdesignofinclusionandexclusioncriteria,aswellasensuringthattheresearchersapplytheinclusionandexclusioncriteriaconsistently.Within-studybiasisvariabilityincodingbetweenresearchers,whichcanbeaddressedthroughdevelopmentofwell-definedcodes,calibrationtrainingofthecoders,andincludingcoderswithavarietyofbackgrounds,ideallywithoutpreconceptionsaboutthetheoreticalframework.Thus,althoughthereisthepotentialforbiasinanSLR,itcanbeaddressedthrougheffectivestudydesign.THEORYBUILDINGAPPROACHESDevelopingtheoryfromrich,unstructureddatausesaninductiveapproach,buildingonaninterpretivistperspective(Huff,2009),wheremeaningislinkedtoobservationsinspecificdomains.Althoughthisprocessmayappeartobeprimarilycreativeandimaginative,disci-plinedapproachescanbeusedtorevealthemesandaggregatedimensions,providingthebasisfordevelopingnewconstructs,proposingnewwaysinwhichconstructsarerelated,andusingthemtodeveloptheory.Case-BasedAnalysisCase-basedresearchhasbeenusedinbuildingtheoryacrossmanydisciplines.Oneofthechallengesincase-basedresearchisretainingandcapitalizingontherichnessofthequalitativedata,whileavoidingstorytellingandaccusationsofselectingcasedatatosupportresearchers’preconceptions(Gehmanetal.,2018).Eisenhardt’swell-knownapproachtocaseresearchdesignprovidesaneffectiveguidetostrategicselectionofresearchcases,developinganinterviewprotocol,conductinginterviews,andapplyingdisciplinetocompilingtheresultsintotranscriptsanddevelopingdetailedcasenarrativesthatsynthesizemultiplesourcesofcasedata.Within-andbetween-caseanalysis(Eisenhardt,1989)articulatesemergingthemesthatformthefoundationforpropositions.Thesummarydocumentsforeachcaseareindividuallycodedbyeachresearchteammember,usingbothaprioricodes,basedontheprotocolandtentativetheoreticalbackground,andemergentcodesdevelopedduringthewithin-caseanal-ysis.Between-caseanalysisusesdisciplinedmethodsforcomparinginsightsaboutthecasesinavarietyofways,toallowinsightstoemerge.Eisenhardt(1989)recommendsgroupingthecasesinvariousways,thencomparingthemonvariouscriteriatorevealinsights.Forexample,casescouldbegroupedbylargeversussmallfocalfirms,domesticversusglobalSCs,orbytheidealtypestheyrepresent.Agoodwaytothinkaboutthisisasaspreadsheet,wherethecolumnsarecases,therowsarecomparisoncriteria,andthecellsaresimpledescriptionssuchaslarge,old,multinational,highorsticky.Theorderofthecolumnsisrepeatedlychangedtogroupthecasesdifferently,andtheentriesinthecellsforeachgrouparecomparedandcontrasted,revealinginsightsfortheresearchteamtoconsider.Theresultisasetoftentativepropositions.Thecasestudydatabaseisthensearchedforspecificevidencetosupportorrefuteeachtentativeproposition.Inthisway,tentativepropositionsarerefinedintoafinalsetoftheoreticalpropositions,enrichedbyadiversechainofcaseevidence.MarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

5638Handbookoftheoriesforpurchasing,supplychainandmanagementresearchForexample,KrauseandPullman(2020)appliedcase-basedresearchtodevelopmiddle-rangetheoryonthemanagementofsupplychainsintheemerginglegalcannabisindustry.Althoughblackmarketcannabissupplychainshaveexistedformanyyears,cannabisproductsarejustbeginningtobelegal,with24countriesand33UnitedStates(US)statesallowingcannabissalesformedicaluse,andfivecountriesand11USstatesallowingsalesforrecreationaluse.Thisindustryisuniquebecauseofitsstringentregulationsforingestibleproducts,unpredictableturbulence,andrapidlychangingregulations.KrauseandPullman(2020)studiedvalue-addedproducers(VAPs)thatprocesscannabisintovarioustypesofproducts.TheystrategicallyselectednineVAPcompaniesinOregontoincludeingestible,inhalableandtopicalproductsandarangeofcompanysizes.Thecaseswerestudiedlongitu-dinallyfrom2016to2019,usingsemi-structuredinterviewsofprimarySCdecisionmakers(typicallycompanyowners)thatwererepeatedannually.Thequalitativeinterviewdataweresupplementedwithinformationfromcompanywebsites,onlineinformation,industrypub-lications,fieldnotesandcompanyreports,resultinginover1000pagesofqualitativedata.Theseweresynthesizedinthewithin-caseanalysis,whichprovidedasummaryofeachcasethatintegrateddatafromallsources.Codingofthewithin-caseanalysiswasdonebybothresearchers,explicitlydevelopingcodesforaprioriconceptsandidentifyingmajoremergentthemes.TheresearchersappliedthecodesusingNVivosoftwareandaxialcodingtoconnectcommonthemes.Inthebetween-caseanalysis,multipletablesweredevelopedtoidentifyandexplorepatternsbetweenthecasestodevelopemergingthemes.Iterativetriangulationofcaseevidencewasthenusedtofleshout,supportorrefuteemergentthemesandrefinethemintotheoreticalpropositionssupportedbyrichqualitativedata.KrauseandPullman(2020)thendevelopedatheoreticaltypologyofmaladaptive,adaptiveandtransformativecannabisVAPs,elaboratingonthecharacteristicsdifferentiatingbetweenthem.Otherapproachestobuildingtheorythroughcase-basedanalysisuselongitudinalorprocess-orientedapproaches.TheGioiamethodology(Gioiaetal.,2012;Gehmanetal.,2018)foranalysingrichqual-itativecasedatabringsfurtherdisciplinetotheimaginativeprocessofbuildingtheoryfromcaseresearch.Itusesthreestagesofcodingthatincreaseintheirabstraction,culminatingindevelopmentofadatastructurethatclearlyarticulatesthechainofevidence.AkeyfeatureoftheGioiamethodologyisthatitexplicitlybuildsonthevoiceoftheinformants,aswellasthevoiceoftheresearchers.Thefirststagecodesinterviewtranscriptsandcasenotesusingtheinformant’sterminologyandperspectives,inordertoreflecttheirlivedexperience.Astheanalysisunfolds,similaritiesanddifferencesbetweenfirst-ordercategoriesarenoted,leadingtotheircombinationinasmallernumberofcategoriesthatbegintorevealadeeperstructure,similartoStraussandCorbin’s(1998)axialcoding.Thesecond-orderanalysisreflectstheperspectivesoftheresearchersandextanttheory.Theresearchteamexaminesthefirst-ordercategoriestodeterminewhethertheyreflectexistingoremergenttheoreticalconstructs,iter-atingbetweenfirst-ordercategoriesandthetheoreticalliteratureuntil‘theoreticalsaturation’(GlaserandStrauss,1967)isreached.Thethirdstageofanalysisfocusesondistillationofemergentsecond-orderthemesintoaggregatedimensions.Adatastructureisthendeveloped,providingavisualaidreflectingtheprogressionfromtherawdata(informants’words)totheoreticaltermsandthemes(constructs).Thedatastructureprovidesthefoundationforbuildingagroundedtheorymodel,throughtheadditionofrelationshipsbetweenconstructs,andpropositions.QuarshieandLeuschner’s(2020)studyofinterorganizationalinteractionsbetweenmembersofhumanitarianSCsfollowingHurricaneSandy,andVillenaandGioia’s(2018)studyofMarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

57Developingpurchasingandsupplymanagementtheory39lower-tierSCmembers,provideexamplesofanalysingcasedatausingtheGioiamethodol-ogy.QuarshieandLeuschner(2020)interviewedinformantsfromstategovernmentagencies,NGOs,faith-basedorganizations,long-termrecoverygroups,utilityfirmsandretailers,resultingin475pagesofinterviewtranscriptsanddetailednotes.VillenaandGioia(2018)conducted165interviewswithinformantsfromthreemultinationalcorporations,ninetier-onesuppliers,and22lower-tiersuppliersinMexico,theUSandChina.Botharticlesprovideniceexamplesofdevelopingfirst-ordercategorylabelsbasedontheinformant’slanguage,thendistillingtheemergentthemesintotheoreticaldimensionduringthesecond-orderanalysis.Theirdatastructuresclearlyillustratethechainofevidenceleadingtotheirpropositions.VillenaandGioia(2018)alsoemployEisenhardt’s(1989)multiplebetween-casecomparisonsapproachatdifferentlevels,comparingtwoemployeesinthesamefirm,casesacrossinterna-tionalboundaries,datafromdifferentsources(interviews,jobshadowingandmeetingmemos)anddatabetweenfirms,encouragingnuancedthemestoemerge.Thus,Eisenhardt’s(1989)approachandtheGioiamethodology(Gioiaetal.,2012)canbeusedhand-in-handtoimprovethecredibilityoftheorybuildingfromcaseresearch.CriticalEngagedResearchCriticalengagedresearchisbasedondeepengagementofaresearcherwithresearchpartici-pants,inordertoavoidbeingconstrainedbytheassumptionsthatunderlietraditionaltheories.Criticalengagedresearchisasynthesisoftwoapproaches:traditionalengagedresearchandacriticalorientation.Intraditionalengagedresearchapproaches,researchersareembeddedintheprocessofgeneratingdeepsituationalknowledgetoinformtheorydevelopment,basedontheunderstandingthatitisneverpossibleforresearcherstocompletelydetachthemselvesfromthephenomenatheyareobserving.Theknowledgeproducedthroughengagedresearchhasaproblemsolving,contextualknowledgefocus.Thegoalischangingpractices,ratherthanconductingunbiasedobservation;althoughsomeaspectsoftheorythatisdevelopedthroughengagedresearchmaybegeneralizable,thisisnotitsoverarchinggoal(CunliffeandScaratti,2017).Extendedembeddingoftheresearcherinthecontextdevelopsmutualtrustwithpar-ticipants,leadingtodeepknowledgeofkeyconstructsandrelationships.Traditionalengagedresearchisbasedondialogicalsensemaking,whichisdefinedasgivingresearchersausefulpurposeintheirembeddedrole,surfacing,questioningandexploringthemes,multiplemean-ings,anddevelopingnewdirections(CunliffeandScaratti,2017).Thereisconstantinterplaybetweencontext,people,relationships,interactionsandactions(movement)andcognizanceofthe‘veil’thatobstructsvision(opacity).Thus,theresearcherisanactiveparticipantintheprocess,bringinguniquevaluethroughacademictrainingandperspective.Forexample,Akkermansetal.(2019)workedwithinadigitalservicesprovidertoexamineprojectrampupandrampdown,andofferadvicetomanagementonhowtoimprovetheseprocesses.Theotheressentialelementofcriticalengagedresearchisitscriticalorientation,withagoalofpushingasociallyusefulagenda(CunliffeandScaratti,2017).Acriticalorientationisnormativeandemphasizesthepoliticalandethicalaspectsofasocialorganization,suchasanSCorapurchasinggroup,focusingonpower,exploitationandemancipation(Touboulicetal.,2020).Buildingonacriticalorientationcausesresearcherstoquestiondominantideologiesandtheirassumptions.Forexample,Touboulicetal.(2020)describethedominantdiscourseinglobalSCresearchasshapedbyhistory,especiallycolonialism,whichisembodiedinasymmetricrelationships,wherebuyingfirmstendtobelargecorporationsindevelopedMarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

5840Handbookoftheoriesforpurchasing,supplychainandmanagementresearchcountries,whilesuppliersaresmallerfirmsindevelopingcountries.Suppliersareoftenmar-ginalizedstakeholderswhosevoiceshavebeensilencedinthedominantdiscourseoffreetradeandglobalsupplymanagement,whichisshapedbytheperspectiveofWesternfirmsbasedontheiragenda.Criticalresearchengagestheperspectivesofdiverseparticipants,suchasindige-nouspeople,defendersoftheenvironment,consumersfromallbackgrounds,thenaturalenvi-ronment,lower-tiersuppliers,andworkersatalllevels,inthediscoursethatinformstheorydevelopment.Imaginativereflectionisimportantinanalysingthisdatainconjunctionwithresearchparticipants.Aresearchermightoffertentativeinsightstoresearchparticipantsafterbeingembeddedwiththem,engageindeepconversationwiththemabouttheinsights,thenreturntoreflectfurtherandrefinetheinsights.Thisiterativereflection‒discussion‒reflectionprocesscontinuesasinsightsarerefinedintotheory.Activelyinvolvingparticipants,includingthosemarginalizedbytraditionaltheory,laysthefoundationforcreativereframingofproblems(Touboulicetal.,2020).Further,thetheoryismorecompletebecauseofincorporatingdiversevoicesandintegratingcognition,emotionandbehaviour.UnderstandinganSCphenomenonfrommultipleperspectives,rangingfromthebuyingcorporationtomarginalizedworkersforlower-tiersuppliers,supportsdevelopmentofmulti-leveltheoryandgreaterrelevancetopractice.DiscourseAnalysisDiscourseanalysisisthedisciplinedstudyoftexts;adiscourseisacollectionoftextualmaterialsrelatedtoaphenomenon.Likecriticalengagedresearchseekstomoveresearchers’thinkingbeyondtraditionalassumptions,discourseanalysislooksattheeffectsoflanguageonthewayaphenomenonisconceptualizedandhowthisshapesmeaningsandpractices(Hardyetal.,2020).Inadominantdiscourse,thetextsbuilduponandinformeachother,resultinginconvergenceofexplanationsforaphenomenonthatcreatesaunified,taken-for-grantedviewofrealitythatrevealswhatisconsiderednormalinadomain.By‘rulingin’somewaysofthinking,thedominantdiscoursecanalso‘ruleout’alternativewaysofthinking;thus,thelanguageusedtodescribeaphenomenonshapeshowitisexperiencedasreality(Hardyetal.,2020).Likecriticalengagedresearch,discourseanalysisincorporatesacriticalorientation,viewingtextualmaterialswithintheirsocialcontext.Analysisofauthorpositionorlocationwithinthesocialspacefromwhichtextsareproducedcanrevealinsightsaboutthe‘rights’ofvariousauthorpositionstoproducetexts(Phillipsetal.,2008).Textscanalsobeexaminedinthe‘expressivesphereofculture’(Phillipsetal.,2008),whichistheconstructsthatemergefromtherealmofideasthatexistinthetextsthroughwhichpeopleunderstandtheworld.Finally,whileconstructsonlyexistintheexpressivesphere,objectsexistwhenconstructsareusedtomakesenseofphysicalobjectsorsocialrelationships.Thus,discourseanalysisfocusesonrelationshipsbetweenconstructs,objectsandauthors.Forexample,Hardyetal.(2020)describehowthedominantdiscourseofleanisa‘short-hand’forcostcutting,andnewformsofdominatingemployeesandrenderingtheminvisible.Incontrast,Hardyetal.(2020)usediscourseanalysistoanalysewhy,althoughsustainabilityisamatureresearcharea,itisnotdominantinpurchasingandsupplymanagementduetoabsenceofawell-known,authoritativetextthatsupportssustainabilityinpurchasingandsupplymanagement‒unlikeTheMachineThatChangedtheWorld(Womacketal.,2007)forlean‒leadingtoaplethoraofsometimesconflictingdefinitions.Further,sustainabilitytextsMarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

59Developingpurchasingandsupplymanagementtheory41conflictovermeaning:issustainabilitysubordinatetoeconomicprofitability,oronanequalorhigherfooting?Hardyetal.(2020)describethediscourseonmodernslaveryinSCsasemergingfromtheUnitedNationsSustainableDevelopmentGoalsandrecentlegislationonSCtransparencythatrequiresbuyingfirmstoclearlyidentifyallupstreamtiersandreporttheirstrategiesformitigatingriskstovulnerablepopulations.Thus,theSCdiscourseisevolvingtoincludeformerlyinvisiblemarginalizedemployees,throughthediscourseonmodernslaverythatrecognizesorganizationalrisksrelatedtomodernslaveryinpowerrelationshipsamongcompanies.AnotherinterestingapplicationofdiscourseanalysisispresentedbyMeehanetal.(2017),whichappliesthisapproachtohealthcareprocurement.Discourseanalysisopensthedoortonewsourcesofqualitativedatafordevelopingtheory.However,itislessclearaboutmovingfromreflectionandinsighttotheory.FairhurstandPutnam(2019)suggestthatdiscourseanalysisandthedisciplinedanalyticalapproachesasso-ciatedwithcase-basedresearchcangohand-in-handindevelopingtheorybasedontensions,paradoxesandcontradictions.Line-by-linecodingofanarrativedocumentcanbeusedtocodeterminology,actionsandargumentsintextstoidentifypatternsandallowthemestoemerge.Codingcanidentifylanguagethatreflectstensionoremotion,leadingresearcherstoanalysepush‒pulloppositionintextsandremindresearchershowdiscoursescanexertpower.MetaphoricalTransferThemetaphoricaltransferapproachappliesdisciplinetothecreativeandimaginativeapproachofbuildingtheoryfromobservation.Metaphoricaltransferisawayofmovingfromacasuallyinvokedmetaphor(suchasrocksinariver,afunnelorabullwhip)toatheory-constitutivemetaphor(Chenetal.,2013).Terminologythatwasoriginallydevelopedforasourcephe-nomenoninadifferentdomainisappliedtoatargetphenomenonbyelaboratingtheextenttowhichsourcecharacteristicsarealignedwithcharacteristicsofthetargetphenomenonatvariouslevelsofabstraction.Forexample,GarudandKotha(1994)usedthehumanbraintodevelopatheoryconstitutivemetaphorforflexibleproductionsystems.Threestagesofmetaphoricaltransferestablishcorrespondencebetweenthebuildingblocksoftheoryintwodifferentdomains.Theontologystageestablishesalogicalcorrespondencebetweenthe‘whats’(constructs)ofthetargetandsourcephenomena.Forexample,Chenetal.(2013)establishedtheontologicequivalencebetweenmaritalinfidelityandtheuseofalternativesuppliers,betweenspousalalimonyandbreach-of-contractpayments,andbetweenchildsupportandpartswarrantysupport,intheirstudyofSCrelationshipdissolution.LuandKoufteros(2017)establishedequivalencebetweenelementsofthehumanimmunesystemandSCsecuritysystemsbyhighlightingthatbotharedesignedtoensurewell-being(ofahumanorSC),arecomplexandmultilayered,needtobetolerant(totheimmunesystemitself,ortoefficiencyneeds),learn(frompreviouslyencounteredpathogensorpreviousSCbreaches),andmustactquicklytoeliminatepathogensorresolveSCsecuritybreaches.Theanalogylevelestablishescorrespondencebetweenrelationshipsamongelementsofthetargetandsource.Thus,analogicequivalencefocusesonthe‘hows’and‘whys’oftherelationshipbetweenconstructsbysubsumingontology-levelabstractionsintohigher-levelabstractions,constructingagraphicmodelofinterrelationships.Chenetal.(2013)usedmaterialaspects,psycheaspectsandsocialnetworkaspectsofdivorceandSCrelationshipdissolutiontoestablishequivalenceattheanalogylevel.LuandKoufteros(2017)focusedonMarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

6042Handbookoftheoriesforpurchasing,supplychainandmanagementresearchsystemstoprevent,detect,reacttoandrestorediseasesandsupplychainsecuritybreachestoestablishanalogicequivalence.Theidentitylevelestablishespropositions,basedonontologicandanalogicequivalencebetweenthesourceandtargetphenomena.Thegoalistodescribe,explainandpredictrela-tionshipsforboththesourceandtargetphenomenon,oftenbasedonliteratureinthesource’sdomain.Forexample,Chenetal.(2013)adaptedsociologicalprinciplesthatunderliedivorceintoprinciplesfordissolutionofSCrelationships(Chenetal.,2013).LuandKoufteros(2017)usedpropositionsrelatedtothehumanimmunesystemtodeveloppropositionstoexplainandpredictrelationshipsinSCsecuritysystems.Thedisciplinedapproachdescribedbymetaphor-icaltransfer(Chenetal.,2013)providesstructuretotheimaginativeprocessofdevelopingtheory.TopicModellingTopicmodellingcombinesdisciplinedmachinelearninganalysisofco-occurringwordsintextualmaterialswithimaginativeformulationofthethemestheyembody,toidentifytheo-reticalconstructsfromwhichresearcherscanderiverelationshipsandformulatepropositions.Topicmodellingisatextminingtechniqueforextractingusefulinformationfromtextualbigdata(Schmiedeletal.,2019).Itusesanalgorithmforunsupervisedmachinelearning,whereresearcherslackaprioriknowledgeaboutconstructsandrelationships(Bansaletal.,2020;Schmiedeletal.,2019).Topicmodellingisdifferentfromcontentanalysisinseveralimportantways.First,contentanalysisfocusesonindividualwords;forexample,Tateetal.’s(2010)contentanalysisexaminedinfluentialwordsincorporatesocialresponsibility(CSR)reports,constructinganetworkreflectingtheirinfluenceonthetriplebottomline.Topicmod-elling,ontheotherhand,isbasedonthedistributionalhypothesisoflinguistics:‘wordsthatoccurinthesamecontextstendtohavesimilarmeanings’(TurneyandPantel,2010,p.142).Meaningsresultfromrelationshipsbetweenwords,ratherthanfromthewordsthemselves.Second,thescopeofcontentanalysisandoftopicmodellingresearchisdifferent.WhileTateetal.’s(2010)contentanalysisexamined100sociallyandenvironmentallyresponsibleglobalcompanies,theaveragetopicmodellingstudyuses38000documents(Schmiedeletal.,2019),knownasacorpus.Thus,topicmodellingestablishespatternsofwordsthatoccurinthesamecontext.Intopicmodelling,relevanttextualdataisscrapedfromthewebandstoredasdocuments,whoselengthcanrangefromasentencetoachapter(Bansaletal.,2020).Preparationofthescrapeddocumentsforanalysisiscritical:trimmingdocumentstoremoveunnecessarywordsandreducingwordstotheirstems.Atopicmodellingalgorithmisappliedtothepreparedcorpustoextractco-occurringwords,formingtopics(Bansaletal.,2020).Likeclusteranaly-sisinstatistics,thepoweroftopicmodellingreliesonresearchers’abilitytodiscerntherela-tionshipbetweenthestemscomprisingatopicandgiveitanappropriatename.Forexample,Schmiedeletal.(2019)citetheco-occurrenceofthestems‘employe’,‘manag’,‘door’,‘polic’,‘open’,‘concern’and‘listen’ascomprisingatopicwhichtheynamed‘Ismanagementreallylistening?’.Researchersthenconsidertherelationshipamongtopicsandformulateproposi-tions.Bansaletal.(2020)recommendworkingiteratively,firstusingindividualresearchers,thengroups,toresolveinconsistenciesbydiscussingeachother’sperspectivestoidentifythebuildingblocksofemergenttheory.MarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

61Developingpurchasingandsupplymanagementtheory43Topicmodellingisusefulfordealingwithverylargevolumesoftextualmaterialtohelpidentifytopicsthatresearchersmightnotnormallysee,andovercomesomeofthesystematicbiasesassociatedwithcoding.Throughtheresearchteam’sdiscussionandinterpretationofthemeaningofco-occurringwords,newinsightsarerevealed(Bansaletal.,2020).Bansaletal.(2020)illustratedevelopingtheoryusingtopicmodellingbyproposingapurchasingandsupplymanagementexampleofconceptualizingSCsascomplexadaptivesystems,inordertoexamineco-evolutionarymechanismsbetweenSCmemberswidelyseparatedinspaceandcontext,althoughconnectedthroughthetransferofgoods.Theyconcludewithalistofpotentialresearchtrapsembodiedintopicmodelling,aswellasanappendixcontainingusefulsourcesofqualitativebigdatathatcouldinformdevelopingpurchasingandsupplymanage-menttheory.CONCLUDINGTHOUGHTSThischapterintroducesexistingandemergingapproachestodevelopingpurchasingandsupplymanagementtheorybysynthesizingdisciplinewithimagination.Caniatoetal.(2020)describethissynthesisusingthemetaphorofaresearcherasbeinglikeLeonardodaVinci.Leonardoisdescribedasapolymath;likeotherRenaissancescholars,heexcelledinseveralfields,includingengineering,science,technologyandmathematics,aswellasthearts.Becausehewasbothapainterandadesigner,Leonardohadtocombineandintegratebothcreativityandtechniqueinhiswork,buildingonbothemotionandrigour.Thus,althoughhewasprimarilyknownasanartist,hisnotebooksincludeuniqueinsightsrelatedtoastronomy,botany,cartography,anatomy,andevenpaleontology.Theorydevelopmentposessimilarchallengesforresearchers.Forexample,aproperlyexecutedsystematicliteraturereviewcanresultinsimplyacountingexercisethataddsupthenumberofarticlesindifferentcategoriesor,throughtheapplicationofcreativityandimagination,itcanleadtouniqueinsightsandnovelenhancementstoanexistingtheorythatlaythefoundationforexcitingnewresearchopportunities.Thus,thechallengetoresearchersistomelddisciplinewithimagination,toenhanceandbuildpurchasingandsupplymanagementtheory.Moredetailaboutspecificapproachesisprovidedinthecitedreferences,aswellasinthesuggestionsforfurtherreading.Perhapssomeofthemostexcitingopportunitiesfortheoryenhancementanddevelopmentlieinnewsourcesofdataandanalyticalapproachesfortheorydevelopmentincludedarkdata,datamining,datavisualization,ethnography,datavirtualiza-tion,‘live’bigdata,meta-analysis,predictiveanalytics,operatingandsensingdata,andthickdata.Someoftheseapproachesanddatasourceshavetheiroriginsinotherdisciplines,whileothersarecompletelynewasameansofdevelopingtheory.Theseandmanyotherapproacheshavethepotentialtoguideresearchersindevelopingtheorythatisuniquetopurchasingandsupplymanagement,overcomingthelimitationsassociatedwithgrandtheory.NOTE1.Atypologyshouldnotbeconfusedwithataxonomy,whichisaschemeforclassifyingorganiza-tionsorphenomenausingdecisionrulesthatresultinmutuallyexclusiveandexhaustiveclassifica-tions.Whiletaxonomiescanbeusefulinunderstandingaphenomenonanddevelopingmid-rangetheory,taxonomiesarenottheorythemselves,butratherempiricallydeveloped.MarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

6244Handbookoftheoriesforpurchasing,supplychainandmanagementresearchREFERENCESAkkermans,H.,VossC.,andvanOers,R.(2019),‘Rampupandrampdowndynamicsindigitalser-vices’,JournalofSupplyChainManagement,55(3),3–23.Alvesson,M.,andKärreman,D.(2007),‘Constructingmystery:empiricalmattersintheorydevelop-ment’,AcademyofManagementReview,32(4),1265–1281.Ashby,A.,Leat,M.,andHudson-Smith,M.(2012),‘Makingconnections:areviewofsupplychainmanagementandsustainabilityliterature’,SupplyChainManagement:AnInternationalJournal,17(5),497–516.Bansal,P.,Gualandris,J.,andNahyun,K.(2020),‘Theorizingsupplychainswithqualitativebigdataandtopicmodeling’,JournalofSupplyChainManagement,56(2),7–18.Barney,J.(2012),‘Purchasing,supplychainmanagementandsustainedcompetitiveadvantage:therelevanceofresource-basedtheory’,JournalofSupplyChainManagement,48,3–6.Borgatti,S.P.,andFoster,P.C.(2003),‘Thenetworkparadigminorganizationalresearch:areviewandtypology’,JournalofManagement,29,991–1013.Bromiley,P.,andRau,D.(2014),‘Towardsapractice-basedview’,StrategicManagementJournal,35,1249–1256.Cameron,K.S.,andQuinn,R.D.(2005),DiagnosingandChangingOrganizationalCulture:BasedontheCompetingValuesFramework.NewYork:JohnWiley&Sons.Caniato,F.,Harland,C.,Johnsen,T.,Moretto,A.,andRonchi,S.(2020),‘Theartandscienceofpro-curement:revisitingLeonardodaVinci:Editorialofthe2019IPSERAConferenceSpecialIssue’,JournalofPurchasingandSupplyManagement,26(4),1–7.Carter,C.R.,Kosmol,T.,andKaufman,L.(2017),‘Towardasupplychainpracticeview’,JournalofSupplyChainManagement,53(1),114–122.Chen,Y.S.,Rungtusanatham,M.,Goldstein,S.M.,andKoerner,A.F.(2013),‘Theorizingthroughmeta-phoricaltransferinOM/SCMresearch:divorceasametaphorforstrategicbuyer–supplierrelationshipdissolution’,JournalofOperationsManagement,31(7–8),579–586.Cunliffe,A.L.,andScaratti,G.(2017),‘Embeddingimpactinengagedresearch:developingsociallyusefulknowledgethroughdialogicalsensemaking’,BritishJournalofManagement,28,29–44.Doty,D.H.,andGlick,W.H.(1994),‘Typologiesasauniqueformoftheorybuilding:towardimprovedunderstandingandmodeling’,AcademyofManagementReview,19(2),230–250.Durach,C.F.,Kembro,J.,andWieland,A.(2017),‘Anewparadigmforsystematicliteraturereviewsinsupplychainmanagement’,JournalofSupplyChainManagement,53(4),67–85.Eisenhardt,K.M.(1989),‘Buildingtheoriesfromcasestudyresearch’,AcademyofManagementReview,14(4),532–550.Fairhurst,G.T.,andPutnam,L.L.(2019),‘Anintegrativemethodologyfororganizationaloppositions:aligninggroundedtheoryanddiscourseanalysis’,OrganizationalResearchMethods,22(4),917–940.Garud,R.,andKotha,S.(1994),‘Usingthebrainasametaphortomodelflexibleproductionsystems’,AcademyofManagementReview,19(4),671–698.Gehman,J.,Glaser,V.L.,Eisenhardt,K.N.,Gioia,D.,Langley,A.,andCorley,K.D.(2018),‘Findingthetheory-methodfit:acomparisonofthreequalitativeapproachestotheorybuilding’,JournalofManagementInquiry,27,284–300.Gioia,D.A.,Corley,K.G.,andHamilton,A.L.(2012),‘Seekingqualitativerigorininductiveresearch:notesontheGioiamethodology’,OrganizationalResearchMethods,16,15–31.Glaser,B.G.,andStrauss,A.L.(1967).TheDiscoveryofGroundedTheory:StrategiesforQualitativeResearch.Hawthorne,NY:AldinedeGruyter.Hardy,C.,Bhakoo,V.,andMaguire,S.(2020),‘Anewmethodologyforsupplychainmanagement:dis-courseanalysisanditspotentialfortheoreticaladvancement’,JournalofSupplyChainManagement,56(2),19–35.Hayes,R.,andWheelwright,S.C.(1979),‘Linkmanufacturingprocessandproductlifecycles’,HarvardBusinessReview,January–February,133–140.Holland,J.H.(2001),‘Studyingcomplexadaptivesystems’,JournalofSystemsScienceandComplexity,19(1),1–8.Huff,A.S.(2009),DesigningResearchforPublication.LosAngeles,CA:SAGE.MarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

63Developingpurchasingandsupplymanagementtheory45Johnson,J.L.,Dooley,K.L.,Hyatt,D.G.,andHutson,A.M.(2018),‘Cross-sectorrelationsinglobalsupplychains:asocialcapitalperspective’,JournalofSupplyChainManagement,54(2),21–33.Kim,Y.,andChoi,T.Y.(2015),‘Deep,sticky,transient,andgracious:anexpandedbuyer–supplierrelationshiptypology’,JournalofSupplyChainManagement,51(3),63–86.Krause,D.,andPullman,M.(2020),‘Fightingtosurvive:howsupplychainmanagersnavigatetheemerginglegalcannabisindustry’,JournalofSupplyChainManagement,56(4).Longoni,A.,Luzzini,E.,Pullman,M.,andHabiague,M.(2019),‘Businessforsocietyissociety’sbusiness:tensionmanagementinamigrantintegrationsupplychain’,JournalofSupplyChainManagement,55(4),3–33.Lu,G.,andKoufteros,X.(2017),‘Towardataxonomyoffoodsupplychainsecuritypractices’,JournalofMarketingChannels,24(3),190–203.Lund-Thomsen,P.,andLindgren,A.(2014),‘Corporatesocialresponsibilityinglobalvaluechains:wherearewenowandwherearewegoing?’,JournalofBusinessLogistics,123(1),11–22.Meehan,J.,Menzies,L.,andMichaelides,R.(2017),‘Thelongshadowofpublicpolicy:barrierstoavalue-basedapproachinhealthcareprocurement’,JournalofPurchasingandSupplyManagement,23(4),229–241.Ni,J.Z.,Melnyk,S.A.,Ritchie,W.J.,andFlynn,B.B.(2015),‘Whybefirstifitdoesn’tpay?ThecaseofearlyadoptersofC-TPATsupplychainsecuritycertification’,InternationalJournalofOperationsandProductionManagement,36(10),1161–1181.Pagell,M.,Fugate,B.,andFlynn,B.B.(2018),‘Fromtheeditors:introductiontotheemergingdiscourseincubatoronthetopicofresearchwherethefocalactorinthenetworkisnotafor-profitfirm’,JournalofSupplyChainManagement,54(2),1–2.Phillips,N.,Sewall,G.,andJaynes,S.(2008),‘Applyingcriticaldiscourseanalysisinstrategicmanage-mentresearch’,OrganizationalResearchMethods,11(4),770–789.Poole,M.S.,andVandeVen,A.H.(1989),‘Usingparadoxtobuildmanagementtheories’,AcademyofManagementReview,14(4),562–578.Porter,M.E.(1980),CompetitiveStrategy:TechniquesforAnalyzingIndustriesandCompetitors.NewYork:FreePress.Porter,M.E.(1985),CompetitiveAdvantages:CreatingandSustainingSuperiorPerformance.NewYork:FreePress.Pullman,M.,Longini,A.,andLuzzini,D.(2019),‘Therolesininstitutionalcomplexityandhybridityinsocialimpactsupplychainmanagement’,JournalofSupplyChainManagement,54(2),3–20.Quarshie,A.M.,andLeuschner,R.(2020),‘Interorganizationalinteractionindisasterresponsenet-works:agovernmentperspective’,JournalofSupplyChainManagement,56(3),3–25.Reimann,F.,Kosmol,T.,andKaufmann,L.(2017),‘Responsetosupplier-induceddisruptions:afuzzysetanalysis’,JournalofSupplyChainManagement,53(4),37–66.Schmiedel,F.,Müller,O.,andvomBrocke,J.(2019),‘Topicmodelingasastrategyofinquiryinorgan-izationalresearch:atutorialwithanexampleoforganizationalculture’,OrganizationalResearchMethods,22(4),941–968.Strauss,A.,andCorbin,J.(1998),BasicsofQualitativeResearch:TechniquesandProceduresforDevelopingGroundedTheory(2ndedn).ThousandOaks,CA:SAGE.Tate,W.L.,Ellram.,L.M.,andKirchoff,J.F.(2010),‘Corporatesocialresponsibilityreports:athematicanalysisrelatedtosupplychainmanagement’,JournalofSupplyChainManagement,46(1),19–44.Touboulic,A.,McCarthy,L.,andMatthews,L.(2020),‘Re-imaginingsupplychainchallengesthroughcriticalengagedresearch’,JournalofSupplyChainManagement,56(2),36–51.Turney,P.D.,andPantel,P.(2010),‘Fromfrequencytomeaning:vectorspacemodelingsemantics’,JournalofArtificialIntelligenceResearch,37,141–188.Villena,V.H.,andGioia,D.A.(2018),‘Ontheriskinessoflower-tiersuppliers:managingsustainabilityinsupplynetworks’,JournalofOperationsManagement,64,65–87.Weick,K.E.(1989),‘Theoryconstructionasdisciplinedimagination’,AcademyofManagementReview,14(4),516–531.Womack,J.P.,Jones,D.T.,andRoos,D.(2007),TheMachineThatChangedtheWorld.NewYork:FreePress.Zimmerman,F.,andFoerstl,K.(2014),‘Ameta-analysisofthepurchasingandsupplymanagementpractice–performancelink’,JournalofSupplyChainManagement,50,37–54.MarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

6446Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSUGGESTEDFURTHERREADINGTheoryDevelopmentCarter,C.R.,Meschnig,G.,andKaufmann,L.(2015),‘Movingtothenextlevel:whyourdisciplineneedsmoremultileveltheorization’,JournalofSupplyChainManagement,51,94–102.Ketokivi,M.,andMantere,S.(2010),‘Twostrategiesforinductivereasoninginorganizationalresearch’,AcademyofManagementReview,35,315–333.Pinder,C.C.,andMoore,L.F.(1979),‘Theresurrectionoftaxonomytoaidthedevelopmentofmiddle-rangetheoriesoforganizationbehavior’,AdministrativeScienceQuarterly,24,99–118.Rich,P.(1992),‘Theorganizationaltaxonomy:definitionanddecision’,AcademyofManagementReview,17,758–781.Weick,K.G.(1974),‘Middle-rangetheoriesofsocialsystems’,BehavioralScience,21,1–19.Case-BasedTheoryDevelopmentBarratt,M.,Choi,T.Y.,andLi,M.(2011),‘Qualitativecasestudiesinoperationsmanagement:trends,researchoutcomes,andfutureresearchimplications’,JournalofOperationsManagement,29,329–342.Bitektine,A.(2008),‘Prospectivecasestudydesign:qualitativemethodfordeductivetheorytesting’,OrganizationalResearchMethods,11,160–171.Corbin,J.,andStrauss,A.(1990),‘Groundedtheoryresearch:procedures,canonsandevaluativecrite-ria’,QualitativeSociology,13,3–21.Eisenhardt,K.M.(1991),‘Betterstoriesandbetterconstructs:thecaseforrigorandcomparativelogic’,AcademyofManagementReview,16,620–627.Eisenhardt,K.M.,andGraebner,M.E.(2007),‘Theorybuildingfromcases:opportunitiesandchal-lenges’,AcademyofManagementJournal,50(1),25–32.Ketokivi,M.,andChoi,T.Y.(2014),‘Renaissanceofcaseresearchasascientificmethod’,JournalofOperationsManagement,32(5),232–240.Langley,A.(1999),‘Strategiesfortheorizingfromprocessdata’,AcademyofManagementReview,24,691–710.Leonard-Barton,D.(1990),‘Adualmethodologyforcasestudies:synergisticuseofalongitudinalsinglesitewithreplicatedmultiplesites’,OrganizationScience,1,1–19.Pratt,M.G.(2008),‘Tensionsinevaluatingandpublishingqualitativeresearchingtop-tierNorthAmericanjournals’,OrganizationalResearchMethods,11,481–509.Stake,R.E.(1995),TheArtofCaseStudyResearch.London:SAGEPublications.MetaphoricalTransferCornelissen,J.P.(2006),‘Makingsenseoftheoryconstruction:metaphoranddisciplinedimagination’,OrganizationalStudies,27(11),1579–1597.Foropon,C.,andMcLachlin,R.(2012),‘Metaphorsinoperationsmanagementtheorybuilding’,InternationalJournalofOperationsandProductionManagement,33(2),181–196.Hunt,S.D.,andMenon,A.(1995),‘Metaphorsandcompetitiveadvantage:evaluatingtheuseofmeta-phorsintheoriesofcompetitivestrategy’,JournalofBusinessResearch,33(2),81–90.Morgan,G.(1980),‘Paradigms,metaphors,andpuzzlesolvinginorganizationtheory’,AdministrativeScienceQuarterly,25(4),605–622.O’Malley,L.,Patterson,M.,andKelly-Holmes,H.(2008),‘Deathofametaphor:reviewingthe“market-ingasrelationships”frame’,MarketingTheory,8(2),167–187.Tsoukas,H.(1991),‘Themissinglink:atransformationviewofmetaphorsinorganizationalscience’,AcademyofManagementReview,6(3),566–585.MarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

65Developingpurchasingandsupplymanagementtheory47EngagedResearchVandeVen,A.H.(2007),EngagedScholarship:AGuideforOrganizationalandSocialResearch.Oxford:OxfordUniversityPress.MarkPagell,BarbaraB.Flynn,BrianFugate,andDavidE.Cantor-9781839104503DownloadedfromPubFactoryat05/28/202209:10:05AMviaColumbiaUniversityLibrary

664.Theoriesrelevanttopurchasingandsupplymanagementresearch:statusquoandfuturesuggestionsLarryGiuniperoandRehamEltantawyINTRODUCTIONRecognitionoftheincreasedcomplexityofpurchasingandsupplymanagement(PSM)phenomenacallsforincreasinglydiversetheoreticalframeworks.ScholarshavearguedfortheneedforinterdisciplinaryandmultidisciplinaryresearchinPSM(e.g.,Knightetal.,2016).DespitethemultiplecallsfortheuseoftheoryinPSM,littleformalresearchhasbeenproducedexamininganddescribingtheactualtheoriesbeingused,andtheextentoftheirusageinthefield.ThepurposeofthisresearchistoaddressthisgapinthePSMbodyofknowledge.TheaimofthischapteristopromoteandsupportlearningandinnovationaboutnovelandunderutilizedtheoreticalperspectivesthatcanhelptopromotenewinsightsintothePSMdisciple.Thus,thischapterexplorestheprevalenttheoriesfoundincontemporaryPSMresearchanddiscussespromising,butsporadicallyadopted,theoriesthatcanfurtherfuturePSMresearch.Tounderstandtheextenttowhichthesetheorieswereused,wereliedonastudybyGiuniperoetal.(2019).Theyreviewed520PSMsourcingarticles,publishedin20supplychain,operationsandmarketingjournalsfrom1995to2018.TheanalysispresentedonthefollowingpagessummarizestheresultsofthisreviewandextendsthediscussiontoincludecurrentlyunderutilizedtheoriesthatcanbefurtherappliedtoadvanceafutureresearchagendainPSM.Theremainderofthechapterisorganizedasfollows.First,wepresentthefindingsdescribingthetrendsandtheuseofvarioustheoriesduringthesampledperiodandlinktheirusetoPSMtopics.Next,weelaborateonthetheoriesbeingfrequentlyusedandtheirappli-cations.Finally,wetakeastepbackfromtheanalysisandpresentourthoughtsontheoryusegoingforward.HISTORICALOVERVIEW:PSMTHEORETICALDEVELOPMENTTheoryisasystematizedstructurecapableofexplainingandpredictingphenomenatodis-tinguishtheoreticallybasedworksfromatheoreticalones(Hunt,1991).TheoryisimportantforPSMresearchersandpractitionersasitprovidesaframeworkforanalysis,anefficientmethodforfielddevelopment,andclearexplanationsforthepragmaticworld(Wacker,1998).Therefore,atotalof20journalswereselectedbyGiuniperoetal.(2019),and520articlesaddressingrelevanttopicswereidentifiedfrom1995to2018.PSMresearchersareincreasinglyapplyingatheoreticallenstounderpintheirstudies.Mostarticlesfrom2010forwardusedtheorytounderpintheirresearchpropositions.Approximately48LarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

67Theoriesrelevanttopurchasingandsupplymanagementresearch49Table4.1TheoriesbytimeperiodTheories1995–19992000–20042005–20092010‒PresentTotal%oftotal%oftheory/theoriesusedtotalarticlesTransactioncost6151118501410Resource-basedview037192986Game027142364Agency133101753Socialexchange01381232Resourcedependency12351132Stakeholder001101132Knowledge-based12431032theoryContingency21161032Auctiontheory0124721Institutional0214721Power1003411Totalquality0400411Classicaleconomic1102411Prospect1111411Other93531771524329Total237375184355%6212152Source:Giuniperoetal.(2019).52percentofallsampledarticlespublishedbetween1995and1999usedtheories,whichthenincreasedto71percentbetween2000and2004,beforedecreasingto58percentbetween2005and2009.Thissinceincreasedtoapproximately75percentofarticlesbetween2010and2018.Clearly,atheory-basedapproachtosourcingresearchwillbethenormforjournalpublicationsmovingforward.Morespecifically,asindicatedinTable4.1,trendsseenintheoriesusedincludeanincreaseintheoverallnumberoftheory-basedarticlesand,conversely,adecreaseintheuseoftrans-actioncosteconomics(TCE).TCEwasusedin14percentofallarticlesinthetimeperiodsof1995–1999and2000–2004.However,thisdeclinedto9percentandthen7percentinthetimeperiodsof2005–2009and2010–2018,respectively.Meanwhiletheresource-basedview(RBV)hasseenasteadyincreasesince1995.Inthetimeperiodof1995–1999,theRBVwasnotused.However,itsusageincreasedto3percent,then5percent,andfinally8percentinthethreefollowingtimeperiods.Onepossibleexplanationisthatsourcinghasevolvedtobeviewedasstrategicactivity,versusbeingmoretacticalinthepast.Othertheoriesthathaveseenasteadyupwardtrendincludegametheory,agencytheoryandsocialexchangetheory.Thefollowingsectionprovidesanoverviewofthethreetopwidelyusedtheories(TCE,RBVandagencytheory)throughthelensofPSMscholarship.LarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

6850Handbookoftheoriesforpurchasing,supplychainandmanagementresearchWIDELYUSEDTHEORIESANDTHEIRPSMAPPLICATIONBasedontheworkofGiuniperoetal.(2019),thefollowingdiscussionhighlightsthetopthreemostfrequentlyusedtheoriesandtheirPSMapplications.Thethreeare:transactioncosteconomics,theresource-basedviewandagencytheory.TransactionCostEconomicsWilliamson’s(1975)transactioncosteconomics(TCE)wasadaptedfromCoase’s(1937)workandessentiallystatesthatfirmsusethemosteconomicalchoiceofmarketsorhierarchiestogoverntransactions.Inselectingtousemarkets,theorganizationwillincurgovernancecoststoguardagainstsupplierstakingadvantageofbuyers(opportunism).Theorganizationalhierarchywillgoverninternaltransactions.ThemethodstocontrolopportunismhavebeenasubjectofresearchinPSM.TCEconsiderssupplierrelationshipsasdiscretetransactions,whichistheunitofanalysisadopted,thatneedtobemanagedwiththegoalsofminimizingcostsinvolvedandcurbingpartners’opportunism(Williamson,1985).Williamson(1975)proposedaclassificationoftransactioncoststhatarecomprisedofmarketcostsandhierarchycosts.Ontheonehand,marketcostsinclude:costsoftheselectionofthesupplierofferingthebestqualityatthemostcompetitiveprice;costsoffindingtargetcustomersfortheproductsofthefirm;costsforcontractdraftingandapproval;costsforcontractenforcing.Ontheotherhand,hierarchycosts,whichcorrespondtocostsoftheentrepreneurialorganization,include:costsforhumanresourcesselectionandmanagement;costsofcontroloncontractsregardinghumanresources;costsofcontractenforcement;costsofcoordinationandinformationtrans-missionwithinthefirm(Costantinoetal.,2012).TCE,therefore,canbeusedasalenstounderstanddecisionsthroughoutthePSMprocess.Forexample,TCEexplainsinfluencingdecisionsandbehaviourofsuppliersthroughfiatanduseofdeliveryandqualitycontrol,annualaudits,on-sitevisits,anddirectcontroloversecond-tiersuppliers(Belloetal.,2004).TCEhasalsobeencrucialinunderstandingtheresourcesdevotedtolower-tiersuppliersintermsofidentifying(exante)andmonitoring(expost)criticallower-tiersuppliers(Meinlschmidtetal.,2018).ThesalientrelevanceofthesetenetsoftheTCEexplainsitshistoricalprominenceinthePSMliterature.Therefore,therecontinuestoberoomtoutilizeandextendTCEtoexplainPSMphenomenon.Resource-BasedViewTheresource-basedview(RBV)focusesattentiononafirm’sassetsasaunitofanalysis.Themostimportantassetsare‘strategic’resourcesthatarerare,valuable,anddifficulttopur-chaseorimitate(Barney,1991).Theseresourcesprovidecompetitiveadvantagesoverrivalslackingsuchresources.Patents,strongreputationsandpositiveorganizationalcultures,forexample,mayserveasstrategicresourcesforsomeorganizations.Incontrast,non-strategicassets(forexamplecash)arepossessedbymanyorganizationsandthusdonotdistinguishanorganization’sabilitytobecompetitive.Specifically,Barney(1991)identifiedfouressentialrequirementsforaresourcetobeasourceofcompetitiveadvantage.First,theresourcemustbevaluable,inthatitimprovesfirmefficiencyand/oreffectiveness.Second,theresourcemustberare,sothatbyexercisingcontroloverit,thefirmcanexploitittothedisadvantageofitscompetitors.Third,theresourcemustbeimperfectlymobile,todiscouragetheexpostLarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

69Theoriesrelevanttopurchasingandsupplymanagementresearch51competitionfortheresourcethatwouldoffsettheadvantagesofmaintainingcontroloftheresource.Fourth,theresourcemustnotbesubstitutable;otherwise,competitorswouldbeabletoidentifyequivalentresourcestobeusedforthesamepurpose.WhileTCEhelpstoexplainwhyfirmsexist,theRBVfocusesonwhyfirmsdifferinper-formance;bothveryrelevantinmakingPSMdecision(Halldorssonetal.,2015).TheRBVsuggeststhatamaturePSMfunctionwilloftenexhibitattributesthatcontributetobeingasourceofsustainedcompetitiveadvantagetothefirm(Barney,2012).Competitiveadvan-tageisthevaluethatafirmcreatesforitscustomersthroughcostleadershipand/ormeaningfuldifferentiation(Porter,1985).Forexample,relationshipswithkeysuppliers,ifwellmanaged,canbevaluable,rareanddifficulttoimitate.RBVidentifiesconditionsunderwhichPSMcanbeasourceofcompetitiveadvantage.AgencyTheoryAgencytheoryhasbeendeployedbyPSMresearcherstoexplainthebehaviourofagentsfortheorganization.Anagencyrelationshipexistsinanyjointeffortinwhichoneparty(thatis,theprincipal)delegatesauthoritytoasecond(thatis,theagent).Becausethepartiesoftenpossessdivergentgoals,agentsoftenelevatetheirownaimsabovethoseofprincipals.Inresponse,theprincipalmusteithermonitoragentbehaviourorofferstrongincentivestoensurethatagentsactintheprincipal’sbestinterest(Eisenhardt,1989).Thedeviationfromtheprinci-pal’sinterestbytheagentiscalledagencycost(JensenandMeckling,1976).Thefocusofthetheoryisondeterminingthemostefficientcontracttogovernaparticularrelationship,giventhecharacteristicsofthepartiesinvolvedandthefactthatenvironmentaluncertaintyandthecostsofobtaininginformationmakeitimpossiblefortheprincipaltomonitortheagentcom-pletely(Bergenetal.,1992).Principalsandagents,therefore,mustchoosebetweenacourseofactionthatbenefitstheirfirmversusonethatbenefitsbothparties.Leveragingtoolssuchasrewardstructuresandculturalcompetitivenesstoensurealignmentamongparticipants’interestsremovesthetemptationtotakeadvantageofotherpartiesintherelationship(KetchenandHult,2007).GiventhatmostPSMfunctionsconsistofmultipleemployeesatvariousfirmlevels(buyer,categorymanager,procurementmanager,andsoon),developingandimplementingPSMstrategiesandprogrammesnecessarilyinvolvesmanagingagencyrelationships(Tateetal.,2010).Ideally,ifthebuyer‒supplierrelationshipisstrong,allmembersprosper.However,individualrelationshipimbalancescanmakecertainparticipantsvulnerabletoopportunism.Thebuyerorsellermaytakeadvantageoftheirpartnertomaximizetheirowngain.Similarly,thebuyer(agent)hasauthoritytoenterintocontractsandcommittheorganization’s(princi-pal’s)funds.Inessence,theagentisgiventheauthoritytoactonbehalfoftheprincipalandenterintocontractswithsuppliers(Monczkaetal.,2016).AgencytheoryoffersanaturalfitwithPSMresearchwithapplicationsincludingethicalconduct,buyer–supplierrelationships,andrelationshipswithinternalstakeholders.LarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

7052Handbookoftheoriesforpurchasing,supplychainandmanagementresearchUNDERUTILIZEDTHEORIESANDAFUTURERESEARCHAGENDAAmoreprescientquestionmightbe:areweoverlookingimportantresearchopportunitiesbyfocusingsomuchattentionononlyafewtheoriesinmostofthePSMresearch?Thiscanlimitthescopeofinvestigationinthedisciplineandcreateblindspotsinourknowledgebase.Forthisreason,weselectedthetenmostpromisingtheoriesbasedontheliteraturereviewandanalysisbyGiuniperoetal.(2019).ThesetheorieswerereportedbyGiuniperoetal.(2019)tohavebeenusedthreeorfewertimesinthecontemporaryPSMliterature,despitetheirpoten-tialtoinformPSMfutureresearchandprovideadditionalinsightintothePSMphenomenon.ThisisnottosaythattherestofthetheorieslistedintheliteraturereviewbyGiuniperoetal.(2019)asunderutilizedtheoriescannotbesuccessfullyusedbyscholarstoshedlightonPSMphenomena.Rather,wewereconstrainedbyspacelimitationstoofferonlyamoredetaileddescriptionforafewselectedpromisingtheories.OurgoalistohelpinformfuturePSMresearchvianoveltheoreticallenses,andpromotelearningandinnovationaboutunderutilizedtheoreticalperspectivesinthediscipline.Belowwehighlightthesetenpromising,butsporad-icallyadoptedtheories,andwithinthePSMcontext.AttributionTheoryAttributiontheoryattemptstodescribeandexplainthementalandcommunicativeprocessesinvolvedineverydayexplanations,mosttypicallyofindividualandsocialevents(Kelley,1973).Attributiontheoryrestsonthreecausaldimensions(BettmanandWeitz,1983):(1)internal(forexample,ability,effort)orexternal(forexample,taskdifficulty,luck,environ-mentalconstraints);(2)causalstability,whichreferstothetemporalnatureofthecausesthatis,causescanbepermanentandunchanging(forexample,ability)ortemporaryandunstable(forexample,luck);and(3)controllabilityofthecauseortheextenttowhichafirmhaspowertochangeoralterthecause.PSMscholarscanuseattributiontheorytounderstandhowmanagersinterpretPSMout-comes.Thishasimportantimplications:differentinterpretationscanleadtodifferentstrategicresponses(forexample,endingarelationshipwithasupplierorcontinuingtoworkwiththesupplier)withdifferentperformanceoutcomes(Wowaketal.,2016).Broadlyspeaking,attri-butiontheorycanbeusedtoexaminewhoorwhatgetscreditorblameforvaluecreationordestructionwithinPSM.Forexample,purchasingmanagersmustensurethattheirsuppliersarecompliantwithsustainabilitystandardsiftheyfacehigherpressuresfromtheirstake-holderstomeetsocial/environmentalsustainabilitycriteria(Goebeletal.,2018).Thismayinducehigherpurchasingcostsand,asaconsequence,forceatrade‐offbetween(shortterm)economiccriteria(thatis,purchasingcostreduction)andsocial/environmentalsustainabilitycriteria.AuctionTheoryAnauctionisaformofmarketwithspecificrulesthatdetermineresourceallocationandpricesonthebasisofbidscomingfrommarketparticipants(McAfeeandMcMillan,1987).Auctiontheoryisabranchofgametheory,whereauctionsareatypeofgamecharacterizedbyincompleteinformationandinformationasymmetry(Costantinoetal.,2012).AuctiontheoryLarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

71Theoriesrelevanttopurchasingandsupplymanagementresearch53assumesthatbiddersarerisk-neutral;biddersaresymmetric;andpaymentsareafunctionofthebidsalone(McAfeeandMcMillan,1987).Areverseauction(RA)isdefinedasanelectronicbiddingprocesswheremultiplesellersarevyingforthebusinessofasinglebuyer,resultinginintensepricecompetitionamongsellers(Monczkaetal.,2016,p.725).Consequently,auctiontheoryoffersavalidframeworktostudythebiddingprocessinPSM.Itfitsnicelywiththegrowingpopularityofreverseauctionsasasourcingtool.Thistheorycanexplainandpredictbuyer–supplierbiddingbehaviourundervariousconditions.Forexample,LiandZheng(2009)showthattheequilibriumbiddingbehaviourcanbecomelessaggressivebecauseofentrycosts,sothatbiddersbecomediscour-agedfromenteringthecompetitionastheexpectednumberofbiddersincreases.Pearcyetal.(2007)foundthatpartitioningtheRAprocessintoofferandexecutionphasewilllessenthenegativeimpactonthebuyer–supplierrelationship.Overall,auctiontheoryessentiallydealswithbuyerandsupplierbehaviourinauctionmarkets,andthepropertiesandrulesusedtojudgebehaviourwhenauctionsareusedtoestablishapriceinmarkets.PSM’suseofreverseauctionsinthesourcingcycleoffersmultipleopportunitiesforresearcherstoapplythistheory.InformationProcessingTheoryForbuyingfirms,oneofthemostpressingchallengesisthattheyfrequentlydonotpossesssufficientinformationonwhatisoccurringintheircomplexsupplychains(Busseetal.,2017).Informationprocessingtheory(IPT)positsthattheuncertaintyarisingfromafirm’sbusinessenvironmentcreatesinformationprocessingneedswhichmustbemanagedappropriatelybythefirm(TushmanandNadler,1978).IPTevolvedinthe1970swithanintra-organizationalfocus,inresponsetoorganizationaldesignproblemsoflargefirms(Galbraith,1973).Itwaslaterextendedtoadyadic,interorganizationalleveltoassessbuyer–supplierrelationships(BensaouandVenkatraman,1995).Informationprocessingencompassesthegathering,inter-pretingandsynthesizingofinformation(TushmanandNadler,1978).IPTisconcernedwiththelinkbetweenenvironmentaluncertaintyandPSM-relatedinformationprocessingneeds,aswellaswiththequestionofhowbuyersandsupplierscancopewiththeseneeds(Trautmannetal.,2009).Uncertaintyastherootcauseofinformationprocessingneedsis‘thedifferencebetweentheamountofinformationrequiredtoperformthetaskandtheamountofinformationalreadypossessedbytheorganization’(Galbraith,1973).TheeffectofthefitbetweeninformationprocessingneedsandcapabilitiesonPSMperfor-mance(Premkumaretal.,2005)callsforapplicationsoftheIPTtoexaminethecomplexitiesofrelatedphenomena.UnderstandingPSMinformationprocessingneedsthoughtfulanalysisofthefeaturesofdifferentsourcesofuncertaintythataugmentit(Duncan,1972),suchascomplexity(thatis,thepluralityofrelevantfactors)anddynamism(thatis,ameasureoftemporalchange)(BensaouandVenkatraman,1995;Premkumaretal.,2005).TheuseofIPTshouldincreasealongwiththegrowthofartificialintelligence,machinelearningandroboticsinPSM.InnovationTheoryThetheoryoftheadoptionanddiffusionofinnovations(innovationtheory,forshort)devel-opedbyRogers(1962)isoneofthemostwidelyacceptedacademicworksoninnovationadoptionthathasbeenappliedtoavarietyofcontextsoveranextendedperiodoftime(e.g.,LarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

7254Handbookoftheoriesforpurchasing,supplychainandmanagementresearchMooreandBenbasat,1991;PremkumarandRoberts,1999).Innovationdiffusionistheprocessbywhichaninnovationiscommunicatedthroughcertainchannelsovertimeamongthemembersofasocialsystem(Debnathetal.,2016).Historically,thestrategicfocusoninnovationandcompetence-basedthinkinghaschangedandelevatedtheroleofPSM(VanWeeleandVanRaaij,2014).ThePSMfunctionhasbeendeemedtobeadriverofkeystrategicprocessesandsupplierrelationships.However,contri-butionsonhowtoleveragepurchasingandsupplyknowledgeandexpertisewithinandacrossorganizationsinthemainstreamliteratureremainlimited(VanWeeleandVanRaaij,2014).InnovationtheorycaninformtheadoptionofPSMinnovationsandtechnologywithinthefirmandacrosspartnerorganizations.Itcanalsoprovideanassessmentofthekeycharacteristicsthatdriveinnovationdiffusionsuccess(Rogers,1962).Thesecharacteristicsinclude:per-ceivedrelativeadvantageofaninnovation,theperceivedcompatibilityofaninnovation,theperceivedcomplexityofaninnovation,perceivedtrialability,andtheperceivedobservabilityofaninnovation.Sinceinnovationdiffusionrequirescommunicationthroughthesupplychainchannelsovertime(Debnathetal.,2016),themeasurementofdivergenceandconvergenceintheseperceptionsamongbuyer–supplierpartnerfirmscaninformtheinnovationdiffusionphenomenoninPSM.InstitutionalTheoryInstitutionaltheoryistraditionallyconcernedwithhowvariousgroupsandorganizationsbettersecuretheirpositionsandlegitimacybyconformingtotherulesandnormsoftheinsti-tutionalenvironment(Debnathetal.,2016;ScottandDavis,2007).Accordingtoinstitutionaltheory,organizationsaresubjecttothreetypesofforces:normative,placedonorganizationsbymarketforces,suchascustomers,toadoptcertainpractices;mimetic,placedbythecompetitiveenvironmentandtheneedtobeawareoftheactivitiesoftheircompetitors;andcoercivepressuretoconformoradoptcertainpracticesbasedonthedemandsfromregulatoryauthoritiesorotherpressuregroups(DiMaggioandPowell,1983).Theseexternalpressuresconsequentlymakebuyer–supplierorganizationsadoptorabandonpurchasingpractices,regardlessoftheirefficiencyandeffectiveness,astheygrowincreas-inglysimilar;duetotheirneedtoadoptverysimilarindustrypracticesandstructuresoutofaconcernforlegitimacyevenintheabsenceofviableperformancegains(Ahmedetal.,2013;Tateetal.,2009).Forexample,buyerscreatepressurestoadoptprogrammessuchasISO9000thatmanysupplierswouldnototherwiseimplement;andprofessionalorganizationssuchastheInstituteforSupplyManagement(ISM)createnormativepressuresthroughtheirpublicationsandmanagerialcertifications,leadingpurchasingprofessionalstoembracestand-ardpracticesasacriticalpartoftheirjobs.InstitutionaltheorycaninformPSMresearchinexploringboundedrationalityandtimeconstraintsleadingtosolutionswherenoefficiencygainshavebeenrealized.OrganizationalLearningTheoryMarch(1991)introducedthetheoryofthelearningorganizationandpresentedthechallengesofmanagingthetrade-offbetweendifferenttypesoflearning-relatedcapabilities.Organizationallearningrepresentsaprocessofcreation,transferand/ormodificationofknowledgeiniti-atedbyanorganizationalmemberand/orgroupsofmembersforthepurposeofimprovingLarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

73Theoriesrelevanttopurchasingandsupplymanagementresearch55organizationalperformanceandoutcomes(Realetal.,2014).Thistheoryhighlightsthatthelearningcapacityofanorganizationdependsonfactorssuchas:top-levelleaders’behaviours;organizationalstructure,cultureandflexibility;anduncertaintiesintheenvironmentinwhichtheorganizationfunctions.Accordingtothistheory,organizationallearningiscomposedoftheprocessoflearningandthestructureofthelearningorganization(SlaterandNarver,1995).Thestructureofalearningorganizationisbasedonhowitis‘skilledatcreating,acquiring,andtransferringknowledgeandatmodifyingitsbehaviortoreflectnewknowledgeandinsights’(Garwin,1993).AccordingtoPeterSenge(1990,2006),fivedisciplinescreateorganizationallearning:(1)asharedvision;(2)mentalmodels;(3)teamlearning;(4)personalmastery;and(5)systemthinking.OrganizationallearninghaslongbeenrecognizedasanimportantdeterminantofPSMperformanceandsustainability(e.g.,Dawesetal.,2007;Hultetal.,2000).Thissaid,exist-ingPSMresearchhascommonlyfocusedontheperspectivesofasinglegroupandviewedorganizationallearningasasingle-level,top-downandorganizedorganizationaleventinitiatedbytheleader.ThisparticularperspectivemayfallshortofexplainingtheeffectsofPSMmulti-levelparticipantsandspontaneousbehavioursonorganizationallearning.PSMlearningactivitiestakeplaceamong,andareinfluencedbythepowerof,stakeholderssuchasmanagement,buyers,suppliers,customers,localcommunityandpublic(ChouandRamser,2019).Therefore,wesuggestdevelopingamulti-leveltheoreticalperspectiveinexploringhowthedecisionsandbehaviourofaPSMparticipant,suchasabuyerorsupplier,fosterorganizationallearning.ItisevidentthatorganizationallearninghasmanyapplicationsfororganizationsintechnologyandevenindealingwiththecurrentCovid-19pandemic(Dawesetal.,2007).PowerDependenceTheoryEmerson(1962)definedpowerastheabilityofanactortoinfluenceanothertoactinamannerthattheywouldnothaveotherwise.Inhisseminalwork,hesuggeststhatpower:existsinadyadicrelationshipwheneachactorseekstoacquireresourcescontrolledbytheotherparty;isdirectlyproportionaltooneparty’smotivationalinvestmentingoalsmediatedbytheotherparty;andisinverselyproportionaltotheavailabilityofthosegoalstothepartyoutsideoftherelation.PfefferandSalancik(1978)appliedEmerson’sphilosophytothecontextofbuyer‒supplierrelationships,withthefundamentalpremisethatpowerinanexchangerelationshipisarelativeconceptdeterminedbywhichfirmismoredependentontheotherfirmforneededresources.Buchanan(1992),characterizedpower‒dependenceimbalancesinbuyer–supplierrelationshipsasthedifferenceinvaluethatbuyersandsellersattachtotherelationship.Inbalancedrelationshipsneitherpartydominates,asopposedtoasymmetricrelationshipswherethemostindependentpartydominates.AlthoughtheconceptofpowerhasawidescopeofapplicationsinPSM,empiricalPSMstudiesthatinvestigatetheimpactofbuyer–supplierrelationshippoweraresparse,andmanydebatesonthebasesandimpactsofpowerwithinthesupplynetworkremainunresolved(MeehanandWright,2012).Explanationscouldbethatpowerdependencetheoryrequiresprecisecontext-specificdefinitionsforresearch(PfefferandSalancik,1978),andthedifferingschoolsofthoughtwithrespecttotherelevantunitofanalysisadopted.Mostoftheliteratureviewspowerininterorganizationalrelationshipsasanattributeofanorganization(Chicksand,2015;Pullesetal.,2014).Yet,oneorganization’sdependenceonanotherisnotonlycontingentLarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

7456Handbookoftheoriesforpurchasing,supplychainandmanagementresearchonthecriticalityoftheresourcessought,butalsoproportionaltotheavailabilityofalternativesources(Huff,2016).Thelackofintegrationoftheselevelsofanalysiscreatesattenuatedcon-ceptualpositionsontheoriginsofpower,andanarrownessintheviewofpower.IntegrationtolocatetheconceptofpowerwithincomplexdynamicsisneededtoincreasetheutilityofstudiesofpowerinPSMtobetheoreticallymeaningfulandusefulinpractice.RelationalExchangeTheoryRelationalexchangetheory(RET)isanoffshootofandislargelybasedonBlau’s(1964)socialexchangetheory(SET).Macneil’s(1980)relationalexchangetheorydescribesexchangesalongacontinuumfromdiscrete,characterizedbyashort-termorientation,limitedcommunications,competitivebehaviours,andpursuitofindividualgoalslimitedtobuyingandsellingissuesandinteractions;torelational,characterizedbyextensivecommunications,commitmentandalong-termorientation.MorganandHunt’s(1994)treatiseoncommitmentandtrusthasalsoevolvedfromSET(Blau,1964)andhasbeenregardedasoneofthemainpillarsofstudiesonRET(Leeetal.,2010).Inoneofthefoundationalworksonexchangerelationships,Dwyeretal.(1987)differentiatedbetweenvarioustypesofrelationships,market-governedtransactionsanddiscreteexchanges,andproposedthatrelationalexchangesgainbenefitsfromreducinguncertainty,managingdependence,increasingefficiencyandprovidingsocialsatisfactions.RETespousesthatthehistoricalandsocialcontextsshouldbetakenintoaccountinmanagingbuyer–supplierrelationships(Heide,1994).Accordingly,scholarsforwardedinformalmechanismsthatarebasedonmoralandsocialnorms(Liuetal.,2009)andthatthriveonrelationshipelementssuchasopencommunication,trust,solidarityandjointcooperation(Heide,1994)tomakePSMdecisions.Theareaofrelationalgovernanceingeneralisripewithapplicationsandunansweredques-tionsinthePSMcontext.Forexample,ontheonehand,unilateralgovernanceinexchangerelationshipsemergesasasubstituteformarketgovernancewhenitismoreefficientduetoexternalorinternaluncertaintyortransaction-specificinvestments(Heide,1994).Ontheotherhand,bilateralgovernancefocusesonreducinguncertaintyaswell,butalsoonmanagingdependencebypromotingcooperation,collaboration,commitment,dependency,power,trust,riskanduncertainty(Gummesson,1999;HuntandMorgan,1995).Despitepotentialgains,bilateralgovernanceiscostly.Asbuyersandsuppliersmanagetheirrespectivedependenceinarelationship,itissimultaneouslyincreasedthroughspecificinvestmentswhichmakethedis-solutionoftherelationshipverycostly(Aistrich,2002).Forexample,thesupplier’sdepend-enceonabuyercannotberemoved,butthebuyercanbecometiedtothesupplieraswellbyvirtueoftherelationshipandmakingspecificinvestmentsinit.Therefore,understandingandmeasuringthebuyer–supplierbonds,therelatedactivitylinksandtheresourcetiesinvolved(Gummesson,1999)isimportantforthePSMfunction,becauserelationshipsarerecognizedtoconstrainand/orenhancetheabilitytoact.However,aconceptualandmethodologicalgapinPSMrelationshipmanagementscholarshipremainsasitpertainstohowtomeasuresuchrelationshipaspectsandtogaugetheimpactofmultipleandinterconnectedbuyer–supplierrelationshipsonorganizations.LarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

75Theoriesrelevanttopurchasingandsupplymanagementresearch57ResourceOrchestrationTheoryResourceorchestrationtheory(ROT)isanextensionoftheRBVwhichsuggeststhatitisthecombinationofresources,capabilitiesandmanagerialacumenthatultimatelyresultsinsuperiorfirmperformance(Helfat,2007).Inhiswork,Helfatdefinedresourceorchestrationasthecapacityofmanagerstopurposefullycreate,extendormodifytheresourcebaseofanorganizationbyassemblingandorchestratingconfigurationsofitsco‐specializedresources.Therefore,ROTcanprovidethelenstounderstandandpredictthePSMfirm-leveldecisionsastheyrelatetothethreedimensionssuggestedbySirmonetal.(2007):(1)structuring‒resourcesmustbeacquired,accumulatedanddivested;(2)bundling‒resourcesmustbebundledandtailoredtomeetthefirm’suniqueneedsonceacquired;and(3)leveraging‒resourcesmustbemobilized,coordinatedanddeployedtoexploitmarketopportunitiesandtocreatevalueforcustomersaftertheyhavebeensuccessfullystructuredandbundled.Assuggestedbystrategicmanagementscholars(Chadwicketal.,2015;Sirmonetal.,2011),PSMscholarshipcanuseROTtohighlighttheimportanceofsupplymanagementactionsfortheorganizationtorealizethefullvalueofitsresourceswhenthebreadth(resourceorchestrationacrossthescopeofthefirm),lifecycle(resourceorchestrationatvariousstagesoffirmmaturity)anddepth(resourceorchestrationacrosslevelsofthefirm)oftheseresourcesaremanagedeffectively.This,inturn,providesanopportunityforPSMscholarshiptoinformbuyers’andsuppliers’decisionstoorchestraterelevantresourcesastheystructuretheirresources,bundlethemintocapabilities,andleveragefromthosecapabilitiestohelpbothachievetheirgoals.SocialNetworkTheorySocialnetworktheory(SNT)examinessocialstructuresassystemsornetworksofrelations(Scott,1991)andviewssocialrelationshipsintermsofnodesandties.Morespecifically,asocialnetworkisasetofentities(forexample,individuals,departments,firmsorcountries)connectedtooneanotherbyaseriesofrelationshipsthatcanberepresentedgraphicallybyasetofnodesconnectedbylines(Lincoln,1982).Nodesaretheindividualactorswithintheframeworks;tiesaretherelationshipsbetweentheactors(Lincoln,1982).Withinthisframe-work,abasicassumptionisthatstructureisimportant(Chabowskietal.,2011);thatis,thefocusofthistheoryisrelationshipsandtieswithotherentitieswithinthenetwork,ratherthantheattributesofsuchentities.Assuch,thefocusofthisperspectiveisonrelationshippatternsaswellastheircausesandconsequences(TichyandFombrun,1979).SNTexplicatesthepropertiesoftoday’sPSMnetworks,includingthenatureofthelinksbetweenjoinedentities(Tichyetal.,1979)andthetransactionalcontent,definedastheconsistentflowsorexchangeofknowledge,influenceandideasfromoneentitytoanother.IthelpsinunderstandinghowinteractionsandinterconnectednessacrossthenodesandlinksinasupplychainimpacttheoverallperformanceofPSM.Thatis,itparallelstheshiftinfocusfromeachindividualfirminthesupplychain,tohowthosefirmsinteractwithoneanothertocreatevalue(Gligoretal.,2019).Theincreaseduseofsocialmediatoolsforsourcingmakethisaveryusefultheoryforthefuture.Socialnetworksareprimarilyassociatedwithpersonalinteractions,butalsocanhaveabusinesspurpose.Wealsoknowthatoftensocialandbusinessinteractionscanbecomplementary.Certainly,thepopularityofLinkedInasaprofessionalbusinesssiteandFacebook,whilemoresocial,canservebusinesspurposes.ThistheoryhasLarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

7658Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable4.2SuggestedtheoriesandexamplesofPSMapplicationsTheoryApplicabilityexamplesAttributiontheoryExaminewhoorwhatgetscreditorblameforvaluecreationordestructionwithinPSM.Understandhowdifferentinterpretationscanleadtodifferentstrategicresponses(forexample,endingarelationshipwithasupplierorcontinuingtoworkwiththesupplier).ThiswillbeimportantinthenextdecadeinPSMpractice,asnewtechnologiessuchasartificialintelligenceandmachinelearningimpactuponsupplierselection,retentionandrelationships.AuctiontheoryThiscanbehelpfulinexplainingandpredictingbuyer–supplierbiddingbehaviourthroughelectronicreverseauctionsandexpressivebiddingsoftwareplatforms.Examiningentrycostsandtheirimpactonbidderdecisionsinboththeofferandtheexecutionphasewillhelptoexplaintheresultantbuyer–supplierrelationship.InformationprocessingtheoryUnderstandingthelinkbetweenenvironmentaluncertaintyandPSM-relatedinformation(IPT)processingneedsandhowbuyersandsupplierscopewiththeseneeds.TheapplicationsofIPTshouldincreasealongwiththegrowthoftechnologysuchasartificialintelligence,machinelearningandroboticsinPSM.InnovationtheoryInformtheadoptionofPSMinnovationsandtechnologywithinthefirmandacrosspartnerorganizations.Investigatehowthediffusionofnewtechnologiesandinnovationsthemselvesareinfluencedbyspecificgroups.Supplybaseinnovationisnecessarytosupportinternalinnovation.Thus,thistheorycanprovideanassessmentofbuyers’andsuppliers’divergenceandconvergenceinperceptionsofkeyinnovationcharacteristics.Theseincludetheperceived:relativeadvantage,compatibilityandcomplexityofaninnovation,anditsimpactonsuccessfullydrivinginnovationpracticesamongbuyer–supplierpartnerfirms.InstitutionaltheoryInformtheboundedrationalityinPSMdecisionsleadingtosolutionswherenoefficiencygainshavebeenrealized.Thenormativepressuresandtimeconstraintsthatbuyersfaceleadtoadoptingprogrammesthatmanysupplierswouldnototherwiseimplement.Thistheorycanexaminetheexternalpressuresthatmakebuyerandsupplierorganizationsadoptorabandonpurchasingpracticesregardlessoftheirefficiencyandeffectiveness.OrganizationallearningtheoryExaminehowmulti-levellearningtakesplaceinPSMcontextsandhowstakeholderfeedbackservesasasourceofPSM’spracticesandstrategies.Also,linkindividuals,groupsandtheorganizationtodevelopamulti-levelorganizationallearningmodelexplainingthePSMlearningphenomenon.PowerdependencetheoryUnderstandbuyer–suppliernegotiations.Integrateorganizational,individualandrelationshiplevelsofanalysistounderstandperceptionsofpowerwithinPSMcomplexdynamics.Informourunderstandingofhowindyadicrelationshipsthedominantpartycanimpactuponthebehaviouroftheotherparty.This,inturn,canhelptoprovideadditionalinsightsintothefactorsthatleadtosuccessfulPSMrelationships.RelationalexchangetheoryUnderstandhowbuyersandsupplierscanbebettermotivatedintherelationshiptoperformthetasksrequiredofthem.Thisisinformedbyexaminingandmeasuringthecharacteristicsofbuyer–supplierbonds,therelatedactivitylinks,andtheresourcetiesinvolved.Thistheoryalsocaninformtheimpactofmultipleandinterconnectedbuyer–supplierrelationshipsonorganizations.ResourceorchestrationtheoryInformbuyers’andsuppliers’decisionstoorchestraterelevantresourcesastheystructuretheirresources,bundlethemintocapabilities,andleveragefromthosecapabilitiestohelpbothachievetheirgoals.Also,explainhowresourceversatilityislinkedtohigherlevelsofperformancewithrespecttotheallocationofresourcesacrossdifferentmembersofthesupplychainSocialnetworktheoryUnderstandhowmembersofthesupplychaininteractandrelatetooneanotherandhowtheseinteractions,inturn,impactuponthePSMperformanceofbuyersandsuppliers.Theincreaseduseofsocialmediatoolsforsourcingmakethisaveryusefultheoryforthefuture.Also,itcanhelptoinvestigatethemanyinformalconnectionsthattieemployeesandtheirexecutivestogether,aswellasassociationsandconnectionsbetweenindividualemployeesatpartnerfirms.LarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

77Theoriesrelevanttopurchasingandsupplymanagementresearch59beenusedtoinvestigatehowexecutivesacrossfirmsinteractwitheachother(Chabowskietal.,2011).Therefore,thereisawidespectrumofapplicationsofthesocialnetworktheoryinPSMtoinvestigatehowbuyer–supplierfirmsinteractwitheachother,describethemanyinformalconnectionsthattietheirexecutivestogether,aswellasassociationsandconnectionsbetweenindividualemployeesatpartnerfirms.CONCLUSIONSANDIMPLICATIONSTheoryiscriticaltothedevelopmentofanyfieldofresearch.ThefirstobjectiveofthischapterwastoelaborateontheextentoftheoryuseinPSMresearchanddescribethemostfrequentlyusedtheoriesinPSMresearchpublishedinthepasttwodecades.Asstatedearlierinthischapter,theoryisbecominganecessaryrequirementtopublishPSMscholarlywork.TCEandtheRBVhavebeenthedominanttheoreticallensesusedtoexplainPSMphenomena.Othertheoriesthatwediscussedweremuchlessused,buthaveexperiencedsomeupwardmove-ment,andincludegametheory,agencytheoryandsocialexchangetheory.Goingforward,wediscussedtenpromising,butsporadicallyadoptedtheoriesthatcanbeappliedtofuturePSMresearch.ThebroadvarietyoftheoryusethatexistsinrecentPSMresearchmayconfirmthatearliercallsforgreateruseoftheoryhavebeenansweredtosomeextent.Thediscussion,summarizedinTable4.2,showsthatthesetentheoriescanbeutilizedinsuggestedapplicationsbyPSMresearchers,editorsandreviewerstoexpandthescopeofinvestigationandpromotenewinsightsinthediscipline.REFERENCESAhmed,D.,Das,A.andPagell,M.(2013),‘Theinfluenceofproductlifecycleontheefficacyofpurchasingpractices’,InternationalJournalofOperationsandProductionManagement,33(4),470–498.Aistrich,MattiM.(2002),‘Trustus,trustme,trustinthefuture:determinantsofthesupplier’ssuccessinmanagingaglobalaccountrelationship’,UnpublishedDBA,HarvardUniversity.Barney,Jay(1991),‘Firmresourcesandsustainedcompetitiveadvantage’,JournalofManagement,17(1),99–120.Barney,JayB.(2012),‘Purchasing,supplychainmanagementandsustainedcompetitiveadvantage:therelevanceofresource-basedtheory’,JournalofSupplyChainManagement,48(2),3–6.Bello,D.C.,Lohtia,R.andSangtani,V.(2004),‘Aninstitutionalanalysisofsupplychaininnovationsinglobalmarketingchannels’,IndustrialMarketingManagement,33(1),57–64.Bensaou,M.andVenkatraman,N.(1995),‘Configurationsofinterorganizationalrelationships:acom-parisonbetweenU.S.andJapaneseautomakers’,ManagementScience,41(9),1471–1492.Bergen,M.,Dutta,S.andWalkerJr,O.C.(1992),‘Agencyrelationshipsinmarketing:areviewoftheimplicationsandapplicationsofagencyandrelatedtheories’,JournalofMarketing,56(3),1–24.Bettman,J.R.andWeitz,B.A.(1983),‘Attributionsintheboardroom:causalreasoningincorporateannualreports’,AdministrativeScienceQuarterly,28(2),165–183.Blau,Peter(1964),ExchangeandPowerinSocialLife.NewYork:Wiley.Buchanan,Lauranne(1992),‘Verticaltraderelationships:theroleofdependenceandsymmetryinattainingorganizationalgoals’,JournalofMarketingResearch,29(1),65–75.Busse,C.,Meinlschmidt,J.andFoerstl,K.(2017),‘Managinginformationprocessingneedsinglobalsupplychains:aprerequisitetosustainablesupplychainmanagement’,JournalofSupplyChainManagement,53(1),87–113.LarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

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79Theoriesrelevanttopurchasingandsupplymanagementresearch61Hunt,S.D.andMorgan,R.M.(1995),‘Thecomparativeadvantagetheoryofcompetition’,JournalofMarketing,59(2),1–15.Jensen,M.andMeckling,W.(1976),‘Theoryofthefirm:managerialbehavior,agencycostsandcapitalstructure’,JournalofFinancialEconomics,3(October),305–360.Kelley,HaroldH.(1973),‘Theprocessofcausalattribution’,AmericanPsychologist,28,103–128.Ketchen,D.J.andHult,G.T.M.(2007),‘Bridgingorganizationtheoryandsupplychainmanagement:thecaseofbestvaluesupplychains’,JournalofOperationsManagement,25(2),573–580.Knight,L.,Tate,W.L.,Matopoulos,A.,Meehan,J.andSalmi,A.(2016),‘Breakingthemold:researchprocessinnovationsinpurchasingandsupplymanagement’,JournalofPurchasingandSupplyManagement,22(4),239–243.Lee,J.W.C.,Mohamad,O.andRamayah,T.(2010),‘Outsourcing:isthesocialexchangetheorystillrelevantindevelopingcountries?’,JournalofResearchinInteractiveMarketing,4(4),316‒345.Li,T.andZheng,X.(2009),‘Entryandcompetitioneffectsinfirst-priceauctions:theoryandevidencefromprocurementauctions’,ReviewofEconomicStudies,76(4),1397–1429.Lincoln,JamesR.(1982),‘Intra-(andinter-)organizationalnetworks’,inS.B.Bacharach(ed.),ResearchintheSociologyofOrganizations.Greenwich:JAIPress,pp.1–38.Liu,Y.,Luo,Y.andLiu,T.(2009),‘Governingbuyer‒supplierrelationshipsthroughtransactionalandrelationalmechanisms:evidencefromChina’,JournalofOperationsManagement,27(4),294–309.Macneil,IanR.(1980),TheNewSocialContract:AnInquiryIntoModernContractualRelations.NewHaven,CT:YaleUniversityPress.March,JamesG.(1991),‘Explorationandexploitationinorganizationallearning’,OrganizationScience,2(1),71–87.McAfee,R.P.andMcMillan,J.(1987),‘Auctionsandbidding’,JournalofEconomicLiterature,25(2),699–738.Meehan,J.andWright,G.(2012),‘Theoriginsofpowerinbuyer–sellerrelationships’,IndustrialMarketingManagement,41(4),669–679.Meinlschmidt,J.,Schleper,M.andFoerstl,K.(2018),‘Tacklingthesustainabilityiceberg:atrans-actioncosteconomicsapproachtolowertiersustainabilitymanagement’,InternationalJournalofOperationsandProductionManagement,38,1888–1914.Monczka,R.M.,Handfield,R.B.,Giunipero,L.C.andPatterson,J.L.(2016),PurchasingandSupplyChainManagement(6thedn).Boston,MA:CengageLearning.Moore,G.C.andBenbasat,I.(1991),‘Developmentofaninstrumenttomeasuretheperceptionsofadoptinganinformationtechnologyinnovation’,InformationSystemsResearch,2(3),192–222.Morgan,R.M.andHunt,S.D.(1994),‘Thecommitment–trusttheoryofrelationshipmarketing’,JournalofMarketing,58(3),20–38.Pearcy,D.,Giunipero,L.andWilson,A.(2007),‘Amodelofrelationalgovernanceinreverseauctions’,JournalofSupplyChainManagement,43(1),4–15.Pfeffer,J.andSalancik,G.R.(1978),TheExternalControlofOrganizations:AResourceDependencePerspective.NewYork:Harper&Row.Porter,MichaelE.(1985),TheCompetitiveAdvantage:CreatingandSustainingSuperiorPerformance.NewYork:FreePress.Premkumar,G.,Ramamurthy,K.andSaunders,C.S.(2005),‘Informationprocessingviewoforganiza-tions:anexploratoryexaminationoffitinthecontextofinterorganizationalrelationships’,JournalofManagementInformationSystems,22(1),257–294.Premkumar,G.andRoberts,M.(1999),‘Adoptionofnewinformationtechnologiesinruralsmallbusi-nesses’,Omega,27(4),467–484.Pulles,N.J.,Veldman,J.,Schiele,H.andSierksma,H.(2014),‘Pressureorpamper?Theeffectsofpowerandtrustdimensionsonsupplierresourceallocation’,JournalofSupplyChainManagement,50(3),16–36.Real,J.C.,Roldán,J.L.andLeal,A.(2014),‘Fromentrepreneurialorientationandlearningorientationtobusinessperformance:analysingthemediatingroleoforganizationallearningandthemoderatingeffectsoforganizationalsize’,BritishJournalofManagement,25(2),186–208.Rogers,EverettM.(1962),DiffusionofInnovation.NewYork:FreePress.Scott,John(1991),SocialNetworkAnalysis:AHandbook,NewburyPark:SAGEPublications.LarryGiuniperoandRehamEltantawy-9781839104503DownloadedfromPubFactoryat05/28/202209:10:08AMviaColumbiaUniversityLibrary

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815.Systemslevelsinpurchasingandsupplychainmanagement(PSCM)research:exploringestablishedandnoveltheoriestoaddressPSCMproblemsandchallengesChristineM.HarlandandJensK.RoehrichINTRODUCTIONPurchasingandsupplymanagement(PSM)scholarshavetraditionallyfocusedonpurchas-ing’sroleinanorganisationandtheorganisation’srelationshipswithitssuppliers(WebsterandWind,1972;Leendersetal.,1980).Operationsmanagement(OM),incontrast,originallyfocusedonoperationsinternaltofirms,withitsoriginsdatingbacktothetimeoftheindustrialrevolution.MeredithandAmoako-Gyumpah(1990)tracedthegenealogyofOMfrom‘factorymanagement’through‘productionmanagement’to‘production/operationsmanagement’.Theterm‘supplychainmanagement’(SCM)wasfirstusedin1982todenotetheinternalvaluechainwithinamanufacturingorganisationfromin-tooutboundendsofthebusiness(OliverandWebber,1992),thatistraditionalproduction/operationsmanagement.Itwasnotuntilthelate1980sthatOMasafieldwideneditsperspectivebeyondtheboundaryofthefirmtoincludeconsiderationofsourcingandsupplierrelationships(Hayesetal.,1988;Hill,1989).InTheMachinethatChangedtheWorld,Womacketal.(1990)incorporatedexaminationofsupplierrelationships,coiningthephrase‘lean’supply.SCMhassincebeenconceptualisedasafieldencompassingtraditionalinternalOMandconnectedrelationshipswithsuppliers,suppliers’suppliers,customersandcustomers’customers,operatingatmultiplesystemslevelsofinternalsupplychains,dyadicrelationships,externalsupplychainsandwidersupplynet-works(Harland,1996).Thesemultiplesystemslevelswereconceivedfromtheperspectiveofthe‘focalfirm’(Harland,2021).Purchasingandsupplychainmanagement(PSCM)isoneofamyriadoftermsusedtodefineboundaries,andargueterritoryrights,ofthefieldofresearchandpracticethatincludesthesemultiplesystemslevelsandexaminescontractual,relational,physicalandtransformationalperspectives(Ellrametal.,2020).DuringtheCOVID-19crisis,severalcallshavebeenmadeformoreholisticapproachestomanagementingeneral,andPSCMinparticular,todealwithcomplexproblemsassociatedwithinterconnected,globalphenomena(Chesbrough,2020;Craigheadetal.,2020;Harland,2021).Additionally,acallhasalsobeenmadetoincreasetherelationaland‘softer’ratherthan‘hard’scienceapproachestoPSCM(Caniatoetal.,2020).Thesecallshaveledustobringsystemstheory,systemsthinkingandsystemslevelstotheforegroundforthischapter,toexamineestablishedandnoveltheoriestoaddressPSCMproblemsandchallengesinamoreopen,interconnectedandholisticway,beyondtraditionalfirm-basedperspectives.Inthischapter,westartbyprovidingabriefreviewofsystemsthinking,andhowitemergedfromorganismicbiologyandcybernetics.Weparticularlydiscusssystemsthinkingbyiden-tifying,conceptualisingandproblematisingdifferentsystemslevels;ourassertionisthatthis63ChristineM.HarlandandJensK.Roehrich-9781839104503DownloadedfromPubFactoryat05/28/202209:10:10AMviaColumbiaUniversityLibrary

8264Handbookoftheoriesforpurchasing,supplychainandmanagementresearchiscrucialtoclarifykeylevelsandtheirimportanceinPSCMresearchandpractice(andtheirstrongconnections).ThisisfollowedbyadiscussionofestablishedtheoriesusedatthesesystemslevelswithinpriorPSCMwork,positioning(novel)theoriespopularinrelatedandadjacentfieldsatdifferentlevels,andreflectingonparticularchaptersinthisbookonindivid-ualtheorieswhichmayadvanceresearchinPSCM.SYSTEMSTHINKING:HIERARCHIESANDLEVELSBiologistspioneeredsystemsthinking,desiringtostudythecomplexityofthewholebiologyofanorganism,ratherthanonlyitsphysicalandchemicalcomponents(Pantin,1968).So-called‘organismicbiologists’werefrustratedwithreductionist,hardscienceapproachesthatpromotedthescientificmethodoftheso-calledrestrictedsciencesofphysicsandchem-istry,seekinginsteadtounderstandtheorganisationofthecomplexityofthewholeorganism.Checkland(1981)illustratedthisholismsimply,explainingthattheshapeofanappleisnotmeaningfullydescribedintermsofthecellsandmoleculesthatmakeuptheapple;thecomplexityofthewholeapplegivesrisetoitsoverallshape.LudwigvonBertalanffy(1951)developedthefoundationsofsystemstheoryfromorganismicbiology,toamoregeneralisedviewofallsystemsincludingmanagementsystems(vonBertalanffy,1968),becomingwhatisnowrecognisedas‘generalsystemstheory’.InKevinDooley’sChapter22inthisbook,heexploresunderstandingofcomplexityandhowcomplexadaptivesystemstheorydealswithcomplexinteractionsandfeedbackloopswithincomplexsystems.Inthischapter,wecomple-mentthisbyfocusingonholism,andhowhierarchiesandlevelswithinhierarchiescomprisethewhole,andgivesense,organisationandmeaningtothewhole.Systemsthinkinghasatitscentrethenotionoforganisedcomplexity(Checkland,1981),wherecomplexsystemscompriseahierarchyofsystemslevels,eachlevelmorecomplexthanthelevelbelowitinthehierarchy.Eachhierarchicallevelcontainsemergentpropertiesthatarenotpresentinthelowerlevels.Hierarchytheoryexplainsthestructure,therelativepositionofdifferentlevelswithinasystem,andhowthelevelsrelatetoeachother.Usedparticularlyinecology(foracomprehensiveintroduction,seeOdumandBarrett,1971),hierarchytheoryfocusesondifferencesbetweenonelevelofcomplexityandanother.Whatemergesateachlevelisconstrainedbythefactthatitoperateswithinthecontext,orenvironment,ofthenexthigherlevel.Tounderstandthewholesystemrequiresunderstandingofthelinkagesbetweenlevelsandwhatiscommunicatedupanddowntheselevels.Checkland(1981)proposedthatsystemsthinkingisbasedontwopairsofprinciples:‘emer-genceandhierarchy’and‘communicationsandcontrol’.Inorganisedcomplexity,thereexistsahierarchyoflevelsoforganisation.Emergenceandhierarchyarepairedbecauseeachhierar-chicallevelischaracterisedbyemergentfeaturesthatdonotexistatthelowerlevel;hierarchytheoryisconcernedwiththedifferencesbetweeneachlevelofcomplexityinthehierarchy(Simon,1957).Communicationsandcontrolarepaired,influencedbyvonBertalanffy(1951)whoproposedthatsystemsopentoenvironmentalinfluence–opensystems–requirecommu-nicationbetweendifferentlevelsofthehierarchytoenablecontrolofthesystem,inlinewithcontrolsystemsthinkingfromcybernetics(Wiener,1948).Inmanagement,twoofthemostnotableusesofhierarchytheoryareMaslow’shierarchyofneedsfrompsychology(Maslow,1943),andWilliamson’s(1975)examinationofmarketsandhierarchies.Therehavebeencallsforgreateruseofhierarchytheoryinmanagement(WahbaandBridwell,1973),althoughChristineM.HarlandandJensK.Roehrich-9781839104503DownloadedfromPubFactoryat05/28/202209:10:10AMviaColumbiaUniversityLibrary

83Systemslevelsinpurchasingandsupplychainmanagement(PSCM)research65withtheexceptionofthesetwoexamples,neitherhierarchytheorynor,indeed,systemsthink-ingseemtohavegainedmuchtractioninthelastfewdecadesinmanagementresearch.Itisarguedbysystemsthinkersthatamoreholisticperspectiveofcomplex,real-worldproblems‒a‘bigpicture’‒isachievedthroughcombiningorganismicsystemsthinkingfrombiology(givingrisetoemergenceandhierarchy),withcyberneticsthinking(givingrisetocommunicationsandcontrol),supplementedandcomplementedwithscientificreductionistapproaches(Checkland,1981;Jackson,2003).Buthowdoesthismoreholisticperspectiveenhanceunderstandinginmanagementand,morespecifically,inPSCM?Theclassicalapproachtomanagementtheory,basedonthebehaviouraltheoryofthefirm,focusesmanagementresearchersonfirm-baseddecisionmaking(CyertandMarch,1963).Systemsthinkingviewstheorganisationbothasawholeandaspartofalargerenvironment(Jackson,2003).Thesystemsapproachseestheorganisationasaninterdependent,unifiedsystemcomposedofinterrelatedsubsystemsorparts,ratherthanseparateentities.Morespecifically,systemsthinkingrequiresashiftinmindset,awayfromlineartocircular.Incontrasttoamorelinear,structured‘mechanicalworldview’,theholismofsystemsthinkingoffersadynamic,chaotic,interconnectedarrayofrelationshipsandfeedbackloops,givingrisetoorganisedcomplexityofthewholemanagementsystem.Anotherkeyconceptinsystemsthinkingissynthesis,asopposedtoanalysis;analysisdissectscomplexity(inascientific,reductionistway,wieldingOckham’srazor)intomanageablecomponents,whereassynthe-sislooksatthewhole.Analysisfitsintothemechanicalandreductionistworldview,wheretheworldisbrokendownintoparts.Butallmanagementsystemsaredynamicandoftencomplex;therefore,weneedamoreholisticapproachtounderstandingphenomena,andthussynthesisoffersanunderstandingofthewholeandthepartsatthesametime,alongwiththerelationshipsandtheconnectionsthatmakeupthedynamicsofthewhole.Similarly,systemsthinkingalsoconsiderstheconceptofemergence(thenaturaloutcomeofpartsoftheman-agementsystemcomingtogether).Emergenceisaboutnon-linearityandself-organisation,andweoftenusetheterm‘emergence’todescribetheoutcomeofthingsinteractingtogether.Sinceeverythingisinterconnected,therearealsoconstantfeedbackloopsandflowsbetweenelementsofasystem.Wecanobserve,understandandinterveneinfeedbackloopsonceweunderstandtheirtypeanddynamics.Understandingfeedbackloopsisaboutgainingperspec-tiveofcausality:howonethingresultsinanotherthinginadynamicandconstantlyevolvingsystem(allsystemsaredynamicandconstantlychanginginsomeway).Inthenextsectionwerelatesystemsthinking,particularlylevelsandhierarchy,toPSCMresearchandpractice.SYSTEMSLEVELSINPSCMRESEARCHANDPRACTICEPurchasingandsupplychainmanagementconcernscomplex,multilevelsystems.Consider,forexample,thesupplyofvaccinesforCOVID-19,withlocalhealthauthoritiesmanag-ingimplementationofvaccineplanstosupplythelocalpopulation;nationalgovernmenthealthdepartmentsformingthestrategyforvaccinationandallocationofvaccinestosupplylocalities;internationaltradingblocsformingframeworkagreementsforvaccinesupplytomembernations;andglobalorganisations,suchastheWorldHealthOrganisation,liaisingwithgovernmentsforthesupplyofvaccinestopoorercountriesglobally.Asanotherexample,aglobalfoodproductsmanufacturingorganisationmaypermitlocalplantsourcingforhighlyChristineM.HarlandandJensK.Roehrich-9781839104503DownloadedfromPubFactoryat05/28/202209:10:10AMviaColumbiaUniversityLibrary

8466Handbookoftheoriesforpurchasing,supplychainandmanagementresearchperishableingredients;regionalsourcingforbulkyfoodsthatarecostlytotransport;butinsistonglobal,centralisedsourcingforhigh-value,criticalsuppliesforallplants.Eachorganisationwithinthesesupplysystemsdealseverydaywithemergenceandhierarchy,communicationsandcontrol,withinthesecomplex,multilevelsystems.Inadditiontodealingwithmultilevelsystemcomplexity,PSCMhasthreedistinctfeatures:itsrootsinpractice,itsresearchmethodologiesanditstheoreticalunderpinnings.PSCMworkinpracticeisoftendeeplyembeddedinindividualbehaviours,organisational,supplychainornetworkpracticesandchallenges,usingarangeofmethods,includingin-depthcasework,ethnographicoractionresearchstudiesandfieldexperiments.Thischapter(andbook)isparticularlyconcernedwiththetheoreticalunderpinningsinpriorandfuturePSCMworkanditsimpactonpractice.Thissection,therefore,firstexplorestheimportanceandrelationshipbetweentheoryacrosslevelsandpractice,beforeexploringsomeexemplarytheoriesusedinpriorPSCMresearch.TheImportanceof,andRelationshipBetween,TheoryAcrossLevelsandPracticeItisawidelyheldviewinPSCMthattheoreticalcontributionsareimportantforpublicationinleading(PSCM)journals(Carter,2011;ColquittandZapata-Phelan,2007;Hambrick,2007).Theoriesarestatementsofrelationsamongconceptswithinsetsofboundaryassumptions(Bacharach,1989),andarevitaltointerpretempiricalwork.FollowingDubin(1978),alltheoriesareconstrainedbytheirspecificcriticalboundingassumptions,settinglimitationsintheoryapplication.Twokeyboundaries–spatialandtemporal–havebeenemphasised(Bacharach,1989).Whilstspatialboundariesareconditionsrestrictingtheuseofthetheorytospecificunitsofanalysisorlevels,temporalcontingenciesconstrainthehistoricalapplicabilityofatheory.Bothboundariestogetherrestricttheempiricalgeneralisabilityofthetheory.Inthisbook,moredetailsregardingtheorycanbefoundinChapter2byFlynnetal.aboutthefoundationsoftheory,andChapter3byPagelletal.aboutdevelopingPSMtheory.Inthischapter,wearemainlyconcernedwithdifferentsystemslevelsandtheirchallengesforPSCMresearchandpractice.Thedevelopmentpathoftheorytestingandbuilding,and,morerecently,theoryelaboration(see,forexample,KetokiviandChoi,2014),hassparkeddebatesamongstacademics.Whilesomeresearchersadvocateconsensusandunityakintoa‘well-tendedgarden’(Pfeffer,1993,1995),othersfavourlessstructuredpluralityofinquiriesfortheorybuilding,encouragingmultipletheoriestocompete,asina‘weed-patch’(VandeVen,1989;VanMaanen,1995).Theorybuilding,testingandelaboratingarecloselyinterrelatedintheprocessofknowledgecreationandrefinementwithinadiscipline(ColquittandZapata-Phelan,2007).Academicfieldsanddisciplines(andPSCMisnoexceptionhere),needtoconsideracarefulbalancebetweentheorybuildingandelaborationtoalloworiginalideastobeintroduced,andtheorytesting,aprocesswhichascertainswhethertheempiricalevidencesupportsordoesnotsupportagiventheory.PSCMhasbeencriticisedforlackingsufficienttheoreticaldevelopmentandunderpinningtobeconsideredanacademicdiscipline(Harlandetal.,2006;Chicksandetal.,2012;Spinaetal.,2016).Thishasledtosimplifiedconceptualisationsofkeyconceptsandtheircontexts,andlackofgeneralisability,highlightingtheimportanceofusingtheoriestounderstandcomplexenvironmentsacrosslevelsinwhichindividuals,teamsandorganisationsareoperat-ing(Chicksandetal.,2012).Forinstance,aliteraturereviewbyCroometal.(2000)showedChristineM.HarlandandJensK.Roehrich-9781839104503DownloadedfromPubFactoryat05/28/202209:10:10AMviaColumbiaUniversityLibrary

85Systemslevelsinpurchasingandsupplychainmanagement(PSCM)research67arelativelackoftheoreticalworkcomparedtoempirical-basedstudies.Whilsttherearemorepromisingrecentdevelopmentsoverthelasttwodecadestobuildonandelaboratetheories,PSCMresearchwouldbenefitgreatlyfromtheorisingworkatdifferentlevels(hencethischapterandthewholebookarecrucialtosupportthesefutureresearchefforts).Managementtheory(includingwhenappliedtoPSCMchallenges)focusesonfactsandsoundprinciples,whichoftenprescribewhattodotomeetdesiredoutcomesinandoutsideorganisations,therebyinformingandadvancingPSCMresearchandpractice.Therelationshipbetweentheoryandpracticeiscloselyintertwinedformanagement,andinparticularforPSCMscholars,asfollows:managementtheoryprovidesthebasisformanagementpractice,andthepracticeinturnhelpstorein-forcethedevelopmentofmanagementtheory.Managementpracticethereforeinvolvesthetranslationofexistingmanagementknowledgeandtheoriesintoactionthatwillresultintheachievementofthedualgoalsoforganizationalefficiencyandeffectiveness.Managementpractitionersandprofes-sionalsareinthevanguardofmanagementpractice,andtheirpracticeprovidestheopportunityforreviewingexistingmanagementtheoriesandevendevelopingnewones.Managementtheoristsandpractitionersreinforceoneanotherandareinacontinuousprocessofinteraction.Theknowledgeofbothisrequiredtoimproveourunderstandingofmanagementinsociety.(Inyang,2008,pp.124‒125)Alongthesamelines,priorwork(AlvessonandKärreman,2007;VanMaanenetal.,2007)hasalsoemphasisedtherelationshipbetweenthevalidityandpowerofatheoryanditsrelationtoempiricalreality.Itiswidelyrecognised,andpriorPSCMworkisagoodexample,thattheempiricalnourishestheconceptualasdataareusedasevidencetosupport,refineandfurtherdevelopatheory(VanMaanenetal.,2007).Thus,aspractisedbyPSCMscholars,theengage-mentwithpracticalproblemsopensupavenuesforatheorytoemerge,tobeelaboratedandtobetested.WearguethatanunderstandingofdifferenttheoriesacrosslevelsisvitalforPSCMresearchers,asatheoreticalbaseisakeyunderpinningforthefieldtodevelopintoalegitimatemanagementdisciplineandinformandshapepractice.Table5.1appliesasystemsthinkinglenstoexaminetheoryrelevanttoPSCM.Specifically,itisstructuredintosystemslevelswithinahierarchy,allowingexaminationofemergence,communicationandcontrol,andkeychallengesassociatedwithresearchateachlevel.Itoffersabriefoverviewofkeytheories(mostofwhicharediscussedinmuchmoredetailacrosschaptersinthisbook).TheoriesatDifferentPSCMSystemsLevelsThissectionbuildsonthevarioussystemslevelsdiscussedintheprevioussectionbyiden-tifyingkeytheoriesusedinpriorPSCMwork(mainlybasedonthechaptersinthisbook).WethenproposeexemplarytheoriesacrosstheselevelswhichhavesofarreceivedlimitedattentioninpriorPSCMstudies,butwhichwebelieveofferampleopportunitiestoaugmentanddevelopourthinkingandpracticalinsights.BybringingtogetherdifferenttheoreticalperspectivesfromPSCMaswellasrelatedresearchfieldsandadjacentdisciplines,wehopetosupportfuturetheoreticallyinformedeffortstoadvancePSCMresearchandpractice.DespitesomepriorstudiesarguingthatPSCMlackstheoreticalunderpinningswhencom-paredtoothermanagementfieldsandadjacentdisciplines,priorPSCMstudieshaveusedamyriadoftheoriesacrossdifferentlevels.Priorstudieshaveusedtheoriesfromanumberofdisciplinesincluding,butnotlimitedto,economics,sociology,engineeringandpsychologytoChristineM.HarlandandJensK.Roehrich-9781839104503DownloadedfromPubFactoryat05/28/202209:10:10AMviaColumbiaUniversityLibrary

8668Handbookoftheoriesforpurchasing,supplychainandmanagementresearchExemplarytheoriesandreferencesAttributiontheory–Kelley,1973Dynamiccapabilities‒Teeceetal.,1997Eventsystemtheory‒Morgesonetal.,2015Expectancydisconfirmationtheory–Oliver,1977Gametheory–vonNeumannandMorgenstern,1944;Parkhe,1993Informationprocessingtheory(IPT)‒TushmanandNadler,1978;Decietal.,1994Knowledge-basedview(KBV)–KogutandZander,1992Naturalresource-based-view(NRBV)–Hart(1995)Organisationallearningtheory‒March,1991Populationecology‒HannanandFreeman,1977Prospecttheory‒KahnemanandTversky1979Realoptions‒Hultetal.,2010Resource-basedview(RBV)–Barney,1991Self-determinationtheory(SDT)–Decietal.,2017Strategicchoice‒Child,1972Structuralinertiatheory‒HannanandFreeman,1984Transactioncostseconomics/analysis(TCE/TCA)–Williamson,1975;RindfleischandHeide,1997Agencytheory–Eisenhardt,1989;Tateetal.,2010Regulatoryfocustheory(RFT)–WeberandMayer,2011Signallingtheory–Spence,1973Socialexchangetheory(SET)–Blau,1964Powerdependencytheory‒Emerson,1962ExemplarychallengesIdentitycoherenceandlegitimacy,trainingandeducationrequirements,professionalism,careerprogression.Categorymanagement,supplymarketresearch,supplierdevelopment,supplyportfoliomanagement,riskmanagement,sustainableandethicalprocurement.Contractualandrelationalgovernance;psychologicalandrelationalissuesvs.operationalandinformationalissues;vendorrating;investmentinrelationshipspecificassets;cooperation,competitionandcoopetition,newproductdevelopmentandinnovation,horizontalcooperation;makeorbuy/outsourcing.Emergence,communicationandcontrolIndividualidentity;communicationandcontrolwithinPSCMteamdynamicsandperformance;communicationandcontrolacrossinternalsupplychainfunctionalboundaries;PSCMstrategyandalignmentwithcorporatestrategy;relationshipswithstakeholders;communicationandcontrolwithsupplybase.Power,trustanddependenceinsupplierdyadicandtriadicrelationships;dyadicandtriadicsocialcapital;dyadicandtriadiclearning;communicationandcontrolwithexternalsupplychain.DefinitionandscopeThisisaboutthejob(jobrole)ofPSCMincluding,butnotlimitedto,individualbuyers,supplychainplannersandboundary-spanners.Purchasingteams,projectteams,supplychainteams,managementteams.MembersofaPSCMdepartmentmanaginginboundtooutboundphysicalandinformationflows.Thisisconcernedwiththeinterorganisationalrelationshipswithsuppliers.Buyer‒supplier,supplier–supplier,public‒privateorganisation.Buyerandtwofirst-tiersuppliers,buyerandonefirst-tierandonesecond-tiersupplier.Systemlevels:theirscope,definition,exemplarychallengesandtheoriesTable5.1Systemslevelinahierarchy/chapterIndividuals,andthePSCMinternalsupplychainteam(organisation)Chapter8Chapter10Chapter25DyadicandtriadicrelationshipsChapter7Chapter19Chapter29ChristineM.HarlandandJensK.Roehrich-9781839104503DownloadedfromPubFactoryat05/28/202209:10:10AMviaColumbiaUniversityLibrary

87Systemslevelsinpurchasingandsupplychainmanagement(PSCM)research69ExemplarytheoriesandreferencesInstitutionaltheory‒DiMaggioandPowell,1991;Scott,1995Panarchytheory–Allenetal.,2014Resourceorchestrationtheory‒Sirmonetal.,2007;Barneyetal.,2010Stakeholdertheory–Freeman,1984Socialnetworktheory/analysis(SNT/SNA)–Scott,1988Weaktiestheory–Granovetter,1973Complexitytheory–Byrne,1998;Dooley,2020Complexadaptivesystems(CAS)‒Holland,1995;Choietal.,2001Clustertheory–ManziniandDiSerio,2017Institutionaltheory–DiMaggioandPowell,1991;Scott,1995Systemstheory‒vonBertalanffy,1951;Forrester,1994Factormarketrivalry–Ellrametal.,2013Supplymarketconcentration–DeWittetal.,2006ExemplarychallengesVerticalintegration/disintegration;CPFR;integratedenterpriseresourceplanning(ERP).ExtendedERP(ERPII);keiretsu;networkcooperationvs.networkcompetition;strategicpositioninthenetwork;networkinnovation.Supplysystemgovernance;supplyexchangesandplatforms;sustainableandethicalsupply.Innovationexploration;supplymarketdevelopment;supplymarketconcentration;scarceresourcestrategies;factormarketrivalry.Emergence,communicationandcontrolSupplychaindynamicsemerge.Communicationandcontrolwiththebroadersupplynetwork.Supplynetworkcollaborationandnetworksocialcapitalemerge.Communicationandcontrolwiththebroadersupplysystemoccurringinconfederalsupplysystems,orwithindustrygroupsinasector.Culturesemergewithinconfederalsupplysystems(forexampleUnitedNationsculture).Communicationandcontroltodevelopandmanagesupplymarkets.Impactofsupplymarketconcentrationandcompetitionemerges.Communicationandcontrolwithwidereconomyandsociety.DefinitionandscopeThisisaboutflowsandintegrationofmaterialsandinformationacrosstiersinasupplychain.Supplier,buyer,customer(pluspossiblysub-suppliersandcustomers’customers).Thisisconcernedwithamoreshared,collaborativeeffort.Focalorganisationsupplynetworknestedwithininterorganisationalnetworks(containingoverlappinginnovation,learningandsocialnetworks).Supplynetworkboundaryisaroundentitiesandprocesseswhosecorepurposeistosupplyaproduct,serviceorsolution.Networksofsupplywithinsectorsorindustries;industrygroups.Allavailablesuppliersinaparticularsectororindustry.Thisisnotanexhaustivelistofchallengesandtheories,andmerelyanillustrationofthemacrosslevels;sometheoriesareusedacrossdifferentsystemlevels.Systemslevelinahierarchy/chapterExternalsupplychainChapter32SupplynetworkChapter32SupplysystemChapter22Chapter27Chapter32SupplymarketNote:ChristineM.HarlandandJensK.Roehrich-9781839104503DownloadedfromPubFactoryat05/28/202209:10:10AMviaColumbiaUniversityLibrary

8870Handbookoftheoriesforpurchasing,supplychainandmanagementresearchunderstandphenomenaandaddresschallengesinpractice(Sarkisetal.,2011;TouboulicandWalker,2015).Theevolutionoftheuptakeofthesetheoriesisalsoinformedbychanginghis-toricalconditionssuchasacrossmarketsandindustriesoverthelastdecades.Inthissection,weprovideanillustrative(ratherthanexhaustive)overviewofpopular(thatis,intermsoffrequencyofuseinpriorPSCMwork)theories.Furtherdetailsformostofthesetheoriescanbefoundinindividualchaptersinthisbook(pleaseseeTable5.1).WhilepluralismintermsofusingdifferenttheoriesisastrengthofPSCM,researchersneedtobeawareofthebenefitsandlimitationsofindividualtheories.Thus,weofferadiscussionofdifferenttheoriesandtheirusageacrosslevels,aseachperspectiveandlevelprovideauniquesetoftheoreticalinsights.Theprocessoflookingacrosslevels(asofferedinthischapter)andacrosscomplementarytheoreticalperspectives(asofferedinthisbook)isvitalandtimely.ThisiscoupledwiththeincreasingvisibilityandpopularityofbehaviouralperspectivesinOMandPSCMmorespecifically,aswellasemergingchallenges(forexample,digitaltechnologies,theCOVID-19pandemic;KacheandSeuring,2017;Craigheadetal.,2020).Eachmanagementtheoryprovidesvaluableinsightintodifferentaspects(suchasresources,transactions,relationsandcapabilities)atdifferentlevels(fromindividualstomarkets,andsometimesacrosslevels).Selectingatheoryforaparticularresearchstudydependsonanumberoffactorsincluding,butnotlimitedto,theresearchquestion(s)andhypothesesthestudyseekstoanswer,thekeyaspectsunderstudy(forexample,resources,capabilitiesandbehaviours),theboundariesandlimitationsofaparticulartheory,aswellasthelevelofanalysis.Thus,mappingandbridgingmultipleperspectivesandlevelsinthefieldandacrossfieldsanddisciplinesisvital.WithinpriorPSCMwork,thereisapreferenceofusingtheoriesthattakeamoreorganisa-tionalandstrategicperspectiveratherthananindividualandbehaviouralone.Thesetheories(suchastransactioncosteconomics,stakeholdertheoryandinstitutionaltheory)utilisedinPSCMhavefavouredtheprevalenceoflarge(oftenprivate)buyerorganisations’perspectiveastheunitofanalysis.Therehasalsobeenastreamofresearch,albeitsmaller,thatfocusesonpublicorganisationsandsmallandmedium-sizedenterprises(SMEs)(Amannetal.,2014)andtherelationshipsbetweenpublicandprivateorganisations(Zhengetal.,2008;Caldwelletal.,2009).Public‒privaterelationshipmayofferfurtheropportunitiestoexplorearangeofkeyPSCMareasrangingfromrelationshipmanagementtocomplexcontractingforproducts,ser-vicesandmoreintegratedsolutions(Barlowetal.,2013;RoehrichandLewis,2014;RoehrichandKivleniece,2021).Forexample,wheninstitutionaltheoryisappliedtoasupplychaincontext,itenablesconsiderationofwhethersupplychainpracticesshouldmimicindustrybestpracticesorreflecttheparticipants’uniquecharacteristics.ThestudybyPreuss(2009)showsthattheadoptionofethicalsourcingcodesisstronglyinfluencedbyisomorphicandpublicpressures.Institutionaltheoryhasalsobeenusedasalensthatoffersinsightsintothepressurethatfirmsputononeanotherinthemovementtowardsadoptingmoresustainablesupplychainpractices(forexample,mimeticisomorphism;Hoejmoseetal.,2014).Similarly,Tateetal.(2010)useinstitutionaltheorytoanalysethecontentofCSRreportsandhighlightthatalthoughinstitutionalpressureisclearacrossvariousindustries,thewayinwhichitisinterpretedandtranslatedwithinreportsvariesaccordingtothesizeofthecompanyanditsgeographiclocation.AnotherpopulartheoryusedinpriorPSCMworkistransactioncosteconomics(TCE)(Williamson,1975;GroverandMalhotra,2003).TCEispowerfulwithregardtotheinteror-ganisationalaspectsandissuessuchasdefiningfirmboundaries(Coase,1937;Williamson,1981;Grimm,2008).AninitialstepforpurchasingandsupplychainmanagersistodecideChristineM.HarlandandJensK.Roehrich-9781839104503DownloadedfromPubFactoryat05/28/202209:10:10AMviaColumbiaUniversityLibrary

89Systemslevelsinpurchasingandsupplychainmanagement(PSCM)research71whichcomponentstheywillproducein-houseandwhichtheywillsourcefromexternalsuppliers.TCEhasbeenusedtoexplainmake-or-buyandoutsourcingoroffshoringdecisionsindifferentindustries(Ellrametal.,2008).Thetheorypositsthatfirmswillpreferinternalhierarchy,ormakingcomponentsinternally,asopposedtopurchasingthemfromexternalsup-pliersviathemarket,whentransactioncosts(costsofusingthemarket)arehigh.Transactioncostsaredrivenbythedegreeofassetspecificity,frequencyanduncertainty.Onceafirmdetermineswhichcomponentswillbeproducedoutsidethefirm,thefirmmustthenestablishandmanagerelationshipswithvarioussuppliers.Onekeydecisionisthedegreetowhichfirmsemployashort-orlong-termrelationship(anditsnature:transactionalversusrelational)withaparticularsupplier.Theserelationshipsareoftengovernedbyadetailedcontract(Essigetal.,2016;Roehrichetal.,2021).Again,TCEsuggeststhatwheretransactioncostsarehigh,duetoelevatedassetspecificity,frequencyand/oruncertainty,thefirmwouldbemorelikelytoestablishlong-termrelationships(Grimm,2008).Furthermore,thenatureofthecontractwillalsobedrivenbytheextentoftransactioncosts.Wherecostsarehigh,firmswilltendtodeveloplonger-termcontracts,andcontractswithmorecomplexfeatures,andwithdetailedcontrolandcoordinationclauses(Roehrichetal.,2020)inordertoframetherelationship(forexample,itsimpactonjustice;Bouazzaouietal.,2020)andtackleemergingissuesinrelationshipssuchascoordinationfailuresandcurbopportunism(Howardetal.,2019;Kalraetal.,2021).Emergingresearchoncontractualandrelationalgovernancemechanismshasalsostartedtoexploretheirindividualrolesandinterplaytorealisearangeofperformanceoutcomes(Hartmannetal.,2014;RoehrichandLewis,2014;Kreyeetal.,2015;Caldwelletal.,2017).Insummary,aswehavebrieflyshownandisevidentacrosschaptersinthisbook,PSCMresearchershaveutilisedtheorypluralismtoexplainandmakesenseofPSCMphenomenatoinformtheoryandpracticealike.WenowturntotheorieswhichareyetunderutilisedinpriorPSCMstudies,butwhichwebelievecouldofferfurtherpowerfultheoreticalinsightstoinformtheadvancementofthefieldandimprovementofpractice.THEORIESUSEDOUTSIDEPSCMThissectionpaysparticularattentiontotheorieswhichareusedmorefrequentlyinothermanagementfields,andalsotakesacloserlookattheoriesusedinadjacentdisciplinessuchaspsychology.AnunderstandingoftheseandothertheoriesisimportantforPSCMscholars,asourthinkingcanbeadvancedbylearningabout(aswellastestingandelaborating)theoriesfromotherfieldsanddisciplines.Pleasenotethatthisisanexemplary,ratherthananexhaus-tive,listoftheorieswhichmightprovepowerfultouncover,understandandexplainprocesses,activities,behavioursandrelationshipsinfutureresearchtoaddressPSCMproblemsandchal-lenges.WeurgePSCMscholarsalsotolookoutsidePSCM(andevenmanagement),todetect,exploreandthenutilisetheorieswhichwouldhelptoadvanceourthinkingandpractices.Atanindividuallevel,self-determinationtheory(SDT)focusesonhumanmotivationcon-cernedwithhowindividualsinteractwiththesocialenvironmentandengageinabehaviour(RyanandDeci,2000;Decietal.,2017).AcentraltenetofSDTisthatindividualspossessinnatetendenciesandmechanismstooptimisetheirwell-being,developmentandmotivation(RyanandDeci,2000).Thetheorypositionstwotypesofmotivation:autonomousandcon-trolled(Decietal.,1994;GagnéandDeci,2005).AutonomousmotivationshowsthattheChristineM.HarlandandJensK.Roehrich-9781839104503DownloadedfromPubFactoryat05/28/202209:10:10AMviaColumbiaUniversityLibrary

9072Handbookoftheoriesforpurchasing,supplychainandmanagementresearchbehaviouranindividualengagesiniscongruentwiththeindividual’sowninterestsandvalues(thatisvalueinternalisation)(Reinholtetal.,2011),andhence,itleadstoeffortandpersis-tenceinengagementofthatbehaviour(Robsonetal.,2012).Incontrast,controlledmotivationreflectsengagementinbehaviourduetoanexternalsourceofpressure;thatis,lackofauton-omyandself-determination(RyanandDeci,2000).Forinstance,individualsmayengageinanactivitytomeetanexternalexpectation,complywithregulations,ormaintaintheirreputationinthesocialenvironment.SDTarguesthatthesocialcontextcanfacilitatevalueinternalisationthroughsatisfactionofthreeinnateneeds:autonomy,competenceandrelatedness(Decietal.,1994;Weibel,2007).Theneedforautonomyfocusesontheexperienceoffreedom,whichisthesentimentofbeingtheperceivedsourceororiginofanindividual’sownbehaviour.Inotherwords,autonomyisthefeelingoffreedombasedanindividualchoice.Individualswhoexperienceautonomyhaveasenseofownershipofbehaviour(GagnéandDeci,2005)thatiscentraltotheabilitytotransformactivelyexternalfactors(forexample,regulationsandinitiatives)intoanindi-vidual’sinnerprinciples.Theneedforcompetencereferstowhenindividualsfeeleffectiveintheirongoinginteractionswiththeenvironment,andtrytomaintainandincreasetheircapacityandskillsthroughactions(RyanandDeci,2000).Lastly,theneedforrelatednessreferstothefeelingsofbeingconnectedtootherpeople,thatisimportanttoanindividualwithinsocietyorbusinessenvironments(VandenBroecketal.,2016).SDTwasoriginallydevelopedinsocialpsychologyandmorerecentlyhasbeenadoptedinmanagementstudies(VandenBroecketal.,2016).ResearchershaveusedSDTtoinvestigatearangeoftopicssuchascreativity(Liuetal.,2011),knowledgesharing(Reinholtetal.,2011),citizenshipbehaviour(ChiniaraandBentein,2015)andemployees’performance(Aryeeetal.,2015)withinorganisations.However,SDTanditskeydimensionsareunderutilisedinpriorPSCMstudies,apartfromaveryfewexceptions.OneofthefirststudiesinPSCMtoexplicitlyuseSDTistheworkbyRoehrichetal.(2017),whoexplorehowrealisingimprovedperfor-manceingreensupplychainmanagementiscontingentuponSDTmechanismsofautonomy,competenceandrelatednessintheaerospaceindustry.Othertheoriesonanindividuallevelincludeattributiontheory,whichseekstoexplainthementalandcommunicativeprocessesinvolvedineverydayexplanations,mosttypicallyofindividualandsocialevents(Kelley,1973;Chapter4inthisbookbyGiuniperoandEltantawy).Similarly,PSCMresearchersmaywanttoexploreothertheoriesthatareusefulonanindividuallevelincluding,butnotlimitedto,realoptions(Hultetal.,2010),strategicchoice(Child,1972)andprospecttheory(KahnemanandTversky,1979).Atanorganisational(andmarketlevel),PSCMresearchersmaywanttoconsiderpopulationecology(Craigheadetal.,2020),whichprovidesinsightsonwhichorganisationssurviveordiebasedonthenaturalselectionprocess,whichisbeyondorganisations’control(HannanandFreeman,1977).Thisperspectiveprovidesacontrastingviewtoresourceandcapabilityperspectives(forexample,theresource-basedview,dynamiccapabilities)astheyarecentredonwilfuladaptationbytheorganisation.Thetheorypointstowardsstructuralinertiainprovid-inganexplanationofwhysomeorganisationscannotadapttochanging(forexamplemarket/sector)conditions(HannanandFreeman,1984).Forexample,Kodakonceheldadominantpositioninphotographicfilm,butstruggledtoadjusttodigitalphotography,whichhassinceadverselyaffecteditsmarketposition.Craigheadetal.(2020)havealsorecentlyarguedthatwithinPSCMresearch,structuralinertiatheoryhasbeensparelyused.ArareexampleinPSCMisthestudybyRungtusanathamChristineM.HarlandandJensK.Roehrich-9781839104503DownloadedfromPubFactoryat05/28/202209:10:10AMviaColumbiaUniversityLibrary

91Systemslevelsinpurchasingandsupplychainmanagement(PSCM)research73andSalvador(2008)whichseekstoexplainthereasonswhyorganisationsfinditdifficulttorealisemajorshifts(forexample,frommassproductiontocustomisation).Structuralinertia,Craigheadetal.(2020)posit,maybeapromisinglenstoinvestigatewhycertainorganisationsdobetterthanothersduringacrisisorpandemic.Whilstunder‘normalconditions’smallerfirmsfailmoreoftenthanlargeronesduetolimitedresources(HannanandFreeman,1984),butduringapandemicthisissuemightbeamplifiedassmallerfirmsmaylackrequiredresourcesforsurvival,asevidencedduringtheCOVID-19pandemic(Craigheadetal.,2020).However,duringlockdowns,largerfirmswerenotimmunetoresourcechallenges.Assessingtheimpactofstructuralinertiabefore,duringandafterapandemic(orcrisissituation)wouldofferfruitfulfutureresearchopportunities(Craigheadetal.,2020).FuturePSCMstudiesattheleveloftheorganisationmayalsobenefitfromexploringtheuseoforganisationallearningtheory(March,1991).Thistheoryhighlightsthatthelearn-ingcapacityofanorganisationdependsonamyriadoffactors,suchastop-levelleaders’behaviours,organisationalstructureandculture(Chapter4inthisbookbyGiuniperoandEltantawy).Similarly,eventsystemtheorycanbeappliedonmultiplelevels,butespeciallyatanorganisationallevel(Morgesonetal.,2015).Thetheoryoutlineshowimportanteventsare,howtheybecomemoremeaningfulandeventuallyimpactuponorganisationsacrossspaceandtime.Atadyadicrelationshiplevel,regulatoryfocustheory(RFT),anasyetunderexploredtheoryinPSCMresearch,hasbeenusedtoaddresstheroleofcontractframingandexpectationsoncontractualrelationships(WeberandMayer,2011;SelviaridisandvanderValk,2019).RFTdifferentiatesbetweenapreventionframeandapromotionframe,eachofwhichleadstodis-tinctinterpretationsofgoalsintherelationship,emotionalandbehaviouralreactionsaswellasviewsandexpectationsoftherelationship.Apreventionframingofanegotiationbetweentwoorganisationsresultsinminimalgoal-inducing,high-intensitynegativeemotionsifthegoalisnotattained,andlow-intensity,positiveemotionswhenthegoalisaccomplished.Incontrast,whenanegotiationbetweentwopartieshasapromotionframing,partiesviewthesamegoalassomethingthatwouldbeidealifreached.Whenapromotionframingisusedandthegoalisnotattained,low-intensitynegativeemotionsresult,whereasparticipantsexperiencehigh-intensity,positiveemotionswhenthegoalisaccomplished.FuturePSCMresearchmayalsoconsiderpowerdependencytheory(Emerson,1962),whichdefinespowerastheabilityofanactortoinfluenceanothertoactinamannerthattheywouldnothaveotherwise.PfefferandSalancik(1978)appliedEmerson’sphilosophytothecontextofrelationshipswiththefundamentalpremisethatpowerinanexchangerelationshipisarelativeconceptdeterminedbywhichfirmismoredependentontheotherforneededresources(Chapter4inthisbookbyGiuniperoandEltantawy).Atanorganisational,supplychain,networkandsystemlevel,resourceorchestrationtheorymightprovetobeausefullens(Chapter4inthisbookbyGiuniperoandEltantawy).Sirmonetal.(2007)(buildingonBarney,1991)arguethatstrategicresources,includingassetssuchasasophisticatedsupplynetwork,arevaluable,rareanddifficulttosubstituteorimitate,andthesecanleadtosustainablecompetitiveadvantage.Resourceorchestrationtheorysuggeststhatstrategicresourcesareaccompaniedbythreetypesofactions:(1)structuring(managementofafirm’sresourceportfolio);(2)bundling(actionsthatbringtogetherandintegrateresourcesbystabilising,enrichingandpioneeringprocessesthattweak,extendordevelopcapabilities);and(3)leveraging(actionstakentogeneratevaluefromafirm’sresources,includingmobilis-inganddeploying)(Sirmonetal.,2011).Similarly,Helfat(2007)definesresourceorchestra-ChristineM.HarlandandJensK.Roehrich-9781839104503DownloadedfromPubFactoryat05/28/202209:10:10AMviaColumbiaUniversityLibrary

9274Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtionasthecapacityofmanagerstocreate,extendormodifypurposefullytheresourcebaseofanorganisationbyassemblingandorchestratingconfigurationsofitsco‐specialisedresources.Sirmonetal.(2007,2011)uncoveredtheprocessesbywhichtheseeffectsunfold.Priorworkinvestigatingperformancemanagement(Koufterosetal.,2014)andproductrecalls(Ketchenetal.,2014)hasadoptedaresourceorchestrationperspective,butCraigheadetal.(2020)pointoutthatthetheoryisyettobeproperlyutilisedwithinPSCMresearch.Consideringthevariousorchestrationchallengesfirmsface(whichareespeciallypronouncedduringpandemicsorcrisissituations),Craigheadetal.(2020)positionthatthiswouldbeanidealplacetobuildmomentumforresourceorchestrationtheorywithinPSCMresearch.CONCLUSIONSInthischapter,wehavesuggestedthatPSCMscholarsmightwanttoconsidernovel(atleasttoPSCM)theoreticalapproachestoexploringandunderstandingkeybusinessandsocietalchallenges.Buildingonothercalls,wearguedthatthefieldofPSCMisuniquelypositionedtoattemptmultileveltheoreticalperspectivestogainacomprehensiveunderstandingofkeypracticalchallenges(AstleyandVandeVen,1983;Kleinetal.,1999;Craigheadetal.,2020).TherichnessofPSCMsettingsandphenomenaforempiricalstudies(includingsupplychainsandnetworks,andglobalcrisessuchasCOVID-19)shouldbeexploitedtowardselaborating,testingandevendevelopingtheory.TheseeffortsshouldcapitaliseonthestrongconnectionswithpracticeasevidencedinpriorPSCMwork.Publicandprivateorganisations(smallandlarge)arefacedwiththerealityofaddressingarangeofPSCMchallenges.TheoriesmayconstituteusefulframesandlensesthroughwhichPSCMmaymakesenseofthesechallengesinanefforttoadvancepractice,policyandscience.ItisimportantforPSCMscholarstorememberthatagoodtheory(andthereareplentyofthemtochoosefrominthisbook)ispracticalbecauseitadvancesourknowledgeinascientificdiscipline,guidesresearchtowardcrucialresearchquestionsandenlightenstheprofessionofmanagement(VandeVen,1989).Wehopethatdiscussionsprovidedinthischapter(andthebook)willhelptobringtogetherpriorPSCMworkbuildingonmanagementtheoriesandpavethewayforasyetunderutilisedtheoreticalperspectivesfromotherfieldsanddisciplinestoinformfuturePSCMresearcheffortsandguidepractice.REFERENCESAllen,C.R.,Angeler,D.G.,Garmestani,A.S.,Gunderson,L.H.andHolling,C.S.(2014).Panarchy:Theoryandapplication.Ecosystems,17(4),578–589.Alvesson,M.andKärreman,D.A.N.(2007).Constructingmystery:Empiricalmattersintheorydevelop-ment.AcademyofManagementReview,32(4),1265‒1281.Amann,M.,Roehrich,J.K.,Essig,M.andHarland,C.(2014).Drivingsustainablesupplychainmanagementinthepublicsector:TheimportanceofpublicprocurementintheEU.SupplyChainManagement:AnInternationalJournal,19(3),351‒366.Aryee,S.,Walumbwa,F.O.,Mondejar,R.andChu,C.W.L.(2015).Accountingfortheinfluenceofoveralljusticeonjobperformance:Integratingself-determinationandsocialexchangetheories.JournalofManagementStudies,52,231‒252.Astley,W.G.andVandeVen,A.H.(1983).Centralperspectivesanddebatesinorganizationtheory.AdministrativeScienceQuarterly,28,245‒273.ChristineM.HarlandandJensK.Roehrich-9781839104503DownloadedfromPubFactoryat05/28/202209:10:10AMviaColumbiaUniversityLibrary

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986.Enhancingtheorizinginpurchasingandsupplymanagementthroughmiddle-rangetheoriesJennyBäckstrandandÁrniHalldórssonINTRODUCTIONWiththischapterwepresentmiddle-rangetheory(MRT)asapromisingwayofbothspec-ifyingwhattheoryisinthecontextofpurchasingandsupplymanagement(PSM),andhowthesetheoriescomeabout,thatis,theorizing.MRTderivesfromspecificpracticalproblemsandpertainstoalocalsettingbutcan,duetoitsmodifiablefeature,betransferredtootherindustrialsectorsthantheonebeinginvestigated.Researchinpurchasingandsupplymanagement(PSM)aimstodevelopandtesttheorythatadvancesknowledgerelevanttopractitioners,buthasyettoestablishafirmstatusasanacademicdisciplineas‘itlacksitsowntheoriesandcommonthemesofresearch’(Ellrametal.,2019).WhilstonekeyaimofadvancingknowledgeofPSMistheorydevelopment,theapproachestowardsthisvary.Currentknowledgecreationapproachestakedifferentforms.Oneapproachisborrowingtheoriesandconceptsfromexternalgrandtheories(EGTs),forexampletransactioncostanalysistoanalysePSMproblemssuchasoutsourcingandsupplierrelationshipmanagement.AnotheremergingapproachtotheorizingissituatedinPSMprac-tice,inwhichMRToffersarelevantvenue.FollowedbyadefinitionofMRTandthecallfortheseinPSM,thechapterarguesthatthebroadscopeofPSM,rangingfromprofessionaltotheoreticalknowledge,canbenefitfromMRT.TheintellectualfoundationofMRTasitcouldapplytoPSMisestablished,andbasedonthis,examplesofMRTinPSMarepresented.WhilstthechapterfirstsetsouttheconceptsandbasicsofMRTinPSM,itthenseekstoadvancethisbyidentifyingguidingprinciplesfortheorizingPSMthroughMRT.WHATISMRT?Incontrasttowell-establishedEGTswhicharecommonlyusedinPSM,suchastransactioncostanalysis,thatbuilduponawell-establishedrangeofconceptsandassumptions,MRTcanbedefinedintermsof‘solutionstoproblemsthatcontainalimitednumberofassumptionsandconsiderableaccuracyanddetailintheproblemspecification’(Weick,1989).Morespecially,MRTpertainto‘Context-specificconceptualizationprovidingtheoreticallygroundedinsightreadilyapplicabletoanempiricalcontext’(Craigheadetal.,2016).Atfirstglance,MRTcanberegardedasawayofcategorizingframeworksandmodelsandenhancetheirlegitimacyinalargerhierarchyoftheories.TofurtherunderstandMRT,itisimportanttonotonlytakesuchastaticperspective,butalsoviewthesefromtheperspectiveof‘howdoMRTscomeabout?’.Thisiswheretheconceptoftheorizingbecomesahelpfuldis-tinctioninouroveralltheorydevelopmentendeavour.Swedberg(2012)statesthefollowing:80JennyBäckstrandandÁrniHalldórsson-9781839104503DownloadedfromPubFactoryat05/28/202209:10:13AMviaColumbiaUniversityLibrary

99Enhancingtheorizinginpurchasingandsupplymanagement81Theexpression“totheorize”roughlymeanswhatyoudotoproduceatheory.Whiletheorizingisprimarilyaprocess,theoryistheend-product.Thetwoobviouslybelongtogetherandcomplementeachother.Buttofocusmainlyontheory,whichiswhatisdonetoday,meansthatthewaysinwhichatheoryisactuallyproducedarebeingneglected.Followingthislogic,MRTdoesnotrefertoaspecifictheorybutisratheratheorylevelandanapproachtotheorizingthataimstointegratetheoreticalandempiricalresearch.ForPSM,MRTcanbeseenasanactingbridgebetween‘grand’,establishedtheoriessuchasEGTs,andconceptsandframeworksthatcaptureaparticularmanagerialsituationorachallenge.MRTsinPSMstemfromknowledgethattheresearcherhas,forexample,gainedthroughempir-icalcasestudiesandconceptualizedanalyticallyorviceversa(Wacker,1998).Theorizingamiddle-rangetheoryishenceinherentlyabductiveinitsapproach(KovácsandSpens,2005).WHYISMRTNEEDEDINPSM?AdoptingthelogicofMRTinPSMcanbemotivatedinvariousways.Firstofall,thedebateonwhetherPSMcanberegardedasamatureacademicfieldisstillquitelively(see,e.g.,Ellrametal.,2019).InsteadofrelyingupontheuseofEGTs,PSMscholarsmaywanttorevisittheirviewonwhattheoryisandhowitcomesabout,toavoidmisconceptionswithrespecttostatusofthefield.Perhapsmoreimportantly,weneedtobemoreconfidentthatourconceptsandframeworksareindeedsignificantastheoreticalcontributionsontheirown.WedonotalwaysneedEGTstogainlegitimacywhenpursuingacademicpublications.Second,MRTconsidersthelocalandthesituationalwhendisplayingresearchsynthesisintoaconceptualframeworkandseekstoenhanceapplicationandsuccessfulinterventioninaparticularsettingratherthanpresentingamoreoverallandabstractview.Inthisrespect,MRTalignswellwithrecentcallsforengagedscholarship(e.g.,BäckstrandandHalldórsson,2019)andengagedtheorization(Touboulicetal.,2020).ByintroducingMRT,wesuggestthatitislessrelevanttoaimforthestateofhavingonesingletheoryinorofPSM;rather,weshouldadvanceourabilitytotheorizeanddevelopapplicableknowledge.BASICCONCEPTUALIZATIONANDEXAMPLESPSMasProfessionandTheory:AQuestforaBroadApproachtoTheorizingPSMentailsabroadrangeinitscontributiontoknowledgeadvancement.Ononehand,PSMisassociatedwithincreasedprofessionalizationofmanagerialpracticesinpurchasingandsupplymanagementinpublicandprivateorganizations.Withinthese,PSMrangesfromoperationalprocessestostrategicissuesatthehighestmanagementlevel.Externally,PSMhasasignifi-cantcontributiontothestrategicsuccessoftheorganizationbymanagingrelationshipswithonekeystakeholder,namelythesupplierbase.Ontheotherhand,PSMcanbeseenasanappliedfieldofresearchcloselyrelatedto,andgrowingoutof,areassuchasoperationsman-agement,industrialmarketing,supplychainmanagementandlogistics,whichareallseekingtoachievestatusasanacademicdisciplineusingandcontributingtotheories.Ourpointofdepartureisthatthisrange–professionalizationofmanagerialpracticesandthestrivefortheoreticalmaturity‒shouldshapeourwayoftheorizingPSM.TounderpinthisJennyBäckstrandandÁrniHalldórsson-9781839104503DownloadedfromPubFactoryat05/28/202209:10:13AMviaColumbiaUniversityLibrary

10082Handbookoftheoriesforpurchasing,supplychainandmanagementresearchview,weintroduceBoyer’s(1990)viewofscholarshipandresearchasaprinciplethatsetsthefoundationforourviewonresearchinPSM,andthatbecomesthefundamentalprincipleforviewingMRTasameanstoenhancetheorizinginandofPSM.Thisperspectiveadvocatesabroaderviewonresearchthanonlydiscovery(whatistobeknown?whatisyettobefound?),twofeaturesofwhichcanserveastheintellectualunderpinningoftheabovementionedrangeofPSM:scholarshipofintegration,andscholarshipofapplication,respectively.First,scholarshipofintegrationsuggeststhatknowledgeiscreatedatintersections:‘attheboundarieswherefieldsconverge’.Advancementofknowledgeisrootedinestablishedtheory.However,inappliedfieldssuchasPSMwherefew,ifany,comprehensivetheoriesorevenasetofinternaltheoriesexist,andwheretherolesandcompetencesofprofessionalsareconstantlydeveloping(Balsetal.,2019),acommonwaytospeedupdevelopment,boostmaturityandincreasetheabilitytodealwithcomplexproblemsisto‘borrow’conceptsandframeworksfromEGTs(Halldórssonetal.,2015;Spinaetal.,2016).Albeitnotnecessarilyall-encompassing,EGTspresentaratherhighlevelofabstractionandarerootedinmorematurefieldsofsocialsciences(management,business,economics,sociology).ExamplesofEGTsandtheirapplicationinPSMare:1.Transactioncostanalysis:make-or-buy/outsourcingdecision;informationsharingbetweenbuyersandsuppliers;supplychaingovernance;adversarialrelationships.2.Resource-basedview:competitiveadvantageinandthroughuniquebuyer‒supplierrela-tionships;criticalityofsuppliers.3.Agencytheory:incentivesandriskincontracts;costmonitoringofsuppliers;supplierrisk.4.Networktheory:relationshipmanagement;supplierselection;interdependenceinsupplynetworks.Thesetheoriesdifferintermsof,forexample,unitofanalysis,problemorientationandbehav-iouralassumptions.AnEGTconcernsanoverallproblemoracorequestion.Forexample,transactioncostanalysisseekstoexplainthemostefficientboundariesofthefirm,thatis,‘whydofirmsexist?’(Williamson,1979),andtheresource-basedviewconcernscompetitiveadvantagebyasking‘howdofirmsdiffer?’(Teeceetal.,1994).AlthoughtheapplicationofthesetheoriesgiveslegitimacytotheindividualresearcherandPSMassuch,thekeyreasonfortheirusemustalwaysbetheconceptualproximitybetweenthecoreconceptsofEGTsandthePSMproblemathand.Forexample,agencytheorydepartsfromtheproblemofinforma-tionasymmetrybetweentwoactors;inPSM,thisresonatesverywellwithbuyer‒supplierrelationships,andcorrespondingproblemsandconceptsthathaveemergedfromwithinPSM,suchascollaborativearrangements,contractmanagement,andsupplyriskareintendedtoovercomesomeoftheseproblems(Halldórssonetal.,2015).Sincetherearefewifanyspe-cificandwell-establishedtheoriesatthecoreofPSM,thisborrowinghashadagreatinfluenceontheorizingandthestatusofPSMtoday.WhilstEGTsgiveusthenecessarytheoreticalembeddedness,PSMgivesustheviewoftheprofessionalsandthevocabularythatcatchestheirperspective.Second,scholarshipofapplicationstatesthatknowledgecreationgoesinbothdirectionsbetweenpracticeandtheory.Itrequiresresearchdesignthatissensitivetothecontext,thatis,abletoestablishclosenesstopeople,processesandpracticeswithinwhichthephenomenonunderstudytakesplace.Italsorequiresaprocessorientation:aninteractionbetweentheresearcherandpractitionerovertime.Whilstthisdimensionofscholarshipislessdevelopedthanthatofintegration,recentcallsforincreasedfocusonrelevanceinPSM(KnightetJennyBäckstrandandÁrniHalldórsson-9781839104503DownloadedfromPubFactoryat05/28/202209:10:13AMviaColumbiaUniversityLibrary

101Enhancingtheorizinginpurchasingandsupplymanagement83al.,2016)havebeenfollowedupbymorespecificobservationsonwhatthismayentail.Inparticular,PSMhasbeenencouragedtofollowthelogicofengagedscholarshipassetoutbyVandeVenandJohnson(2006,p.803):‘acollaborativeformofinquiryinwhichacademicsandpractitionersleveragetheirdifferentperspectivesandcompetenciestoco-produceknowl-edgeaboutacomplexproblemorphenomenonthatexistsunderconditionsofuncertaintyfoundintheworld’.InPSM,thisunderpinsresearchdesignsthatareverymuchinlinewith‘proximitytopractice’asthecorefeatureofMRT;professionalsandresearchersinteractcloselyinaco-creativemannerinordertoenhancetherelevanceoftheproblem,butalsotopromotetransferofknowledgeandcreateopportunityforinterventionsandtostudyeffortsandimpactoftransformativeactions(BäckstrandandHalldórsson,2019;Touboulicetal.,2020).Ultimately,theseresearchdesigns,whicharebasedontheideaofengagedscholarship,aimtopresentanactionableknowledge,whichresonateswellwiththeviewofCraigheadetal.(2016)onMRTasbeing‘readilyapplicable’.Bythis,MRTcontributestothelearningofindividualsandorganizationsthatenhancestheircapabilitiesinfutureactions.PSMcannotberegardedasanEGTitselfandthefielddoesnothaveoneoverallEGTtoreferto.However,thetheoreticalstatusofPSMandthewayinwhichitdevelopsresonateswellwithMRT.Basedonthetwounderpinningsofscholarshipoutlinedabove,Figure6.1providesasummaryoftwokeycomponentsoftheorizingaimingforactionableknowledge,suggestingthattheorizinginPSMrestsonscholarshipofintegrationandapplication.Figure6.1TwokeycomponentsoftheorizinginPSMthatleadtoactionableknowledgeWhilstscholarshipofbothintegrationandapplicationserveasanintellectualpreludetoMRT,weobservethatMRTitselfentailsattributesandhasbeengivenanaimthattosomeextentcombinesthesetwotypesofscholarship.MRTdepartsfromapracticalproblemandmaybepresentedwiththeuseofsensitizingconcepts,thatis,conceptsthatemergefromtheempiricalfieldandthatmaybespecifictoPSM;forexample‘portfolioanalysis’and‘earlyJennyBäckstrandandÁrniHalldórsson-9781839104503DownloadedfromPubFactoryat05/28/202209:10:13AMviaColumbiaUniversityLibrary

10284Handbookoftheoriesforpurchasing,supplychainandmanagementresearchsupplierinvolvement’.Theseemergefromconcrete,practicalproblemsandcontaininvivocodes‒thatis,languageusedbythepractitioners‒butcanbefurtherembeddedinEGTssuchascontingencytheoryandknowledge-basedtheoriesofthefirm,respectively.MRToffersthusacomplementaryapproachtotheorizinginPSMwherethetheory-developmentpotentialofresearchshouldstartwithbutalsoleadtopracticalrelevance.EXAMPLESOFMRTINPSMInPSM,keyfeaturesofMRTaremultiplelevelsofanalysisandproximitytopractice,hencemakingthemmoreactionablethangrandtheories.BasedonaliteraturereviewandinputfromtheInternationalPurchasingandSupplyEducationandResearchAssociation(IPSERA)community,thissectionprovidesanalysisofcurrentframeworksinPSMthatcanberegardedasMRT.Oneexampleofamiddle-rangetheoryinPSMistheKraljicmatrix(Kraljic,1983)thatwasconceptualizedbasedonempiricalexperience(Beer,2006),adaptedtoalignwithlocalapplicationsinPSMliterature,andisusedinvariousversionsbyalargenumberofPSMprofessionals.TheupperpartofFigure6.2depictstheoriginalversionoftheKrajlicmatrixasdescribedinthepaper,thoughneverdepictedintheoriginalpublicationinafigurativeform.Thehorizontalandverticaldimensionsserveasdeterminantsforthecategorizationintooneofthefourareasinthemiddle.Thevocabularyintheframeworkconsistslargelyofsensitizingconcepts,whichemergedoutoftheempiricalfield,butarespecifictoPSM.Withitsmultipledimensions,thematrixresonateswithvariousEGTs.Overall,theuseofdimen-sionstodetermineaparticularcategoryinthematrixresonateswithcontingencytheory;thecourseofactionisdependentuponsituationsparticulartotheindividualorganization.Morespecificly,amongstthepreferredcoursesofactions,thelabelsof‘leverage’and‘bottleneck’refertoapowerimbalancebetweenthebuyerandthesupplier,whichhasitstheoreticalrootsinpoliticalscience(Cox,2004).Overtime,theoriginalKrajlicmatrixhasbeensubjecttodiscussionamongstscholarsinPSM,andaccordinglydevelopedtocaptureavarietyofdifferentsituations,especiallythroughthedeterminantdimensionsoftheframework.ThelowerlevelsofFigure6.2depictfouradaptionsoftheoriginalmatrix,thelayoutsarebasedontheworksoftheoriginalauthorsbutillustratedhereinauniformway.Startingfromtheleft,anewfocusbecomesthe‘typeofpurchase’(OlsenandEllram,1997),followedby‘supplystrategies’andamoreoutspokenpower-perspective(GeldermanandvanWeele,2002).Somewhatcontrarytothisis‘manage-mentstrategies’(DuboisandPedersen,2002),whichismorerelationship-orientedthanthepowerapproach.Finally,furthesttotherightisanexampleofaquantifiedmodelfor‘decisionsupport’(Montgomeryetal.,2018).AnotherindicatorofMRTinPSMisthevisualizationofthepurchasingprocessmodelinFigure6.3;allillustrationsarebasedontheoriginalauthors’work,butthelayoutsaremodifiedforuniformityacrossthedifferentmodels.Therearemanydifferentwaysofillustratingthepurchasingprocessmodelsavailable(Bäckstrandetal.,2019)buttheillustrationbyvanWeele(2002)wasfoundtobethemostwidespreadprocessmodel,bothinitsoriginalformandinadoptedforms.AswiththeKraljicmatrix,theprocessmodelhasbeensubjecttoadaptionstocapturedifferentsituations.Someadaptionsproposeamodelwithfewersteps(LysonsandFarrington,2006)andsomewithJennyBäckstrandandÁrniHalldórsson-9781839104503DownloadedfromPubFactoryat05/28/202209:10:13AMviaColumbiaUniversityLibrary

103Enhancingtheorizinginpurchasingandsupplymanagement85Thepurchasingmatrixportfolioanalysis(top)andfouradaptions(below)Figure6.2JennyBäckstrandandÁrniHalldórsson-9781839104503DownloadedfromPubFactoryat05/28/202209:10:13AMviaColumbiaUniversityLibrary

10486Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFigure6.3ThepurchasingprocessmodelbyvanWeele(top)andthreeadaptions(below)moresteps(NovackandSimco,1991),whereasothershaveadaptedthemodeltoserveaspe-cificpurpose,suchasbuyingbusinessservices(VanderValkandRozemeijer,2009).THEORIZINGPSMWITHMRT:ACOCKTAILWITHATWISTItisevidentfromtheabovethatMRTsuggestsapluralistapproachtoPMS.However,thisisnotamatterofhavingmanyconceptsorframeworks.Rather,MRTpertainstoamodifiablefeatureoftheoryandtheorizingthatmakesitattractivetouse.Toexplainthisfurtherwedrawuponananalogytotheskillsinmixology.Everyseriousbartenderseekstomakethecustom-ersthebestdrinktheyevertasted.Todoso,theynotonlyneedtoidentifytherightcocktailforthecustomer,butalsoneedtomastertheskillsofartandtheatrewhenbuilding,twistinganddeliveringthedrink.Now,whathasthistodowithMRTandPSM?ThecocktailmetaphorhelpsustounderstandMRTasatypeoftheoryinPSM,butmoreimportantlyithelpsinillustratingitscreation,thatis,theorizing.AcocktailisacreationJennyBäckstrandandÁrniHalldórsson-9781839104503DownloadedfromPubFactoryat05/28/202209:10:13AMviaColumbiaUniversityLibrary

105Enhancingtheorizinginpurchasingandsupplymanagement87ofvariousingredientsusingspecificdimensionssuchastaste,appearance,temperature,nose-flavourandtexture-mouthfeel(Kaplanetal.,2014).Thebartenderusesamixofthesetocreatealocalexperiencetothecustomer,oftendepartingfromaspecificsituationoroccasion.Whilstthedeep,smoky-sweetflavorofruminDark’N’Stormymaysuitwelltoamelan-cholicNovembereveninginScandinavia,therefreshing,sparklingandcitrusyFrench75,whichusesgintogiveanextrapunch,iswellsuitedtocelebrationsonasunnyday.Agoodcocktaildeliversexperience,justasMRTseekstobringprinciplesintopractice;itissitua-tional,departingfromthemanager’sowncontext,aimingtocreateapositiveexperiencetothesolutionofapracticalproblem.MRTisnotpureorgrand,liketransactioncostanalysisandtheresource-basedview.AnEGTistoMRTwhatspirits‒gin,vodka,rumortequila‒aretomanycocktails.Theyarethebase;theysetthebaselineforthetaste,forthesolution.Theygiveusacoreconceptatahigherlevelofabstraction.LikeanEGT,thesespiritsarewellknownandwidelyused;butseldomontheirown.Theyhardlydeliverauniqueconsumingexperience,apartfrombooziness,ifconsumedwithoutanymodificationorguidelines.JustasMRTofteneitherimplicitlyrelatestoEGTsorevenexplicitlymakesuseofconceptsandlogicsfromanEGT,cocktailsareinmostcasesbuiltonabase.ThinkofMRTasatasteful,classiccocktailsuchastheMargarita.Classicinthesensethatitisnotonlyoldbuthasturnedouttobeusefultothemanageroveralongerperiodandinavarietyofsituations.AMargaritaisembeddedintequilaasthebase,justasthepowerconceptintheKrajlicmatrixreferstopoliticalscienceasthebase.Topreludeauniqueexperiencebytheconsumer,thebasemustrelatetosomethingspecific:acontextorasituation.Togivethecocktailacharacter,ormakeatheoreticalframeworksituational,weneedmodifyingagents.ThisistheroleoflimeandtheliqueurCointreauinaMargarita.InMRT,wedecidewhichdimensionsoritemstouse,andhowtooperationalizethem.IntheKrajlicmatrix,forexample,wewoulddefinesupplierbasecomplexitynotfromalonglistofitemsfromatextbook,butratherbyselectingafewdimensionsfromsuchalistthatthemanagerfindsuseful.Overtime,theviewonsupplyrisk,aspartofthatconcept,hasdevelopedasbusinesseshavefacednewandoftenformerlyunknownmajordisruptions.Similarly,aMargaritahasdevelopedovertime;itcanbetwistedintoafrozencreation,madeoniceorevenfrozenpineapple.Athirdelementinthecocktailarethespecialflavouringandcolouringagents;orinourcase,adashofsyruptofurtherenhancethelocal–visualandaromatic–characteroftheexperience.Temperatureandappearancecontributetothefinaltouch,justliketheshapeandthewaybywhichMRTisdisplayed.InPSM,two-by-twomatrixesseemtobequitepopular.Finally,asforcocktails,MRTdoesnotdeliverexperienceonitsown,throughthemixoutlinedintherecipe;itreliesuponthebartenders’–ortheresearchers’–theatricandartisticskillsinmixingandcommunicatingwiththereceiver.ADVANCEDGUIDINGPRINCIPLESFORMRTINPSMWhilsttheprevioussectionsgaveustheunderpinningsofMRTandillustratedthisbyexam-plesfromPSM,thefollowingopensforincreaseduseofMRTanditslogicwhendevelopingandpresentingtheoreticalperspectivesinMRT.TwoperspectivesonMRTinPSMarepre-sented.First,baseduponthedefinitionofMRTandouranalysisofPSMabove,bypositioningMRTasaparticularleveloftheoryinawiderhierarchyoftheories.Second,MRTisgivenJennyBäckstrandandÁrniHalldórsson-9781839104503DownloadedfromPubFactoryat05/28/202209:10:13AMviaColumbiaUniversityLibrary

10688Handbookoftheoriesforpurchasing,supplychainandmanagementresearchacomplementaryroleoftheorizingPSMtothecurrentborrowingtheoriesfromotherdisci-plinesandengagedscholarshipbypresentingfourmodesoftheorization.TheoriesasLevels:PositioningPSMResearchasMRTDepartingfromtheexamplesofMRTinPSMabovearetheKrajlicmatrixandthepurchasingprocessmodels,whichcontainconceptsthatoriginateinanEGT,buttheshapeoftheframe-workhelpstooperationalizetheseandbringthemclosertopracticaluse.Figure6.4presentsaviewoftheoriesasahierarchy(orlevelsofabstraction),rangingfromtheoriesabouttheories‒thatis,philosophyofscience‒throughEGTsandMRTtowardsconceptualframeworksthatlieclosertopractice.Figure6.4LevelsoftheoryandthebridgingroleofMRTAgreatdealoftheorizinginPSMhasbuiltuponborrowingtheoriesfromotherdisciplines,ortheEGTlevel.ThefigurepositionsMRTinPSMasan‘in-between’kindoftheory,bridgingthetwoknowledgecreationcyclesthat,accordingtotheamountofliterature,oftenappearasseparateentities.Intheidealworld,however,therelationshipsbetweenthelevelsaretwo-sided.NexttothisbridgingroleofMRT,threeadditionaldistinctfeaturesofMRTinPSMcanbederivedfromthis:extensionofcriteriaforrigourandrelevance;bottom-up;andcumulative.First,whereasrelevanceandrigourareconsideredasdifficulttocomprehendsimultane-ously,thelevelsinFigure6.4suggestthatthecriteriaforrigourandrelevancemustbeunder-stoodwithrespecttothelevelofabstractionatwhichtheresearcheroperates.Traditionally,muchresearchinPSMreferstoexternalvalidityasacorequalitycriterionwithoutconsideringwhatleveloftheoryisbeingproposed.Ournotionisthatthiscriterionisvalidasregardsthehigherlevelsoftheory,andwhencomparingparticularresultswithcurrenttheoryaswedowhenestablishingananalyticalgeneralizability(Yin,2018).However,aswemovetowardslowerlevelsofabstractionsuchasMRT,andgiventhenatureandroleoftheseinPSMasexemplifiedabove,usingthisnotionofgeneralizabilityrunstheriskoflosingtheconnectionJennyBäckstrandandÁrniHalldórsson-9781839104503DownloadedfromPubFactoryat05/28/202209:10:13AMviaColumbiaUniversityLibrary

107Enhancingtheorizinginpurchasingandsupplymanagement89withtheappliednatureofPSMandtheprofessionalsinthefield.Therefore,scholarsshouldperhapsratherconsiderthetransferability(HalldórssonandAastrup,2003)orevenadapt-abilityoftheirtheoriesasqualitycriteriatocreateanimpact(Elgetal.,2020).Toenhancetransferabilityoftheresults,researchqualitycriteriamustassertbothlocalactionabilityoftheresultsaswellasadaptabilityofthesetootherlocalsettings.Second,movingfromthebottomandupwards:beinganapplieddiscipline,theorizinginPSMhasitsrootsatthebottomofthefigure,inthepracticesandprofessionofPSM,andmovesupwards.Althoughthisismotivatedbynotionssuchasphenomenon-drivenresearch(SchwarzandStensaker,2014),respondingtobusinesschallenges,or‘nothingastheoreticalasgoodpractice’(PloyhartandBartunek,2019),however,toooftentheorizationendswiththepresentationofaframeworkinanaca-demicarticle.SuchoutputcouldbegivenclearertheoreticalmeritsifconceptualizedasMRT.Finally,followingBourgeois(1979)whoseesMRTascumulative,rangingfromadescriptive,substantivetheorytowardsaformaltheory.Inthisrespect,theKrajlicmatrixoriginatedasaconceptualframeworkandsubstantivetheorybuthasdevelopedintoamoreformaltheoryasitgainedpopularityamongprofessionalsandwasfurtheradvancedbyscholarsinPSM.Speedinguptheprocessofthisupwardstransitionrequiresanextensionofthequalitycriterion(seetheright-handsideofFigure6.4)usedforassessingthequalityofengagedresearch,aswellasuseofengagedscholarship-basedresearchdesign.MRTasModeofTheorizationAlthoughPSMmightnotyethavereachedthestatusofhavinginternaltheories(Spinaetal.,2016),thefieldisrichinframeworksandconceptsthatarespecifictothefieldand/orhaveemergedduringempiricalstudiesofPSMprofessionals.GiventhisrichnessofPSM,andtheintellectualbackgroundofMRTanditscombinatoryabilityofbeingcontext-specificandsituationalbutalsotheoreticallygrounded,wesuggestthatPSMframeworkscouldbenefitfrombeingconsideredasMRT.Toillustratethis,andtounderstandthepositionofMRTwithrespecttothestatusofPSM,Figure6.5presentsthreedifferentmodesoftheorizing.Figure6.5Modesoftheorization:MRTascomplementarytoborrowingtheoriesandengagedtheorizationBeginningfromtheleft,PSMhasgrownfromanappliedfield(a),withfewifanyestab-lishedtheoriesorframeworks,butconsistingofconceptsandprinciplesthathaveemergedJennyBäckstrandandÁrniHalldórsson-9781839104503DownloadedfromPubFactoryat05/28/202209:10:13AMviaColumbiaUniversityLibrary

10890Handbookoftheoriesforpurchasing,supplychainandmanagementresearchfrompractice.Thiscanbeseenasprecursortothemoreadvancedmodesoftheorizing.Thesecondmodeoftheorizingoutlinedaboveis‘theory-centrictheorizing’(b),borrowingconceptsandframeworksfromEGTstoinvestigatePSMpractices(Halldórssonetal.,2015;Spinaetal.,2016).Thethirdmode,‘engagedtheorizing’(c),isphenomenon-drivenresearchthatputsgreatrequirementsontheresearchdesignandmethodstocreateproximity(Knightetal.,2016)tothepractitionersthroughcollaborativeresearchdesign(Walkeretal.,2008),engagedscholarship(BäckstrandandHalldórsson,2019)orengagedtheorization(Touboulicetal.,2020).Finally,‘MRTastheorization’(d)isdepictedastheoriesthatrelatetoboththeoryandpracticespheres,yetnotatthesamedepthasborrowingtheoriesdoeswithEGTs,orengagedtheorizationdoeswiththepractice.Tothisend,MRTentailsacombinatoryapproachoftheorizingPSM,movingverticallyacrossthethreespheresinFigure6.5(d).Featuresofthismodeoftheorizinginclude(butarenotlimitedto):1.Orientation.Situatedinapracticalprobleminthepracticesphere(bottomup)thatseekstogeneratetheorythatfallsbetweenmoreabstractEGTsataresearcherlevelandatheoryaboutaspecifictopicareainPSM.2.Accumulative.Makeuseofexistingconceptsandframeworkbutseektobringthesetowardsahigherlevelofabstractiontocontributeto(ratherthanborrowfrom)currentEGTs.Forexample,PSMprovidesafirminterorganizationaldimensiontotheresource-basedview,thatisresourcesandcapabilitiesthatresideinthebuyer‒supplierrelationship.3.Methodologicalinseparability.Theselectionofaresearchdesignwithfeaturesthatentailuseoftheresearchresults(forexample,intheformofaprototype)notonlyenhancesthesituationalfeatureofMRTbutalsohelpstheresearchertounderstandtheadaptabilityandactionabilityoftheframeworkproposed.4.Contributions.ByusingWhetten’s(1989)criterionforcontribution,MRTencouragessensitivitytothecontext,whichinturnshouldresultinframeworksthatcontainfactorsmeaningfultothemanager’scontextandthatcanbeactedupon,thatis,beactionable.Moreover,thesituationalfeatureofMRTswillencouragecontributionswithrespecttowhatfactorsarerelevant,andevenhowtheyarerelated.AimingforWhetten’sfourthtypeofcontribution,the‘why’thatleadstoquestioningfundamentalassumptionsismorelikelytooccurusinghigherlevelofabstractionofEGTsratherthanMRT.5.Researchquality.First,inlinewithMilesetal.(2020),MRTshouldbeofpragmaticvaluefortheparticipantsinvolved;thatis,beactionable,haveacertainactionorientation.Second,qualitativeresearchthatissensitivetothecontext:thetraditionalcriterionofexter-nalvalidityasameasureforgeneralizabilityisreplacedbytransferability(HalldórssonandAastrup,2003).ThisiswhereMRTshowsitstruestrength:factorsandtheirrelationshipsthatareexplicitlyrelatedtothespecificcontexthelpincreatingsimilaritiesbetweenthesenderandthereceiveroftheframework.EstablishingsuchsimilaritiesandthefactthatMRTcontainsdimensionsthataremodifiablewillenhanceapplicabilityofknowledgeoutsidethecontextinwhichitisoriginallygenerated.Modes(c)and(d)oftheorizinginFigure6.5entailactiveparticipationofbothresearchersandpractitioners,andaimtogeneratetransformativeopportunitiesorrelevantandactionableknowledge.Inthisway,theorizingbecomestoacertainextentinseparablefromtheresearchdesign.ThesemodesareintendedtoencouragePSMscholarstoconceptualizetheirresearchcon-tributionwithrespecttoMRT.WedonotnecessarilyagreewiththenotionthatPSMhasnoJennyBäckstrandandÁrniHalldórsson-9781839104503DownloadedfromPubFactoryat05/28/202209:10:13AMviaColumbiaUniversityLibrary

109Enhancingtheorizinginpurchasingandsupplymanagement91internaltheories.Rather,bybroadeningourunderstandingofresearchandscholarshipintobothintegrationandapplication,thisallowsustoconsidertherichnessofPSMwithrespecttoconceptsandframeworks,thathavedevelopedovertimeandthathaveturnedouttobeapplicableinvarioussectors.CONCLUDINGREMARKSAsanappliedfield,purchasingandsupplymanagement(PSM)hasdevelopedtowardsanaca-demicdisciplinethroughtheborrowingoftheoriesandconceptsfromothermoreestablisheddisciplines,andmorerecentlybyemphasizingresearchdesignthatpromotescloseinteractionbetweenresearchersandPSMprofessionals.Somemisconceptionexistsinthefieldaboutwhattheoryis,andtoooftenitisprimarilydefinedwithrespecttograndtheories,leavingPSM-specifictheoriestobelabelledasmodels,frameworksorconcepts.Whencomparedwithexternalgrandtheories(EGTs),acommonnotionisthatPSMlacksaninternaltheoryoratheoryofitsown.Notably,however,PSMisveryrichinframeworksandperspectivesthathaveturnedouttobeusefulacrossavarietyofindustrialandpublicsectors,otherthanthosewhichwereinitiallybeinginvestigated.MRTcanaddtonotonlyclarificationbutalsolegitimacyofscholarshipinPSMwithrespecttotheoreticalmaturityofthefield.ThischapterconceptualizesMRTwithrespecttotheorizinginanappliedfield,suchasPSM.ExamplesofMRTandPSMarepresented,andguidingprinciplesforfurthertheorizinginPSMareoutlined.Basedonthis,wewanttoencouragePSMscholarstomakeuseofMRTasapointofreferenceintheirresearch,andtobebraveinclaimingtheoryandtheoreticalcontributions.OurconceptionofMRTsuggeststhatPSMscholarscanpresentgoodandsolidtheorieswithoutoptingtoborrowtheoriesandframeworksfromexternalgrandtheories.MRTisintro-ducedasawayoftheorizing,complementingtheory-centricapproachessuchasborrowingconceptsandframeworkfromgrandtheories,aswellasmethodsthatemphasizeproximity(Knightetal.,2016)tothepractitionersthroughengagedscholarship(BäckstrandandHalldórsson,2019)andcollaborativeresearchdesign(Walkeretal.,2008).ThetheoreticalframeworksinFigures6.4and6.5encouragePSMscholarstoconceptualizetheirtheoreticalcontributionwithrespecttoMRT.Toenhancetransferabilityoftheresults,researchqualitycriteriamustassertbothlocalapplicabilityoftheresultsaswellasadaptabilityofthesetootherlocalsettings.Consideringthepotentialandlimitationsoftheperspectivepresentedabove,atleasttwovenuesoffutureresearchshouldbeconsidered.First,acomprehensiveliteraturereviewisneededtopopulateagreaterlistofMRTsinPSMtocomplementtheexamplespresentedabove.Second,followingtheleadsuggestedbyBäckstrandandHalldórsson(2019)andTouboulicetal.(2020),afirmerconceptualizationoftherelationshipbetweenengagedschol-arshipandMRTisencouraged.Finally,metaphoricallyspeaking,likeacocktail,MRTisintersectionalandsituational;itistheresultofacreationofingredientsandexperience.Cocktailsdeliverexperiencesinacertaintimeandspace.ThephilosophyofcocktailsresonateswellwithPSMasMRT;theultimateexperienceofthecocktail,andaccordinglytheproblem-solvingcapacityofthespecificMRT,isnotdefinedbyarecipethatisgeneralizable.Rather,itisbasedontheadaptabilityoftherecipe,whichultimatelybecomesactionable,resultinginatruecustomerexperience.JennyBäckstrandandÁrniHalldórsson-9781839104503DownloadedfromPubFactoryat05/28/202209:10:13AMviaColumbiaUniversityLibrary

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1127.TransactioncosteconomicsWendyL.TateandLisaM.EllramINTRODUCTIONThebasicpremiseoftransactioncostanalysisisthatfirmsareprofitmaximizing,andaspartofachievingthatgoalofprofitmaximizationthefirmmustdetermineitsmostefficientbound-ariesbetweenbuyinginthemarketandcreatinggoodsandservicesinternally(Williamson1981),referredtoasmarketversushierarchy.Thisisoftenreferredtoasthe‘makeversusbuy’decision,orthedecisionofwhethertooutsource(ifsomethingiscurrentlybeingdoneinternally).Thecorrectgovernancestructure(market,hierarchy,orahybridform)dependsonthecharacteristicsofthetransaction.Therighttypeofgovernancestructureshouldbebasedonwhatismosteconomical,consideringboththepurchase(production)costsandthetrans-actioncosts(Williamson1979).Therighttypeofstructure,consideringmarket,hierarchy,orsomehybridapproachbetweenthetwo,shouldbecontinuallyreviewed,withtheorganizationadaptingasconditionschange(Williamson2008).KEYVARIABLESANDDEFINITIONSTransactioncosteconomicsconsidersthatinadditiontothepricepaidfortheiteminthemarketplace,therearemanypotentialtransactioncostsandrisksassociatedwithusingthemarket.Ifnotfortheseadditionalcosts,africtionlessmarketplacewouldalwaysbebetterthanhierarchy,becausemarketspecialistsshouldbemoreefficientthanhierarchy.However,onemustconsiderthefrequencyofthetransaction,thespecificityofassetsneededtofulfilthetransaction,theuncertaintyandcomplexityinthetransactionthatmaygiverisetopotentialopportunism(TadelisandWilliamson2012),andtheassociatedspecifictypesoftransactioncosts.Humanbehaviourcomesintoplayregardingfullyunderstandingthecontractandmon-itoringcontractualbehaviour.Twodimensionsofhumanbehaviourplayacriticalrole:boundedrationalityandopportun-ism(RindfleischandHeide1997).Thesecharacteristicsdeterminethemostappropriateformofcontractualgovernance.Eachoftheseareasisexpandedbelow.BasicdefinitionsofthetransactioncosteconomicsvariablesareprovidedinTable7.1.FrequencyoftheTransactionWhenconsideringmarketversushierarchy(verticalintegration),thefrequencyofthetransac-tionisimportant,becausewithgreaterfrequencyitismoreworthwhiletoinvestinspecializedgovernanceinordertomitigaterisk(Williamson1985).Whileitmayseemthathigh-volumeactivitiesarefavourabletoverticalintegration,thisisnotnecessarilythecase.Thisisnotedastheleastimportantandleaststudiedofthethreedimensionsoftransactionfrequency,assetspecificityanduncertainty(Williamson1985;RindfleischandHeide1997).Inaddition,the94WendyL.TateandLisaM.Ellram-9781839104503DownloadedfromPubFactoryat05/28/202209:10:16AMviaColumbiaUniversityLibrary

113Transactioncosteconomics95Table7.1DefinitionsofTCEvariablesElementExplanationReferencessupportingUnitofanalysisThetransaction,oftencharacterizedthroughthelensWilliamson1979,1981,1985;ofthecontractMacherandRichman2008LevelofanalysisFirmlevel,analysingthetransactionorthecontractWilliamson1979,1981;TadelisandWilliamson2012Keyvariables/definitionsFrequencyoftransactionOngoing,regulartransactionversusanoccasionalWilliamson1985,2008transactionAssetspecificityRequirementsforveryspecialized,specificassetsWalkerandWeber1984;Williamson2008requiredtomeetthecontractualneedsUncertaintyandcomplexityThemorecomplexthetask/purchaseditem,andtheRindfleischandHeide1997;Williamsonmoredifficultitistodeterminewhetherithasbeen1979performedproperly,thegreatertheriskofopportunisminthemarketplaceMajortransactioncoststoCostofsearchandinformationgathering,bargainingNorth1990;RindfleischandHeide1997;considercosts,policingandenforcementcostsTateetal.2011AssumptionsabouthumannatureBoundedrationalityLimitedabilitytoprocessalldataandbehavefullyRindfleischandHeide1997rationallyeventhoughwemaywanttoOpportunismTakingadvantageofthesituationduetosomeEllrametal.2020;Williamson2008weaknessintheotherparty’sposition,madepossiblebyincompletecontractsandboundedrationalitycurrentlevelofautomationanddigitizationoftransactionsshiftstheimportanceofthisissue,ashighfrequencyisnotnecessarilyassociatedwithhightransactioncostorset-up(Ellrametal.2008;SchmidtandWagner2019).AssetSpecificityAssetspecificityisacriticaldimension.Itdealswiththeissueofwhetherthesellerhastomakeinvestmentsinspecifichumanorphysicalassetsinordertosupportthefirm’sbusiness.Assetspecificityischaracterizedas‘durableinvestmentsthatareundertakeninsupportofpar-ticulartransactions’(Williamson1985,p.55).Theseinvestmentsmaybeinphysicalfacilities,suchasspecializedcapitalequipmentforproduction,aspecializedbuilding,orabuildinginaspecificareaofinteresttoothers,andcanevenbespecializedhumancapabilities,suchasadedicatedaccountrepresentativewhoisintimatewithallaspectsofabuyer’sbusiness.Transactionsorcontractsbasedonhighlyspecializedassetsareidiosyncraticandareoftenagoodcandidateforverticalintegrationtoavoiddependenceonasupplier.Duetothespe-cializednatureoftheassets,itisintheinterestofthebuyertolimitthenumberofsuppliersinordertogaineconomiesofscale,andavoidpayingmultipleset-upcoststopayforthoseassetsatanumberofdifferentsuppliers.Atthesametime,thesellerinterestedinutilizingtheseassetsfullywillcooperatewiththebuyer,asithasnootheruseforthesespecializedassets(Williamson1979).Acooperativeworkingrelationshipandagoodcontractwithclausesspec-ifyinghowtodealwithchangesinpricinganddemandareessential,asthedependencecreatedbyassetspecificitycanposeriskstobothsidesofthecontractingequation(Williamson1979;WendyL.TateandLisaM.Ellram-9781839104503DownloadedfromPubFactoryat05/28/202209:10:16AMviaColumbiaUniversityLibrary

11496Handbookoftheoriesforpurchasing,supplychainandmanagementresearchBuvikandReve2001).Inaddition,thereareotherrisksposedbyuncertaintysurroundingthetransaction,andhumantendenciestowardsboundedrationalityandopportunism.UncertaintyandComplexityUncertaintymakestransactionsmorecomplexandladenwithproblems.Uncertaintyrelatestothetimespanoftransactions,whichinturninfluencesthebreadthoffuturecontingenciesforwhichcontractualadaptationsarerequired(AkbarandTracongna2018).Uncertaintyincludesunexpectedcontingenciesthatcouldnotbeanticipatedinadvance.Anothertypeofuncertaintyisambiguityregardingwhetherbothpartieshavereallyfulfilledtheirsideofthecontract.Therecouldbejudgementregardingthelevelofqualityofthetransacteditem,thecomplete-ness,andeventheexecutionincasesofsomethingintangible.Uncertaintyisthemostcriticalamongthetransactionattributesoffrequencyoftransactions,assetspecificityanduncertainty(Williamson1979,1985).Thegreatertheuncertainty,themoresafeguardsareneededinthecontracttoprotectbothpartiestothecontract.Butnoteverysituationcanbeanticipated.TransactionCoststoConsiderManyofthecoststypicallyassociatedwithtransactionsarecausedbytheuncertaintyandcomplexityrisksassociatedwithopportunism(Tateetal.2011).Giventhesethreeelementsthataffecttransactioncosts,thethreetypesoftransactioncoststhatorganizationsoftenconcernthemselveswitharecostsofsearchandinformationgathering;bargainingcosts;policingandenforcementcosts(RindfleischandHeide1997;Tateetal.2011).Informationcostsorsearchcostsrefertothepotentialtimeandmonetaryoutlaysassociatedwithdatagatheringtodeterminethesupplier’sbestcourseofaction(HeideandStump1995).Gatheringinformationispre-emptive,tobalanceuncertaintyandavoidmoralhazard.Itisalsoproactive,tocreateunderstandingofthetruescopeofcommitmentthateachpartyismakingtothecontract.Thecostofinformationdealswithdeterminingthecharacteristicsofwhatyouwouldliketopurchase,gaininginformationaboutwhatisavailableinthemarketplacethatmeetsthosecharacteristics,thenidentifyingthesuppliersofthoseitems.Bargainingcostshavebeendefinedasthedirectcostsofnegotiating,documentingandenforcinganagreement(KnezandSimester2000).Thesecostsaccrueprimarilyduetothetimeandeffortinvolvedinbargaininganddevelopinganagreement.Theamountofeffortthatasupplierwillinvestinbargainingisafunctionoftheperceivedvalueoftheexpectedgainsversustheexpectedbargainingcosts(Cramton1991;Tateetal.2011).Bargainingcoststendtoincreaseascertaintyincreases,becausemorecontingencieshavetobebuiltintothecontracts.Enforcementcostsarealsocalledmonitoringcostsandareapolicingfunction.Thesecostsrelatetoreducingopportunismrisksfromothers.Performancemonitoringandmeasurementareessentialinpreventingopportunisticbehaviourandhiddenactions(NarayananandRaman2004).Whenperformanceisnotmonitored,orbehaviourisdifficulttodefine,orthemonitor-ingisnotcost-beneficial,thenopportunismislikelytooccur(Williamson1985).Thecostsofnon-compliancemustalsobeexacted,withtheassociatedcostsconsidered.North(1987),Coase(1937),andothereconomistsarguethattransactioncostsassociatedwithconductingbusinesscanbesubstantial,andshouldbeconsideredaspartofthecostofconductingbusiness.Thesetransactioncostscanapplytobothbuyersandsuppliers.AstheWendyL.TateandLisaM.Ellram-9781839104503DownloadedfromPubFactoryat05/28/202209:10:16AMviaColumbiaUniversityLibrary

115Transactioncosteconomics97transactioncostsbecomehigh,thecontractualrelationshipwillbecomelessattractivetowhicheversideincursthecosts(Tateetal.2011).Ifthetransactioncostsbecometoohigh,asuppliermayrefusethebusiness,andabuyermaydecidetoverticallyintegrate.ASSUMPTIONSREGARDINGHUMANNATUREHumanactorsaredeterminedtoberationalbutbehaveonlylimitedlyso(Williamson2008).Thereareboundsontheirrationality,whichmeansthatallcontractswillbeincomplete.Therewillbegaps,errors,omissions,andsoon.However,iftheboundedlyrationalpartieshavethecapacitytolookahead,orobtainknowledge,thencontractscanbeadaptedtodealwithunanticipateddisturbancestothecontractingprocess(oradditionalcosts)andrealizemutualgains(Simon1955).Self-interestoropportunismalsocreatesproblemsincontracting.Ingeneral,mostpeoplewilldowhattheysaytheywilldo,andsomewilldomoremostofthetime(Williamson2008).However,withoutpropercontrols,ascircumstanceschange,socanself-interest,meaningthatopportunismisintroduced.BoundedRationalityWilliamsonreliesonHerbertSimon,whocoinedtheterm,withthefollowingdefinition:boundedrationalityhasreferencetobehaviourthatis‘intendedlyrational,butonlylimitedso’(Simon1972).Thistermmeansthatalthoughpeoplemayintendtomakearationaldecision,theircapacitytoevaluateaccuratelyallpossibledecisionalternativesisphysicallylimited.Itisbecauseoftheseconstraintsofcognitivecapabilitiesthatcomprehensivecontractingcoveringallcontingentsituationsorfuturechangesisnotfeasible(Williamson1985).Also,pairingexistsbetweenboundedrationalityanduncertainty/complexity.Boundedrationalityposesaproblemonlyinsituationsofuncertainty/complexitywherepeoplecannotmakeafullyrationaldecisionduetothecognitivelimits.Inparticular,anadaptationproblemiscreatedwhenafirmwithdecisionmakersthatarelimitedbyboundedrationalityhasdifficultymodi-fyingcontractualagreementstochangesintheexternalenvironment.OpportunismOpportunismhasbeendefinedbyWilliamson(1979)asself-interestseekingwithguile.Inotherwords,itrecognizesthatbusinessesandindividualswillsometimesseektoexploitasituationtotheirownadvantage.AccordingtoWilliamson(1993),opportunismisthecauseforthefailureofmarketsandtheexistenceoforganizations.Andtheriskofopportunismisgreaterwhenthereexistsasmallnumberofalternatives.Opportunismposesaproblemincasesofassetspecificity.Specifically,asafeguardingproblemariseswhenafirmdeploysspe-cificassetsandfearsthatitspartnermayopportunisticallyexploittheseinvestments.GhoshalandMoran(1996)criticizedthisstrongassumption,sayingthatitcanhavewronganddanger-ousimplicationsforcorporatemanagers.ThiswasclarifiedbyWilliamson(1987),indicatingthattransactionsshouldbeorganizedinawaythateconomizesonboundedrationalitywhilesimultaneouslysafeguardingthemagainstthehazardsofopportunism.However,therearebehavioursthatcannotbeverified,introducinguncertaintyintothetransaction.WendyL.TateandLisaM.Ellram-9781839104503DownloadedfromPubFactoryat05/28/202209:10:16AMviaColumbiaUniversityLibrary

11698Handbookoftheoriesforpurchasing,supplychainandmanagementresearchThe‘Element1‒Variables’issummarizedinFigure7.1.Allfurtherelementsarediscussedinthefollowingsections.Figure7.1OverviewoftransactioncosteconomicstheoryelementsDOMAINWHERETHETHEORYAPPLIESThedomainoftheresearchrepresentstheareastowhichthetheoryapplies.Transactioncosteconomics(TCE)hassomebroadapplicationsbutinitsmostnarrowsense,thedomainofTCEappliestoatransactionbetweentwoentities.However,asyoustarttothinkaboutwhatthatmeans,thedomainofTCEexpandssignificantly.Transactioncosteconomicsfundamentallyguideswhenanentity(organization,individual)shouldperformanactivityitself(hierarchy),andwhenitshouldgothemarkettopurchasetheitem.Thisaffectshowthefirmorganizestocompletethetasksitneedstoperforminordertobesuccessfulinthemarket.Thus,decisionsguidedbyTCEaffecttheentities’governanceandstructure.Ithasanimpactonrelationshipsandcontractswiththirdparties.TCEappliesinalltypesoftransactionsbetweenentities.Thesecanbesingletransactions,thoughweoftenconsidercontractsofvaryinglengthsinTCE(Williamson2008).TheprimarydomainofTCEincludesthebuyer‒suppliercontractsandtransactionsofalltypes.Itprovidesguidanceregardingthemake‒buydecision,includingoutsourcing,offshoring,nearshoringandreshoring.RELATIONSHIPSBETWEENTHEVARIABLESMostcontractsarenotstraightforwardarrangementsthatgojustastheywereplannedwhenoriginallyexecuted.TCEbringsinnumerousvariablestohelpexplainsomeofthethingsthatcanhappenincontractualrelationships,aswellassomewaystosafeguardagainstpotentialWendyL.TateandLisaM.Ellram-9781839104503DownloadedfromPubFactoryat05/28/202209:10:16AMviaColumbiaUniversityLibrary

117Transactioncosteconomics99problems.Becauseofthehumanconditionsofboundedrationality,itisimpossibletobuildallpossiblescenariosandcontingenciesintoacontract.Atthesametime,theremaybeaten-dencyforhumanstobehaveopportunisticallyinthefaceofincompletecontracts,soTCEexplainswhenproblemsaremostlikelytooccur,andpossiblewaystosafeguardthecontract/transactionsfromopportunisticbehaviours.Whetheranorganizationshouldchoosemarketsorhierarchiesisdependentuponthetrans-actiondimensionsofuncertainty,assetspecificityandfrequencyoftransactions(Williamson1975,1981).Greateruncertaintyoverwhethertheotherpartytothecontractisbehavingaspromisedcreatesmoreriskthroughthepotentialforopportunisticbehaviour.Greaterassetspecificityalsocreatesriskasitgeneratesdependence,andessentiallyinvalidatesthepoten-tialadvantageofusingmarkets(Williamson1985).Thetransitiondimensionscoupledwithhumanbehaviourassumptionsdeterminethepossiblelevelofrisk.Insummary,iftheriskistoohigh,thetransactioncostsincrease,asitismoreexpensivetoscanthemarkettodeterminetheleast-risksituation,andnegotiationsandmonitoringbecomemorecomplexandexpensive.Thecostandriskassociatedwithaparticulartransaction(contract)determinetherelativeattractivenessofmarket,hybridorhierarchy.THEORETICALPREDICTIONS(FACTUALCLAIMS)Asstatedabove,intheory,ifinformationwasperfectandthemarketfrictionless,themarketwouldalwaysbepreferredasthemosteconomicalfortransactions.Atanotherextremeisverticalintegrationorperforminganoperationinternally.Inthemiddleoftheseextremestherearevarioustypesofhybrid,bilateralrelationshipsthatattempttoinducesharedrewardsandriskstoreducethepotentialopportunismandincreasepositiveoutcomesoftherelationship(CarterandHodgson2006).Amongthekeytransactiondimensions,uncertaintyisgenerallybelievedtobethemostinfluentialongovernancestructure,followedinimportancebythedegreeofrequiredasset-specificinvestments,thentransactionfrequency(Williamson1979).TherelationshipofthesedimensionsisillustratedinFigure7.1.Williamson(1979)oftenassociatesassetspeci-ficitywithuncertainty.Whenassetspecificityishighormixed,thatcreateshighuncertaintyduetodependenceuponwhoeverownstheassets.Nonetheless,ifthetransactionfrequencyisrelativelylow,itwouldnotbeworthwhiletoverticallyintegrate.Assumingthatthesespecializedinvestmentsarerelativelyimportant,Williamson(1979)suggestsusing‘trilateral’contractingratherthanestablishingarelationship.Hesuggeststhatatrilateralcontractismostefficientbecauseitreliesonanoutsidearbitratorforsettlementinthecaseofadisagreement,ratherthanrequiringacourtsettlement.Thiswouldbefasterandmoreefficient.Sincedependenceanduncertaintycreategreaterriskofopportunism,thistypeofcontractingprovidesabufferfromthatrisk.Heappliesthesamelogictomixeduseassets,thoughtheriskisprobablylessbecausethereislessdependence,andgreaterpotentialapplicationoftheassets(Williamson1979).TCEpositsthatnon-specificuseassetsfacetheleastuncertaintyregardlessoftransactionfrequency,astheassetscanbeputtoanotheruse.Uncertaintyininvestmentincreasesastheassetsbecomemorespecific.However,whenreviewingmanyempiricalstudiesconductedontheapplicationofTCE,CarterandHodgson(2006)foundinconclusiveresults.Inparticular,theyfoundthatpriorstudiesprovidedmixedresultsonwhenverticalintegrationwasbest,andWendyL.TateandLisaM.Ellram-9781839104503DownloadedfromPubFactoryat05/28/202209:10:16AMviaColumbiaUniversityLibrary

118100Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable7.2ImpactoftransactionfrequencyandinvestmentsongovernancestructureInvestmentcharacteristicsNon-specificuseMixeduseIdiosyncraticordedicated(leastuncertainty)(someuncertainty)(mostuncertainty)TransactionLowMarketgovernanceTrilateralgovernancefrequency(classicalcontracting)(neoclassicalcontracting)RecurringMarketgovernanceBilateralgovernanceUnifiedgovernance(classicalcontracting)(relationalcontracting)verticalintegration(relationalcontracting)littlesupportforhybridrelationshipssuchastrilateralrelationshipsandrelationalcontracting.Theycallforfurtherempiricaltestingandalternativeexplanations.Williamson’slaterworkacknowledgesthatinsomecasesverticalintegrationmightbeappropriateforobligationalcontractsaswell,assuchcontractsattempttobufferagainstsomeuncertaintyandprovideprotectionfromsometypesofdependence-inducedopportunism.Forexample,Williamson(1979,p.250):Highlyidiosyncratictransactionsareoneswherethehumanandphysicalassetsrequiredforproduc-tionareextensivelyspecialized,sotherearenoobviousscaleeconomiestoberealizedthroughinter-firmtradingthatthebuyer(orseller)isunabletorealizehimself(throughverticalintegration).Inthecase,however,ofmixedtransactions,thedegreeofassetspecializationislesscomplete.Accordingly,outsideprocurementforthesecomponentsmaybefavoredbyscale-economyconsiderations.SeeTable7.2.Williamsonpredictsthatspecificityanduncertaintyheavilyinfluencemarketversushierarchy:1.Highassetspecificityincreasestheriskofthemarketduetodependence;lowassetspeci-ficitycreatesopportunityforcompetitionandlowerswitchingcosts.2.Uncertaintyoverwhetherthesupplierisreallybehavingascontracteddrivestowardhierarchyandincreasesthetransactioncostsassociatedwithinformationgathering,nego-tiations(whichbecomemorecomplex)andenforcement(monitoringbehaviours).HOWHASTHISTHEORYBEENUSED?PurchasingandSupplyManagementandSupplyChainManagementInthepurchasingandsupplychainmanagementliterature,transactioncosteconomicshasbeenusedtolookattheoutsourcingandlocationdecisionssuchasoffshoringandreshoring.Otherresearchhasfocusedonenvironmentalsupplychaindecisionmaking.Morerecentlytheinfluenceofblockchainonsupplychainrelationshipsusedatransactioncostlens.Belowaresomeexamplesfromthisstreamofliterature:1.Ellram,L.M.,Tate,W.L.andBillington,C.(2008),‘Offshoreoutsourcingofpro-fessionalservices:Atransactioncosteconomicsperspective’,JournalofOperationsManagement,26(2),148–163.WendyL.TateandLisaM.Ellram-9781839104503DownloadedfromPubFactoryat05/28/202209:10:16AMviaColumbiaUniversityLibrary

119Transactioncosteconomics1012.Grover,V.andMalhotra,M.K.(2003),‘Transactioncostframeworkinoperationsandsupplychainmanagementresearch:theoryandmeasurement’,JournalofOperationsManagement,21(4),457–473.3.Hobbs,J.E.(1996),‘Atransactioncostapproachtosupplychainmanagement’,SupplyChainManagement:AnInternationalJournal,1(2),15–27.4.McIvor,R.(2009),‘Howthetransactioncostandresource-basedtheoriesofthefirminformoutsourcingevaluation’,JournalofOperationsManagement,27(1),45–63.5.Schmidt,C.S.andWagner,S.M.(2019),‚Blockchainandsupplychainrelations:Atrans-actioncosttheoryperspective’,JournalofPurchasingandSupplyManagement,25(4),100552.6.Tate,W.L.,Dooley,K.J.andEllram,L.M.(2011),‘Transactioncostandinstitu-tionaldriversofsupplieradoptionofenvironmentalpractices’,JournalofBusinessLogistics,32(1),6–16.7.Tate,W.L.,Ellram,L.M.andDooley,K.J.(2014),‘Theimpactoftransactioncostsandinstitutionalpressureonsupplierenvironmentalpractices’,InternationalJournalofPhysicalDistribution,andLogisticsManagement,44(5),353–372.8.Wacker,J.G.,Yang,C.andSheu,C.(2016),‘Atransactioncosteconomicsmodelforesti-matingperformanceeffectivenessofrelationalandcontractualgovernance’,InternationalJournalofOperations&ProductionManagement,36(11),1551–1575.9.Wever,M.,Wognum,P.M.,Trienekens,J.H.andOmta,S.W.F.(2012),‘Supplychain‐wideconsequencesoftransactionrisksandtheircontractualsolutions:Towardsanextendedtransactioncosteconomicsframework’,JournalofSupplyChainManagement,48(1),73–91.10.Williamson,O.E.(2008),‘Outsourcing:Transactioncosteconomicsandsupplychainmanagement’,JournalofSupplyChainManagement,44(2),5–16.11.Ketokivi,M.andMahoney,J.T.(2020),‘Transactioncosteconomicsasatheoryofsupplychainefficiency’,ProductionandOperationsManagement,29(4),1011–1031.12.Piboonrungroj,P.andDisney,S.M.(2015),‘Supplychaincollaborationintourism:atrans-actioncosteconomicsanalysis’,InternationalJournalofSupplyChainManagement,4(3),25–31.13.Wacker,J.G.,Yang,C.andSheu,C.(2016),‘Atransactioncosteconomicsmodelforesti-matingperformanceeffectivenessofrelationalandcontractualgovernance’,InternationalJournalofOperations&ProductionManagement,36(11),1551–1575.14.Lumineau,F.andOliveira,N.(2020),‘Reinvigoratingthestudyofopportunisminsupplychainmanagement’,JournalofSupplyChainManagement,56(1),73–87.15.Liu,J.,Feng,Y.,Zhu,Q.andSarkis,J.(2018),‘Greensupplychainmanagementandthecirculareconomy’,InternationalJournalofPhysicalDistribution&LogisticsManagement,48(8),794–817.WendyL.TateandLisaM.Ellram-9781839104503DownloadedfromPubFactoryat05/28/202209:10:16AMviaColumbiaUniversityLibrary

120102Handbookoftheoriesforpurchasing,supplychainandmanagementresearchManagementThemanagementliteratureemployingtransactioncosteconomicsfocusesonmarketentrydecisionsandrelationships.Muchoftheresearchherelooksatcontractualsafeguarding,cooperationandopportunism.Someexamplesarebelow:1.Brouthers,K.D.,Brouthers,L.E.andWerner,S.(2003),‘Transactioncost‐enhancedentrymodechoicesandfirmperformance’,StrategicManagementJournal,24(12),1239–1248.2.Buvik,A.andReve,T.(2001),‘Asymmetricaldeploymentofspecificassetsandcontrac-tualsafeguardinginindustrialpurchasingrelationships’,JournalofBusinessResearch,51(2),101–113.3.Chiles,T.H.andMcMackin,J.F.(1996),‘Integratingvariableriskpreferences,trust,andtransactioncosteconomics’,AcademyofManagementReview,21(1),73–99.4.David,R.J.andHan,S.K.(2004),‘Asystematicassessmentoftheempiricalsupportfortransactioncosteconomics’,StrategicManagementJournal,25(1),39–58.5.Geyskens,I.,Steenkamp,J.B.E.andKumar,N.(2006),‘Make,buy,orally:Atransactioncosttheorymeta-analysis’,AcademyofManagementJournal,49(3),519–543.6.Hill,C.W.(1990),‘Cooperation,opportunism,andtheinvisiblehand:Implicationsfortransactioncosttheory’,AcademyofManagementReview,15(3),500–513.7.Jones,G.R.andHill,C.W.(1988),‘Transactioncostanalysisofstrategy‐structurechoice’,StrategicManagementJournal,9(2),159–172.8.Mayer,K.J.andSalomon,R.M.(2006),‘Capabilities,contractualhazards,andgov-ernance:Integratingresource-basedandtransactioncostperspectives’,AcademyofManagementJournal,49(5),942–959.9.Robertson,T.S.andGatignon,H.(1998),‘Technologydevelopmentmode:atransactioncostconceptualization’,StrategicManagementJournal,19(6),515–531.10.Zhao,H.,Luo,Y.andSuh,T.(2004),‘Transactioncostdeterminantsandownership-basedentrymodechoice:Ameta-analyticalreview’,JournalofInternationalBusinessStudies,35(6),524–544.MarketingThemarketingliteratureusestransactioncosteconomicstoexplorerelationshipsbetweenthesellerandthebuyer.Italsolooksatcontractualgovernanceandtheroleofmarketinginbothinternalandsupplierrelationships.Examplesofarticlesfrommarketingjournalsarebelow:1.Cannon,J.P.,Achrol,R.S.andGundlach,G.T.,(2000),‘Contracts,norms,andpluralformgovernance’,JournaloftheAcademyofMarketingScience,28(2),180–194.2.Heide,J.B.andJohn,G.(1992),‘Donormsmatterinmarketingrelationships?,JournalofMarketing,56(2),32–44.3.Heide,J.B.andStump,R.L.(1995),‘Performanceimplicationsofbuyer-supplierrela-tionshipsinindustrialmarkets:atransactioncostexplanation’,JournalofBusinessResearch,32(1),57–66.4.Klein,S.,Frazier,G.L.andRoth,V.J.(1990),‘Atransactioncostanalysismodelofchannelintegrationininternationalmarkets’,JournalofMarketingResearch,27(2),,196–208.WendyL.TateandLisaM.Ellram-9781839104503DownloadedfromPubFactoryat05/28/202209:10:16AMviaColumbiaUniversityLibrary

121Transactioncosteconomics1035.Mudambi,R.andMudambi,S.M.(1995),‘Fromtransactioncosteconomicstorelation-shipmarketing:amodelofbuyer-supplierrelations’,InternationalBusinessReview,4(4),419–433.6.Noordewier,T.G.,John,G.andNevin,J.R.(1990),‘Performanceoutcomesofpurchasingarrangementsinindustrialbuyer-vendorrelationships’,JournalofMarketing,54(4),80–93.7.Pemer,F.,Werr,A.andBianchi,M.(2014),‘Purchasingprofessionalservices:Atransac-tioncostviewoftheantecedentsandconsequencesofpurchasingformalization’,IndustrialMarketingManagement,43(5),840–849.8.Pitt,L.F.andForeman,S.K.(1999),‘Internalmarketingroleinorganizations:atransac-tioncostperspective’,JournalofBusinessResearch,44(1),25–36.9.Rindfleisch.A.andHeide,J.B.(1997),‘TransactionCostAnalysis:Past,Present,andFutureApplications’,JournalofMarketing,61(4),30–54.10.Williamson,O.andGhani,T.(2012),‘Transactioncosteconomicsanditsusesinmarket-ing’,JournaloftheAcademyofMarketingScience,40(1),74–85.OUTLOOKONFUTURERESEARCHOPPORTUNITIESBecauseoftheconstantlychangingenvironment,therearemanyopportunitiesforfutureresearchlookingthroughthelensoftransactioncosteconomics.Ingeneral,transactionfrequencyisincreasingsignificantlybecauseofnewtechnologiesandmoredataavailability.Thetheorysaysthatwhenuncertaintyandmeasurementproblemsarecombinedwithhighfrequency,internalprocurementisexpectedtodominate;inthesecircumstancesthefirmhasanincentivetoincurtheset-upcostsoforganizingthetransaction(Aubertetal.1996).Ifthelevelsofuncertaintyandmeasurementproblemsarelower,relationalcontractingcanemerge;thisistherealmofoutsourcingandstrategicalliances(Williamson1985,1987).Thequestionis:howdoesthefrequencyoftransactionscombinedwithincreasinguncertaintyandmeasure-mentproblemsinfluenceourmakeversusbuydecision;oreventhelocationdecision?Doesitmakesenseto‘reshore’fromlowcostcountriestothehomecountrytodecreaseuncertaintyandimprovetheabilitytomeasure?Whathappensifthereisabigmovementfromlowcostcountriestohighercostcountries:willthischangethefrequencyoftransacting?Moreresearchisalsoneededtounderstandtheroleofopportunisminmarketversushierar-chydecisions.InresearchbyEllrametal.(2020)relatedtocostsavings,theideathatpeoplebehaveina‘passively’opportunisticwaywasrevealed.Researchthatbroadensthedefinitionofopportunismisnecessarytobetterunderstandtheimpactofpassiveopportunismonthemarketversushierarchydecision.Withincreasedinformationavailabilityandtransparency,whatistheinfluenceofbigdataandblockchainontransactioncosts?Significantlyimprovedanalyticsanddataaccuracyisemergingtomonitorrelationshipperformance.Thatchangeinmonitoringcapabilitieswillinfluenceuncertaintywhichwillchangeourdecisionmaking.Moreresearchisalsoneededtounderstandtheimpactofbigdataonpurchasingdecisionmaking.Moreresearchisneededtolookattheinfluenceofblockchainthroughatransactioncosteconomicslens.Someresearchhasstartedtoaddresstheinfluenceofinformationavailabilityandtransparencyonsustainability,whichisanothercontextforfruitfulresearch.Thereappearstobemuchhiddeninformationandpossiblyopportunisminlowertiersoforganizations’supplychains,particu-WendyL.TateandLisaM.Ellram-9781839104503DownloadedfromPubFactoryat05/28/202209:10:16AMviaColumbiaUniversityLibrary

122104Handbookoftheoriesforpurchasing,supplychainandmanagementresearchlarlyinrelationtohumanrightsandenvironmentaldegradation.TCE’sframingofriskanduncertainty,andassumptionsregardinghumanbehaviour,couldshedlightonthisphenome-non.Relatedtothis,theCOVID-19pandemichasbroughttolightsomeadditionalproblemswithoffshoring,riskandresiliency;canweviewchangesindecision-makingthroughaTCElens?Willitmakesenseinthefuturetocontinuetooffshorespendingtolowcostcountries?Willitmakesensetoreshore?Thesearejustafewideasforfutureresearch.Transactioncosteconomicsisavaluablelenstoviewdecisionmakinginamarketversusahierarchy.UnderstandingthetenetsofTCEiscrucialasresearchiscompletedthathelpstoinformdecisionmaking.REFERENCESAkbar,Y.H.andTracogna,A.(2018),‘Thesharingeconomyandthefutureofthehotelindustry:Transactioncosttheoryandplatformeconomics’,InternationalJournalofHospitalityManagement,71,91–101.Aubert,B.A.,Rivard,S.andPatry,M.(1996),‘Atransactioncostapproachtooutsourcingbehavior:Someempiricalevidence’,InformationandManagement,30(2),51–64.Buvik,A.andReve,T.(2001),‘Asymmetricaldeploymentofspecificassetsandcontractualsafeguard-inginindustrialpurchasingrelationships’,JournalofBusinessResearch,51(2),101–113.Carter,R.andHodgson,G.M.(2006),‘Theimpactofempiricaltestsoftransactioncosteconomicsonthedebateonthenatureofthefirm’,StrategicManagementJournal,27(5),461–476.Coase,R.H.(1937),‘Thenatureofthefirm’,Economica,4(16),386–405.Cramton,P.C.(1991),‘Dynamicbargainingwithtransactioncosts’,ManagementScience,37(10),1221–1233.Ellram,L.M.,Tate,W.L.andBillington,C.(2008),‘Offshoreoutsourcingofprofessionalservices:Atransactioncosteconomicsperspective’,JournalofOperationsManagement,26(2),148–163.Ellram,L.M.,Tate,W.L.andChoi,T.Y.(2020),‘Theconflictedroleofpurchasinginnewproductdevelopmentcosting’,JournalofSupplyChainManagement,56(1),3–32.Ghoshal,S.andMoran,P.(1996),‘Badforpractice:Acritiqueofthetransactioncosttheory’,AcademyofManagementReview,20(1),13–47.Heide,J.B.andStump,R.L.(1995),‘Performanceimplicationsofbuyer-supplierrelationshipsinindus-trialmarkets:atransactioncostexplanation’,JournalofBusinessResearch,32(1),57–66.Knez,M.andSimester,D.(2000),‘Directandindirectbargainingcostsandthescopeofthefirm’,SocialScienceResearchNetworkWorkingPaper,accessed15January2020atwww.ssrn.com/.Macher,J.andRichman,B.(2008),‘TransactionCostEconomics:AnAssessmentofEmpiricalResearchintheSocialSciences’,BusinessandPolitics,10(1),1–63.Narayanan,V.G.andRaman,A.(2004),‘Aligningincentivesinsupplychains’,HarvardBusinessReview,82(11),94–103.North,D.C.(1987),‘Institutions,transactioncostsandeconomicgrowth’,EconomicInquiry,25(3),419.North,DouglassC.(1990),‘Institutionsandatransaction-costtheoryofexchange’,inJamesAltandKennethA.Shepsle(eds),PerspectivesonPositivePoliticalEconomy,Cambridge,MA:CambridgeUniversityPress,pp.182–194.Rindfleisch,A.andHeide,J.B.(1997),‘Transactioncostanalysis:Past,present,andfutureapplications’,JournalofMarketing,61(4),30–54.Schmidt,C.G.andWagner,S.M.(2019),‘Blockchainandsupplychainrelations:Atransactioncosttheoryperspective’,JournalofPurchasingandSupplyManagement,25(4),100552.Simon,H.A.(1955),‘Abehavioralmodelofrationalchoice’,QuarterlyJournalofEconomics,69(1),99–118.Simon,H.A.(1972),‘Theoriesofboundedrationality’,DecisionandOrganization,1(1),161–176.Tadelis,S.andWilliamson,O.E.(2012),‘Transactioncosteconomics’,inRobertS.GibbonsandJohnRoberts(eds),TheHandbookofOrganizationalEconomics,Princeton,NJ:PrincetonUniversityPress,pp.150–191.WendyL.TateandLisaM.Ellram-9781839104503DownloadedfromPubFactoryat05/28/202209:10:16AMviaColumbiaUniversityLibrary

123Transactioncosteconomics105Tate,W.L.,Dooley,K.J.andEllram,L.M.(2011),‘Transactioncostandinstitutionaldriversofsupplieradoptionofenvironmentalpractices’,JournalofBusinessLogistics,32(1),6–16.Walker,G.andWeber,D.(1984),‘Atransactioncostapproachtomake-or-buydecisions’,AdministrativeScienceQuarterly,29(3),373–391.Williamson,OliverE.(1975),MarketsandHierarchies:AnalysisandAntitrustImplications,NewYork:FreePress.Williamson,O.E.(1979),‘Transaction-costeconomics:Thegovernanceofcontractualrelations’,JournalofLawEconomics,22(2),233–262.Williamson,O.E.(1981),‘Theeconomicsoforganization:Thetransactioncostapproach’,AmericanJournalofSociology,87(3),548–577.Williamson,OliverE.(1985),TheEconomicInstitutionsofCapitalism:Firms,Markets,RelationalContracting,NewYork:FreePress.Williamson,O.E.(1987),‘Transactioncosteconomics:Thecomparativecontractingperspective’,JournalofEconomicBehaviorandOrganization,8(4),617–625.Williamson,O.E.(1993),‘Opportunismanditscritics’,ManagerialandDecisionEconomics,14(2),97–107.Williamson,O.E.(2008),‘Outsourcing:Transactioncosteconomicsandsupplychainmanagement’,JournalofSupplyChainManagement,44(2),5–16.SUGGESTEDFURTHERREADINGFormoreinformationonindustrialeconomicsanditsroots:Chandler,A.(1992),‘Organizationalcapabilitiesandtheeconomichistoryoftheindustrialenterprise’,JournalofEconomicPerspectives,6(3),79–100.Accessed15January2020athttp://www.jstor.org/stable/2138304.ForanexcellentreviewofthehistoricaldevelopmentofTCE,see:Tadelis,S.andWilliamson,O.E.(2012),‘Transactioncosteconomics’,inR.S.GibbonsandJ.Roberts(eds),TheHandbookofOrganizationalEconomics,Princeton,NJ:PrincetonUniversityPress,pp.150–191.Foranopposingperspective:Ghoshal,S.andMoran,P.(1996),‘Badforpractice:Acritiqueofthetransactioncosttheory’,AcademyofManagementReview,20(1),13–47.GoodliteraturereviewsontheapplicationofTCE:David,R.J.andHan,S.K.(2004),‘Asystematicassessmentoftheempiricalsupportfortransactioncosteconomics’,StrategicManagementJournal,25,39–58.Geyskens,I.,Steenkamp,J.B.E.andKumar,N.(2006),‘Make,buy,orally:Atransactioncosttheorymeta-analysis’,AcademyofManagementJournal,49(3),519–543.Macher,J.andRichman,B.(2008),‘Transactioncosteconomics:Anassessmentofempiricalresearchinthesocialsciences’,BusinessandPolitics,10(1),1–63.WendyL.TateandLisaM.Ellram-9781839104503DownloadedfromPubFactoryat05/28/202209:10:16AMviaColumbiaUniversityLibrary

1248.Resource-basedviewLydiaBalsandEugeniaRoscaINTRODUCTIONTOTHERESOURCE-BASEDVIEWTheresource-basedview(RBV)isanotherofthemostcommonlyappliedtheoriesinsupplychainmanagement(SCM)andpurchasingandsupplymanagement(PSM)researchtoday.TheRBVisrootedininsightsfromeconomicsstemmingfromPenrose(1995)andRichardson(1972)anditiswidelyappliedacrossmanybusinessdisciplines,includingeco-nomics(LockettandThompson,2001).Afundamentalissueofinterestinmanagementstudiesfocusesonunderstandinghowfirmscanleveragetheinternalresourcesandcapabilitiestoachievesustainedcompetitiveadvantage(Barney,1991;Teeceetal.,1997).Whilesignificanteffortshavebeenundertakentoexplorecapabilitiesforsuperiorfinancialperformance,thereismuchlessunderstandingofthecapabilitiesandresourcebundlesneededtocreatesocialandenvironmentalvalue(HartandMilstein,2003;NormanandMacDonald,2004).Theinflu-entialRBVhaspavedthewayforsignificanttheorydevelopmentandextensionleadingtonumeroustheoriessuchastherelationalview,knowledge-basedview,resourceadvantageanddynamiccapabilities.Inthelightofeverincreasingconcernsfortheenvironmentandglobalinequality,twonotableRBVextensionshavebeenproposed.Thenaturalresource-basedview(NRBV),whichincorporatesenvironmentasakeyconstraint,explicatesthelinksbetweenenvironmentalstrategies,capabilitiesandoutcomes(Hart,1995;HartandDowell,2011);whilethesocialresource-basedview(SRBV)highlightscapabilitiesandresourcesneededtocreatesocial,environmentalandeconomicvalue(Sodhi,2015;TateandBals,2018).Figure8.1summarizesthekeytheoryelements(Wacker,1998,2008).Theelementsarediscussedinthefollowingsections.Figure8.1highlightsthevariables,domain,relationshipsandoutcomepredictions,fol-lowing(Wacker,1998),forthethreetheoreticalperspectives:theRBV,NRBVandSRBV.Followingthebasicrequirementsandcharacteristicsoffirmresources,capabilitiesareout-linedfollowingtheoriginalRBVlogicwithafocusoneconomicperformanceofthefocalfirmanditsshareholders.ThistraditionalviewisextendedtoincorporateenvironmentalcapabilitiesoftheNRBVandsocialcapabilitiesoftheSRBV.Theoutcomepredictionsareconceptualizeddrawingonthesharedtriplebottomline(TBL)value‒economic,environmen-talandsocial‒toaccountforcompetitiveadvantage,environmentalandsocialperformance.ThesecapabilitiesareneededtocreateTBLvalueinacontextwithabroadrangeoftraditional(economic)andnon-traditional(socialandenvironmental)stakeholders.106LydiaBalsandEugeniaRosca-9781839104503DownloadedfromPubFactoryat05/28/202209:10:18AMviaColumbiaUniversityLibrary

125Resource-basedview107Source:AdaptedfromTateandBals(2018,p.819).Figure8.1OverviewofRBV,NRBVandSRBVtheoryelementsKEYVARIABLESANDDEFINITIONSRBVTheRBVhasemergedasanalternativetheorytotheexistingenvironmentalmodelsofcom-petitiveadvantagewhichseektoexplainenvironment-basedconditionswhichfavourhighlevelsoffirmperformance(Barney,1991).ThefundamentalargumentbehindtheRBVisthatfirmscanachievesustainedcompetitiveadvantagebasedoninternalfactors.RootedintheseminalworksofPenrose(1995),Learnedetal.(1969),Selznick(1984),theRBVhaspavedthewayforsignificanttheorydevelopmentandextension,withmanyothertheoriesemergingtoexplainhowacquisitionanddeploymentofresourcesenablesfirmstoachievesuperiorrents,forinstance,resourceadvantage(HuntandMorgan,1995)anddynamiccapabilities(EisenhardtandMartin,2000;Teece,2007;Teeceetal.,1997).TheinitialRBVcontributionhasbeenpositionedrelativetothestructure‒conduct‒performance(SCP)modelsofcompeti-tiveadvantagefromeconomics(Barney,2001).PositioningtheRBVinevolutionaryeconom-icswouldhavehelpedtoexplainhowcapabilitiesandresourceschangeovertime,whiletheneoclassicalmicroeconomicswouldhavehelpedtoexplainwhethertheRBVistautologicalandequilibriumanalysiscouldbeusedinthecontextoftheRBV(Barneyetal.,2001).DespitetheoriginalSCPpositioning,furtherdevelopmentsoftheRBVfollowedboththeneoclassicalmicroeconomicsview(Peteraf,1993)andtheevolutionaryview(Teeceetal.,1997).WhileLydiaBalsandEugeniaRosca-9781839104503DownloadedfromPubFactoryat05/28/202209:10:18AMviaColumbiaUniversityLibrary

126108Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtheneoclassicalviewoftheRBVhasgivenriseto‘resource-picking’theories,theevolution-aryversionsoftheRBVhavebeenknownas‘capabilitybuilding’theories(Makadok,1999).Asastartingpoint,Wernerfelt(1984)distinguishesbetweentangibleandintangiblefirmresources,andarguesthatthereisarelationshipbetweenfirmprofitabilityandresourcepositionbarriers.ThisinitialapproachwasextendedbyBarney(1991),whointroducedtheconditionsunderwhichfirmresourcescanleadtosustainedcompetitiveadvantage:firmresourcesneedtobevaluable,rare,imperfectlyimitableandnon-substitutable.Byleveragingsuchresources,firmscandevelopdistinctcapabilities.InthecontextoftheRBV,resourcesare‘basicunitsofanalysisandincludephysicalandfinancialassetsaswellasemployees’skillsandorganizational(social)processes’(Hart,1995).Incontrasttoresources,capabilitiesresultfrombundlesofresourcesandcanbeusedbyfirmstoperformcertainvalue-addingtasks(Winter,2003).Examplesofvaluableresourcesincludehumancapitalintheformofmanagerialrolesandexperiences(IrelandandHitt,1999),tacitandexplicitknowledge(IrelandandHitt,1999;KogutandZander,1993);whileexamplesofcapabilitiesincluderesearchanddevelopment(R&D)andtechnologicalcapabilites(Peteraf,1993;PrahaladandHamel,1990;Wernerfelt,1984).ThereissufficientevidencetosuggestthattheRBVhasreacheditsmaturitystage,achiev-ingahighlevelofprecisionandsophistication,givingbirthtonumerousspin-offs,provingsufficientempiricalworktoenableintegrationwithotherperspectivesandpublicationsofcollectiveassessmentsforthebodyofRBVresearch(Barneyetal.,2011).NRBVTheNRBVproposedbyHart(1995)andextendedbyHartandDowell(2011)expandedthedomaintoincludethenaturalenvironmentasaconstraint.Theychangedthetraditionalcontextofeconomicactivitiestoincorporatetheneedsofthefuturesocietyatlargeandthenaturalenvironmentasaprimaryconstituent(Montabonetal.,2016).Theincorporationofthenaturalenvironmentasaprimaryconstituentinthefirm’scontextisvaluablegivenrecentchallengesrelatedtoclimatechange,populationandeconomicgrowth,expansionofglobalindustrialactivitiesandfossilfuelconsumption,allleadingtosignificantenvironmentaldamage(Tateetal.,2010).TheNRBVfocusesonstrategiccapabilitiesneededforfirmstoachievebothfinancialsuccessandpositiveenvironmentaloutcomes.ThestrategiccapabilitiesundertheNRBVincludepollutionprevention,productstewardship,cleantechnologyandbaseofthepyramid(BoP)businessmodelsandtheyarebasedonkeyfirmresourcessuchascontinuousimprovement,stakeholderintegrationandembeddedinnovation(HartandDowell,2011).SRBVBuildingontheRBVandtheNRBV,theSRBVhasbeenproposedtoexplainhowbusi-nesseswithastrongmissiontoconductbusinesssustainablycancreateTBLvalue.Intermsofvariablesproposed,theSRBVfocusesoncapabilitiesneededforfirmstofulfiltheirmissionsinthecontextofawidestakeholdernetwork.SocialbusinessesentailtraditionalRBVcapabilitiessuchasproduction,distribution,theNRBVsuchaspollutionpreventionandproductstewardship,andessentialsocialcapabilitieswhicharefurtheroutlinedbytheSRBV.TwosocialcapabilitiesareputforwardbytheSRBV:themission-drivenapproachandstakeholdermanagement.Themission-drivenapproachisimportantsincemostsocialLydiaBalsandEugeniaRosca-9781839104503DownloadedfromPubFactoryat05/28/202209:10:18AMviaColumbiaUniversityLibrary

127Resource-basedview109businessesaredevelopedaroundaspecificissueinthelocalcontextandtheirprimarygoalistoemploythebusinesstoimprovethesituation.Stakeholdermanagementcapabilityrelatestomanagingabroadnetworkofactorswhichareneededfortheirdifferentinputsforthesocialbusiness.Thevariousinputsrelatetoprovisionoffinancialresources,productsdeliveredbysuppliers,knowledgeforbusinessmodeldevelopmentorcontextshaping.ContextshapinghasbeenregardedasakeycapabilityforfirmscreatingTBLoutcomessincethecurrentbusinesscontextrequiresfurtheradaptationsandspecialsupportservicesareneededforsocialbusinessestosucceed(GlavasandMish,2015).TheSRBVproposessocialcapabilitiesinthepreviouslysuggestedareasofcommitments,connectionsandconsistency(Meehanetal.,2006).Thecommitmentisreflectedinthestrongmissionunderlyingsocialbusinessesatinception,whilepursuingthisthroughoutlaterstagesofenterprisedevelopmentrelatestoconsistency(mission-drivenapproach).Theconnectionsaspectisreflectedinthestakeholdermanagementcapabilitysinceitreferstomanagingawiderangeoflinkswitheconomic,socialandenvironmentalstakeholderswithdifferentmotivationsandgovernancestructures(BalsandTate,2018;TateandBals,2018).DOMAINWHERETHETHEORYAPPLIESRBVThedomainassumedbytheRBVincludesafocusonsuperiorrents,acompetitivemarketsituationandintegrationoftraditionalbusinessstakeholderssuchasinvestors,customers,shareholdersandcompetitors.InthecontextoftheRBV,valuecreationisdefinedasprofitsforthefocalfirmandsustainedcompetitiveadvantage(Peteraf,1993).Thenatureofthecompetitivemarketisdefinedbycompetitionbetweenfirmsoncommercialterms(Chatain,2011).AnimportantassumptionunderlyingtheRBVisthatfirmsareheterogeneouswithinanindustryduetodifferencesintheirresourcebase(Hittetal.,2016).NRBVAsatheoreticalextensionoftheRBV,theNRBVentailsawiderapplicationdomainandhasintegratedthenaturalenvironmentasakeyconstrainttotraditionaleconomicactivities(Gladwinetal.,1995).TheNRBVhasbeeninstrumentalinlinkingresearchonorganizationstotheenvironmentbyprovidingspecifictheoreticalmechanismstoestablishthelinkbetweenenvironmentalstrategyandprofits(HartandDowell,2011).Whiletheproposedmechanismsaredifferentinnature(forexample,pollutionpreventionorproductstewardship),themeasureofperformanceremainsthesame,withafocusonlowercosts,legitimacy,long-termgrowthandreputation.Subsequently,theNRBVcanberegardedasacontinuationofthetraditionalinstrumentallogicwhichaimstoidentifywin‒winsituationsforfirmstoestablishbothfinan-cialprofitsandenvironmentalsuccess.Morerecently,currentpracticeandliteratureshowthatthistraditionallogicdoesnotnecessarilyleadtomoresustainablefirmsandsupplychains,andthereforetheecologicallydominantlogichasbeenproposedasan‘outside-in’approachtodecisionmakingwhereenvironmentalviabilityisassessedfirst,thensocialandeconomicviability(Montabonetal.,2016).LydiaBalsandEugeniaRosca-9781839104503DownloadedfromPubFactoryat05/28/202209:10:18AMviaColumbiaUniversityLibrary

128110Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSRBVThecreationofeconomic,socialandenvironmentalvaluedemandstheextensionoftra-ditionalfirm-orientedboundariestoconsiderthefocalfirmwithinagivencontext,alocalcommunity,societalneedsandtheenvironment(GlavasandMish,2015).Alongthesamelines,theSRBVdomainbroadlyconsidersawidenetworkofstakeholdersandhasanexplicitfocusonunderstandingtheneedsofthelocalcommunitiesandadvocatingforthenaturalenvironment.Thisgoesbeyondthetraditionalfirm-centricapproachandshareholderfocusoftheRBV.TheSRBVintegratesvariouseconomicstakeholders(forexampleinvestors,finan-cialinstitutions),socialstakeholders(forexample,low-incomefamilies,localcommunities,not-for-profitorganizations)andenvironmentalstakeholders(forexample,localecosystems)inthevaluecreation(BalsandTate,2018).ArelatedextensionoftheRBVisthestakeholderresource-basedviewwhichaimstoinformdecisionmakingofmanagerssothattheymaxi-mizetheutilityofvariousstakeholdersbeyondtheshareholders(Sodhi,2015).DrawingontheRBV,utilityandstakeholdertheory,thisextensionaimstoconceptualizesocialresponsibilityinoperationsmanagementandincludestwofociofinterest:theoperationsasthebasicunitofobservation,andthefirmstakeholders,alltreatedequally.Inthiscontext,allstakeholdersentailimportantresources,routines,dynamiccapabilitiesandutilityconsiderations(Sodhi,2015).RELATIONSHIPSBETWEENTHEVARIABLESANDTHEORETICALPREDICTIONS(FACTUALCLAIMS)RBVThebasicrelationshipproposedbytheRBVisthatfirmscangeneratesustainedcompetitiveadvantagebyleveraginginternalfirmresourceswhicharevaluable,rare,imperfectlyimitableandnon-subsitutable.Yet,animportantconditionforachievingcompetitiveadvantagerelatestothefirm’sabilitytoaccumulate,recombineandreconfigureitsresourcebaseandapplyittonewmarketopportunities(DierckxandCool,1989).ThisRBVextensionisimportanttoexplainwhyfirmswithsimilarresourcebundlesormakingsimilarinvestmentsmaynothavethesameresultingperformanceoutcomes(Hittetal.,2016).NRBVTheNRBVexaminestherelationshipbetweenenvironmentalstrategiesandvariousperfor-mancemeasuresforcompetitiveadvantage(Hart,1995).Originally,Hart(1995)proposedthreeinterconnectedstrategiccapabilitiesfortheNRBV:pollutionprevention,productstewardshipandsustainabledevelopment(Hart,1995).Theproposedstrategiccapabilitiesaredifferentinnature:theyaredrivenbydifferentenvironmentalforces,leveragedifferentkeyresources,andpresentdifferentsourcesforcompetitiveadvantage.Forinstance,pollutionpreventioncapabilitiescanenablefirmstoachievesignificantcostreductionsthroughreducedwasteandemissions,whileproductstewardshipcapabilitiescanenablefirmstoincludeexter-nalstakeholdersintheproductdevelopmentandplanningprocesses,whichinturncanleadtogainsinreputationandexternallegitimacy(Hart,1995).LydiaBalsandEugeniaRosca-9781839104503DownloadedfromPubFactoryat05/28/202209:10:18AMviaColumbiaUniversityLibrary

129Resource-basedview111TheoriginalNRBVpredictionshavebeenfurtherrefinedbydistinguishingbetween‘green-ing’strategies(pollutionpreventionandproductstewardship)withafocusonincrementalimprovements,and‘beyondgreening’strategies(cleantechnologyandBoP)whichfocusonbuildingnewcapabilitiesforthefuture(HartandDowell,2010).Again,eachcapabilitycanleadtodifferentsourcesofcompetitiveadvantage:whilecleantechnologycanenablefirmstostrengthentheirfuturemarketposition,BOPstrategiescanenablefirmstotapthemarketpotentialofpopulationslivinginpovertyconditionsandtherebyachievelong-termmarketgrowth.TheBOPcapabilitywithintheNRBVgoesbeyondenvironmentalconsiderationsandresemblesaveryfirstmovetowardsintegratingthesocialaspectsofsustainabledevelopment.SRBVThemajorcontributionoftheSRBVintermsofoutcomespredictionrelatesto‘sharedTBLvalue’asaunitmeasureforperformance.ThisgoesbeyondthetraditionalinstrumentallogicemployedbyboththeRBVandtheNRBVwheretheultimatemeasuresofcompetitiveadvan-tageareeconomicindicatorssuchasmarketshareandrents(Barney,1991;MahoneyandPandian,1992;Peteraf,1993).SharedTBLvaluesuggeststhateconomic,socialandenvironmentaldimensionsneedtobemanagedtodelivervalueforthebroadrangeofstakeholdersinvolved,includingthelocalcommunitiesandtheenvironment(Bowen,1953;Carroll,1979,1999).Drawingontheinitialdefinitionof‘sharedvalue’providedbyPorterandKramer(2006,2011),theSRBVarguesthatsharedTBLvaluegoesbeyondphilanthropyorsocialresponsibility,andactivelyrede-fineseconomicsuccesswithsocietalandenvironmentalneedsatthecoreofthevaluecreationprocesses.Regardingoutcomepreditions,theSRBVproposesthatsocialcapabilitiesareneededtocreatesharedTBLvalue.SocialbusinessestendtoemploycapabilitiesfromtheRBVandNRBV,andsocialcapabilitiesfromtheSRBV,toreachtheirobjectives:theytendtoshowastrongdesiretocreateTBLvalueforallstakeholdersinvolvedintheiroperations.Whileeconomicviabilityisakeyconcernforthemtoo,theunderyinggoalremainsthecreationofTBLvalue.TheSRBVproposesthatamission-drivenapproachpositivelyinfluencesTBLvaluecrea-tion.Thiscapabilitycanserveasaconstantreferencefordecisionmakingprocessesinsidethefirm,ensuresthatthesocialmissiondoesnotallowanoveremphasisoneconomicoutcomes,andmaintainssharedvaluecreationacrosstheextendedsupplychain(BalsandTate,2018).Theconceptualizationofthemission-drivenapproachcandifferdependingonthetimingofempiricalmeasurement:whileintheearlystagesofventuredevelopmentthisrefersto‘com-mitment’,towardslaterstagesthiscanbeseenas‘consistency’(BalsandTate,2018).TheSRBVproposesthatstakeholdermanagementcapabilitiespositivelyimpactuponsharedTBLvaluecreation.Socialbusinessesoperateinacontextwithabroadrangeofstakeholders,andthereforetheyneedimportantcapabilitiestoconfigure,designandmaintainrelationshipswithbotheconomicandnon-economicactors.Thesecapabilitiescanenablefocalfirmstobetterunderstandthelocalcontextanddeveloplocalembeddeness.Managingstakeholderswithcomplementarycapabilitiesandintegratingtheminthefocalfirm’ssupplychainsisessentialtocreateadditionalvalueandpreventdestructionofvalue.Whiletestingthisrelationshipempirically,thetimingagainservesasamoderatingfactor.Whileinearlystages,thecapability‘valuechainpartnernetworkdesign’ismorerelevant;lateron,thisLydiaBalsandEugeniaRosca-9781839104503DownloadedfromPubFactoryat05/28/202209:10:18AMviaColumbiaUniversityLibrary

130112Handbookoftheoriesforpurchasing,supplychainandmanagementresearchrelatesmoreto‘(supply/valuechain)collaborationintermsofsuppliersand/orfinancialpartners’and‘(supplychain)monitoring’.Formoreonsustainablesupplychaindesigns,BalsandTate(2018)offeredaframeworkinlinewiththetheoryofthesupplychain(Carteretal.,2015).HOWHASTHISTHEORYBEENUSED?RBVempiricaltestinghasfacednumerousmethodologicalchallengesovertheyears,forexamplemeasuringintangibleresources,theneedforlongitudinalanalysistoaccountforthenotionofsustainedcompetitiveadvantage,andtheuseofnew,multidisciplinarymeth-odologies(Barneyetal.,2001).Despitethis,theRBVhasmadesignificantcontributionsinvariousfieldssuchashumanresourcemanagement,economicsandfinance,entrepreneurship,marketing,internationalbusiness,andmore.Earlyon,thefocuswasonempiricalmappingofresourcesandthentestingofrelationshipsbetweenthepresenceofresourcesanddevelopmentofsustainainedcompetitiveadvantages(Barneyetal.,2011).Morerecently,thefocusofRBVworkhasbeenmoreonexploringtheoriginsofresources.Forinstance,Sirmonetal.(2011)showhowmanagersactivelystructure,bundleandleverageresourcesbycoiningtheterms‘resourceorchestration’andresourceorchestrationtheory(ROT),respectively.TheRBVhasbeenextensivelyusedinthecontextofsupplychainsandoperationswithsignificantcontributionsinfourareas:(1)analysisofsupplychainactivitiesindividuallyandcollectively;(2)operationsstrategiesandeffectiveuseofprocesscapabilities;(3)achievingeffectivenessandefficiency;and(4)productandserviceinnovations(Hittetal.,2016).TheapplicationoftheRBVtotheoperationsandsupplychaincontexthasalsoresultedinnewinsightsforRBV;forexample,Allredetal.(2011)proposedanewcapability‒thatis,supe-riorcoordinationamongdiversesupplychainmembers‒withimportantimplicationsforfirmperformance.EmpiricalstudiesemployingtheNRBVhavefocusedontestingthestrategiccapabilitiesputforward.Manystudieshavebeendedicatedtoexploringtheimpactofpollutionpreven-tiononfirmperformance(forexample,KingandLenox,2002),butmorerecentlyempiricalworkhasfocusedonidentifyingmoderatingfactorswhichcanaffectthefirm’sabilitiestogainfinancialbenefitsfrompollutionpreventioncapabilities(HartandDowell,2011).AnexemplarystudydrawingontheNRBVisbySharmaandVredenburg(1998),whofoundthatproactiveenvironmentalstrategiesrequirestakeholderintegration,higher-orderlearningandcontinuousintegration.SincetheSRBVhasbeenproposedonlyrecently,furtherempiricalworkisneededtoexpandandtesttheproposedcapabilities.TheSRBVhasbeendevelopedbasedonexploratoryqualitativeresearchinthecontextofsocialbusinesses.Recently,Lashitewetal.(2020)haveprovidednewevidenceforcapabilitiesneededtosustainsocialbusinesses.TheintegrationoftheRBV,NRBVandSRBVhasbeenusedinrecentworktodistinguishthebroadrangeofeconomic,environmentalandsocialcapabilitiesthatfirmscantakeadvan-tageoftodrivecorporatefinancialperformance(Ratajczak,2021).LydiaBalsandEugeniaRosca-9781839104503DownloadedfromPubFactoryat05/28/202209:10:18AMviaColumbiaUniversityLibrary

131Resource-basedview113ExamplesinPurchasingandSupplyManagementandSupplyChainManagementRBVPeng,D.X.,Schroeder,R.G.,andShah,R.(2008).Linkingroutinestooperationscapabilities:anewperspective.JournalofOperationsManagement,26(6),730–748.Hitt,M.A.,Xu,K.,andCarnes,C.M.(2016).Resourcebasedtheoryinoperationsmanagementresearch.JournalofOperationsManagement,41,77–94.Bromiley,P.,andRau,D.(2016).Operationsmanagementandtheresourcebasedview:anotherview.JournalofOperationsManagement,41,95–106.Lai,F.,Li,D.,Wang,Q.,andZhao,X.(2008).Theinformationtechnologycapabilityofthird‐partylogisticsproviders:aresource‐basedviewandempiricalevidencefromChina.JournalofSupplyChainManagement,44(3),22–38.NRBVMiemczyk,J.,Howard,M.,andJohnsen,T.E.(2016).Dynamicdevelopmentandexecutionofclosed-loopsupplychains:anaturalresource-basedview.SupplyChainManagement:AnInternationalJournal,21(4),453–469.SRBVTate,W.L.,andBals,L.(2018).Achievingsharedtriplebottomline(TBL)valuecreation:towardasocialresource-basedview(SRBV)ofthefirm.JournalofBusinessEthics,152(3),803–826.Sodhi,M.S.(2015).Conceptualizingsocialresponsibilityinoperationsviastakeholderresource‐basedview.ProductionandOperationsManagement,24(9),1375–1389.ExamplesinManagementRBVNewbert,S.L.(2008).Value,rareness,competitiveadvantage,andperformance:aconceptual‐levelempiricalinvestigationoftheresource‐basedviewofthefirm.StrategicManagementJournal,29(7),745–768.Ray,G.,Barney,J.B.,andMuhanna,W.A.(2004).Capabilities,businessprocesses,andcompetitiveadvantage:choosingthedependentvariableinempiricaltestsoftheresource‐basedview.StrategicManagementJournal,25(1),23–37.NRBVSharma,S.,andVredenburg,H.(1998).Proactivecorporateenvironmentalstrategyandthedevelopmentofcompetitivelyvaluableorganizationalcapabilities.StrategicManagementJournal,19(8),729–753.Pujari,D.,Wright,G.,andPeattie,K.(2003).Greenandcompetitive:influencesonenvironmentalnewproductdevelopmentperformance.JournalofBusinessResearch,56,657–671.Christmann,P.(2000).Effectsof‘bestpractices’ofenvironmentalmanagementoncostadvantage:theroleofcomplementaryassets.AcademyofManagementJournal,43,663–680.SRBVLashitew,A.A.,Bals,L.,andvanTulder,R.(2020).Inclusivebusinessatthebaseofthepyramid:theroleofembeddednessforenablingsocialinnovations.JournalofBusinessEthics,162(2),421–448.LydiaBalsandEugeniaRosca-9781839104503DownloadedfromPubFactoryat05/28/202209:10:18AMviaColumbiaUniversityLibrary

132114Handbookoftheoriesforpurchasing,supplychainandmanagementresearchExamplesinMarketingRBVSrivastava,R.K.,Fahey,L.,andChristensen,H.K.(2001).Theresource-basedviewandmarketing:theroleofmarket-basedassetsingainingcompetitiveadvantage.JournalofManagement,27(6),777–802.Capron,L.,andHulland,J.(1999).Redeploymentofbrands,salesforces,andgeneralmarketingman-agementexpertisefollowinghorizontalacquisitions:aresource-basedview.JournalofMarketing,63(2),41–54.Kozlenkova,I.V.,Samaha,S.A.,andPalmatier,R.W.(2014).Resource-basedtheoryinmarketing.JournalofAcademyofMarketingScience,42(1),1–21.NRBVFraj,E.,Martínez,E.,andMatute,J.(2013).GreenmarketinginB2Borganisations:anempiricalanal-ysisfromthenatural‐resource‐basedviewofthefirm.JournalofBusinessandIndustrialMarketing,28(5),396–410.OUTLOOKONFUTURERESEARCHOPPORTUNITIESAsoutlinedearlier,theoriginalRBVandtheextensionssuchasROThavereachedsignificantmaturity.Regardingthespin-offtheories,theNRBVandSRBV,theNRBVneedsfurtherempiricalandconceptualdevelopment.Intermsofkeyvariables,thestrategiccapabilitiesbehindBoPstrategiesrequirefurtherempiricalinvestigation.Moreover,thedomaincanbeexpandedandtheroleoftheexternalenvironmentinshapingfirm’sresponsestoenvironmen-talconcernsshouldbefurtherunderstood(HartandDowell,2011).Still,furtherresearchisneededtoexplorethestrategiccapabilitiesneededtoenablefirmstosucceedinnewcontextssuchasBoPmarketswhicharecharacterizedbyinstitutionalvoids(HartandDowell,2011).Regardingfactualclaims,futureresearchdirectionsforNRBVincludetheidentificationofcontingencieswhichaffecttheenvironmental‒financialperformancerelationship(VanderBylandSlawinski,2015).Moreover,investigatingtheapplicabilityoftheecologicallydominantlogic(Montabonetal.,2016)andthecapabilitiesneededtoreconsidertheprioritiesbetweenecological,socialandeconomicaspects,isimportant.IntermsoftheSRBV,theextendeddomainoffersamplefutureresearchopportunities,extendingthescopefarbeyond‘typical’businessstakeholderstoalsoincludenon-governmen-talorganizations(NGOs),butalsolocalcommunitiesandthenaturalenvironment.Intermsofvariables,futureresearchshouldexplorethenecessaryandsufficientconditionsforachievingTBLvalue,inparticulartheroleofsocialcapabilities,andwhethercapabilitiesfromallviewsareneededtocreateintegratedTBLvalue.Intermsoffactualclaims,animportantaspectforfurtherresearchrelatestotheinterrelationsbetweentheeconomic,environmentalandsocialperformanceoutcomes,especiallyinthecontextofabroadstakeholdernetwork.Thespecificorderofprioritiesbetweenthethreeareascanbeexploredfromtheecologicallydominantview(Montabonetal.,2016)aswellastheanthropocentricversusecocentricperspective(Borlandetal.,2016).Exploringthesequestionsindifferentresearchcontextsisalsoveryimportant,sincetherearemajordifferencesbetweentraditionalfirms,socialbusinesses,B-Corpsandnon-profits.Intermsofresearchstreams,SRBVprovidesalinkbetweensocialentrepreneur-ship(Torugsaetal.,2012),sustainablesupplychainmanagement(SSCM)research(KlassenandVachon,2003;KlassenandVereecke,2012),aswellasperformancemeasurementandLydiaBalsandEugeniaRosca-9781839104503DownloadedfromPubFactoryat05/28/202209:10:18AMviaColumbiaUniversityLibrary

133Resource-basedview115supplierrelationshipmanagementinSSCM(AhiandSearcy,2013;Goldetal.,2010;Hassinietal.,2012;KlassenandVachon,2003;KlassenandVereecke,2012).Bridgingbetweenthosestreamsinfutureresearchtoensurecommonprogressacrossdisciplinesalsorepresentsaresearchopportunity.REFERENCESAhi,P.,andSearcy,C.(2013).Acomparativeliteratureanalysisofdefinitionsforgreenandsustainablesupplychainmanagement.JournalofCleanerProduction,52,329–341.Allred,C.R.,Fawcett,S.E.,Wallin,C.,andMagnan,G.M.(2011).Adynamiccollaborationcapabilityasasourceofcompetitiveadvantage.DecisionSciences,42(1),129–161.Bals,L.,andTate,W.L.(2018).Sustainablesupplychaindesigninsocialbusinesses:advancingthetheoryofsupplychain.JournalofBusinessLogistics,39(1),57–79.Barney,J.B.(1991).Firmresourcesandsustainedcompetitiveadvantage.JournalofManagement,17,49–61.Barney,J.B.(2001).Resource-basedtheoriesofcompetitiveadvantage:aten-yearretrospectiveontheresource-basedview.JournalofManagement,27(6),643–650.Barney,J.B.,KetchenJr,D.J.,andWright,M.(2011).Thefutureofresource-basedtheory:revitalizationordecline?JournalofManagement,37(5),1299–1315.Barney,J.B.,Wright,M.,andKetchenJr,D.J.(2001).Theresource-basedviewofthefirm:tenyearsafter1991.JournalofManagement,27(6),625–641.Borland,H.,Ambrosini,V.,Lindgreen,A.,andVanhamme,J.(2016).Buildingtheoryattheintersectionofecologicalsustainabilityandstrategicmanagement.JournalofBusinessEthics,135,293–307.Bowen,H.R.(1953).SocialResponsibilityoftheBusinessman.NewYork:Harper&Row.Carroll,A.B.(1979).Athree-dimensionalconceptualmodelofcorporateperformance.AcademyofManagementReview,4(4),497–505.Carroll,A.B.(1999).Corporatesocialresponsibilityevolutionofadefinitionalconstruct.BusinessandSociety,38(3),268–295.Carter,C.R.,Rogers,D.S.,andChoi,T.Y.(2015).Towardthetheoryofthesupplychain.JournalofSupplyChainManagement,51(2),89–97.Chatain,O.(2011).Valuecreation,competition,andperformanceinbuyer‒supplierrelationships.StrategicManagementJournal,32(1),76–102.Dierckx,I.,andCool,K.(1989).Assetstockaccumulationandsustainabilityofcompetitiveadvantage.ManagementScience,35(12),1504–1511.Eisenhardt,K.M.,andMartin,J.(2000).Dynamiccapabilities:Whatarethey?StrategicManagementJournal,21(10‒11),1105–1121.Gladwin,T.N.,Kennelly,J.J.,andKrause,T.S.(1995).Shiftingparadigmsforsustainabledevelopment:implicationsformanagementtheoryandresearch.AcademyofManagementReview,20(4),874–907.Glavas,A.,andMish,J.(2015).Resourcesandcapabilitiesoftriplebottomlinefirms:goingoveroldorbreakingnewground?JournalofBusinessEthics,127(3),623–642.Gold,S.,Seuring,S.,andBeske,P.(2010).Sustainablesupplychainmanagementandinter-organizationalresources:aliteraturereview.CorporateSocialResponsibilityandEnvironmentalManagement,17(4),230–245.Hart,S.L.(1995).Anatural-resource-basedviewofthefirm.AcademyofManagementReview,20(4),986–1014.Hart,S.L.,andDowell,G.(2010).Anatural-resource-basedviewofthefirm:fifteenyearsafter.JournalofManagement,37(5),1464–1479.Hart,S.L.,andDowell,G.(2011).Invitededitorial:anatural-resource-basedviewofthefirm:fifteenyearsafter.JournalofManagement,37(5),1464–1479.Hart,S.L.,andMilstein,M.B.(2003).Creatingsustainablevalue.AcademyofManagementExecutive,17(2),56–69.Hassini,E.,Surti,C.,andSearcy,C.(2012).Aliteraturereviewandacasestudyofsustainablesupplychainswithafocusonmetrics.InternationalJournalofProductionEconomics,104(1),69–82.LydiaBalsandEugeniaRosca-9781839104503DownloadedfromPubFactoryat05/28/202209:10:18AMviaColumbiaUniversityLibrary

134116Handbookoftheoriesforpurchasing,supplychainandmanagementresearchHitt,M.A.,Xu,K.,andCarnes,C.M.(2016).Resourcebasedtheoryinoperationsmanagementresearch.JournalofOperationsManagement,41,77–94.Hunt,S.D.,andMorgan,R.M.(1995).Thecomparativeadvantagetheoryofcompetition.JournalofMarketing,59(2),1–15.Ireland,R.D.,andHitt,M.A.(1999).Achievingandmaintainingstrategiccompetitivenessinthe21stcentury:theroleofstrategicleadership.AcademyofManagementExecutive,13(1),43–57.King,A.,andLenox,M.(2002).Exploringthelocusofprofitablepollutionreduction.ManagementScience,48(2),289–299.Klassen,R.D.,andVachon,S.(2003).Collaborationandevaluationinthesupplychain:theimpactonplant-levelenvironmentalinvestment.ProductionandOperationsManagement,12(3),336–352.Klassen,R.D.,andVereecke,A.(2012).Socialissuesinsupplychains:capabilitieslinkresponsibil-ity,risk(opportunity),andperformance.InternationalJournalofProductionEconomics,140(1),103–115.Kogut,B.,andZander,U.(1993).Knowledgeofthefirmandtheevolutionarytheoryofthemultina-tionalcorporation.JournalofInternationalBusinessStudies,24(4),625–645.Lashitew,A.A.,Bals,L.,andvanTulder,R.(2020).Inclusivebusinessatthebaseofthepyramid:theroleofembeddednessforenablingsocialinnovations.JournalofBusinessEthics,162(2),421–448.Learned,E.,Christensen,C.,Andrews,K.andGuth,W.(1969).BusinessPolicy:TextandCases.Homewood,IL:Irwin.Lockett,A.,andThompson,S.(2001).Theresource-basedviewandeconomics.JournalofManagement,27(6),723–754.Mahoney,J.T.,andPandian,J.R.(1992).Theresource-basedviewwithintheconversationofstrategicmanagement.StrategicManagementJournal,13(5),363–380.Makadok,R.(1999).Interfirmdifferencesinscaleeconomiesandtheevolutionofmarketshares.StrategicManagementJournal,20(10),935–952.Meehan,J.,Meehan,K.,andRichards,A.(2006).Corporatesocialresponsibility:the3C-SRmodel.JournalofSocialEconomics,33(5/6),386–398.Montabon,F.,Pagell,M.,andWu,Z.(2016).Makingsustainabilitysustainable.JournalofSupplyChainManagement,52(2),11–27.Norman,W.,andMacDonald,C.(2004).Gettingtothebottomof‘triplebottomline’.BusinessEthicsQuarterly,14(2),243–262.Penrose,E.(1995).TheTheoryoftheGrowthoftheFirm,1959.Oxford:BasilBlackwellandMott.Peteraf,M.A.(1993).Thecornerstonesofcompetitiveadvantage:aresource‐basedview.StrategicManagementJournal,14(3),179–191.Porter,M.E.,andKramer,M.R.(2006).Strategyandsociety:thelinkbetweencompetitiveadvantageandcorporatesocialresponsibility.HarvardBusinessReview,84(12),78–92.Porter,M.E.,andKramer,M.R.(2011).Creatingsharedvalue:redefiningcapitalismandtheroleofthecorporationinsociety.HarvardBusinessReview,89(1/2),62–77.Prahalad,C.K.,andHamel,G.(1990).Corecompetencyconcept.HarvardBusinessReview,64(3),70–92.Ratajczak,P.(2021).Themediatingroleofnaturalandsocialresourcesinthecorporatesocialresponsibility‒corporatefinancialperformancerelationship.ManagerialandDecisionEconomics,42(1),100‒119.Richardson,G.B.(1972).Theorganizationofindustry.EconomicJournal,82(327),883–896.Selznick,P.(1984).LeadershipinAdministration:ASociologicalInterpretation.Berkeley,CA:UniversityofCaliforniaPress.Sharma,S.,andVredenburg,H.(1998).Proactivecorporateenvironmentalstrategyandthedevelopmentofcompetitivelyvaluableorganizationalcapabilities.StrategicManagementJournal,19(8),729–753.Sirmon,D.G.,Hitt,M.A.,Ireland,R.D.,andGilbert,B.A.(2011).Resourceorchestrationtocreatecom-petitiveadvantagebreadth,depth,andlifecycleeffects.JournalofManagement,37(5),1390–1412.Sodhi,M.S.(2015).Conceptualizingsocialresponsibilityinoperationsviastakeholderresource‐basedview.ProductionandOperationsManagement,24(9),1375–1389.Tate,W.L.,andBals,L.(2018).Achievingsharedtriplebottomline(TBL)valuecreation:towardasocialresource-basedview(SRBV)ofthefirm.JournalofBusinessEthics,152(3),803–826.LydiaBalsandEugeniaRosca-9781839104503DownloadedfromPubFactoryat05/28/202209:10:18AMviaColumbiaUniversityLibrary

135Resource-basedview117Tate,W.L.,Ellram,L.M.,andKirchoff,J.(2010).Corporatesocialresponsibilityreports:athematicanalysisrelatedtosupplychainmanagement.JournalofSupplyChainManagement,46(1),19–44.Teece,D.J.(2007).Explicatingdynamiccapabilities:thenatureandmicrofoundationsof(sustainable)enterpriseperformance.StrategicManagementJournal,28(13),1319–1350.Teece,D.J.,Pisano,A.,andShuen,A.(1997).Dynamiccapabilitiesandstrategicmanagement.StrategicManagementJournal,18(7),509–533.Torugsa,N.A.,O’Donohue,W.,andHecker,R.(2012).Capabilities,proactiveCSRandfinancialper-formanceinSMEs:empiricalevidencefromanAustralianmanufacturingindustrysector.JournalofBusinessEthics,109(4),483–500.VanderByl,C.A.,andSlawinski,N.(2015).Embracingtensionsincorporatesustainability:areviewofresearchfromwin‒winsandtrade-offstoparadoxesandbeyond.OrganizationandEnvironment,28(1),54–79.Wacker,J.G.(1998).Adefinitionoftheory:researchguidelinesfordifferenttheory-buildingresearchmethodsinoperationsmanagement.JournalofOperationsManagement,16(4),361–385.Wacker,J.G.(2008).Aconceptualunderstandingofrequirementsfortheory‐buildingresearch:guide-linesforscientifictheorybuilding.JournalofSupplyChainManagement,44(3),5–15.Wernerfelt,B.(1984).Aresource‐basedviewofthefirm.StrategicManagementJournal,5(2),171–180.Winter,S.G.(2003).Understandingdynamiccapabilities.StrategicManagementJournal,24(10),991–995.SUGGESTEDFURTHERREADINGForMoreInformationontheRBVandItsRootsForacriticaldiscussionofitsoriginsandimplications,pleasesee:Barney,J.B.,andArikan,A.M.(2001).Theresource-basedview:originsandimplications.In:Hitt,M.A.,Freeman,R.E.andHarrison,J.S.(eds),TheBlackwellHandbookofStrategicManagement.Hoboken,NJ:Wiley-Blackwell,pp.124–188.ForanexcellentreviewofmainchallengesfacedbytheRBV,see:Priem,R.L.,andButler,J.E.(2001).Istheresource-based‘view’ausefulperspectiveforstrategicman-agementresearch?AcademyofManagementReview,26(1),22–40.ForanopposingperspectiveandcriticismoftheRBV,see:Kraaijenbrink,J.,Spender,J.C.,andGroen,A.J.(2010).Theresource-basedview:areviewandassess-mentofitscritiques.JournalofManagement,36(1),349–372.GoodLiteratureReviewsontheApplicationoftheRBVArmstrong,C.E.,andShimizu,K.(2007).Areviewofapproachestoempiricalresearchontheresource-basedviewofthefirm.JournalofManagement,33(6),959–986.Ferreira,M.P.,Serra,F.R.,Costa,B.K.,andAlmeida,M.(2016).Abibliometricstudyoftheresource-basedview(RBV)ininternationalbusinessresearchusingBarney(1991)asakeymarker.Innovar,26(61),131–144.Hitt,M.A.,Xu,K.,andCarnes,C.M.(2016).Resourcebasedtheoryinoperationsmanagementresearch.JournalofOperationsManagement,41,77–94.Lopes,J.,Ferreira,J.J.M.,andFarinha,L.(2021).Entrepreneurshipandtheresource-basedview:whatisthelinkage?Abibliometricapproach.InternationalJournalofEntrepreneurialVenturing,13(2),137–164.Newbert,S.L.(2007).Empiricalresearchontheresource‐basedviewofthefirm:anassessmentandsuggestionsforfutureresearch.StrategicManagementJournal,28(2),121–146.Wade,M.,andHulland,J.(2004).Theresource-basedviewandinformationsystemsresearch:review,extension,andsuggestionsforfutureresearch.MISQuarterly,28(1),107–142.LydiaBalsandEugeniaRosca-9781839104503DownloadedfromPubFactoryat05/28/202209:10:18AMviaColumbiaUniversityLibrary

1369.Theknowledge-basedviewTobiasSchoenherrINTRODUCTIONTheknowledge-basedview(KBV)hasbeenexperiencingincreasedinterestandapplicationacrossdisciplinesingeneral,andmorespecificallyalsowithinthedomainsofbothsupplychainmanagement(SCM)andpurchasingandsupplymanagement(PSM).ThebasicpremiseoftheKBVisthatknowledgeconstitutestheprimaryand‘moststrategically-significantresourceofthefirm’(Grant,1996a,p.375;seealsoQuinn,1992).Withthisframing,theKBVprovidesaframeworkandassociatedapproachesforintegratingthisknowledgewithinfirms(Grant,1996b).ThisintegrationofknowledgeforthebuildingoforganizationalcapabilitiesisthefundamentaltenetoftheKBV.Assuch,obtaining,disseminatingandutilizingknowledgeispositionedasauniquesourceforacompany’scompetitivedifferentiationandlong-lastingsuccess(KogutandZander,2008).Ofcriticalimportanceforsustainablecompetitiveadvan-tageisthatknowledgeisidiosyncratic,andnoteasilytransferableorreplicable(Grant,1991).TheKBVhasthusatitscoretheinvestigationofmechanismsforhoworganizationsprocessandintegrateknowledge,aswellashowknowledgeiscreated(Nonaka,1994).Westernepistemologistsviewknowledgeasjustifiedtruebeliefandhavebeenstudyingitsnature,aswellaswhatelevatesabelieftobecomeknowledge.Managementscholars,however,generallydeviatefromthisstrict,traditionalistunderstandingofepistemologicalknowledge,whichfocusesonthe‘absolute,static,andnonhumannatureofknowledge,tradi-tionallyexpressedinpropositionalformsinformallogic’(Nonaka,1994,p.15).Thistradi-tionalviewfocusesonthetruthfulnessaspectofknowledge,ratherthanasubjectivebeliefforwhichjustificationissought.Thelatterhasbeenthefocusofmanagementscholars,studyinghumanprocessesresponsibleforthejustificationofpersonalbeliefsandaspiringfortruthinthem,ratherthanviewingtruthasanabsolutelynecessaryconditionforbeliefstoconstituteknowledge.Inthischapter,Iconsiderknowledgefromtheperspectiveofmanagementschol-ars.Withthisframing,thechapterprovidesbackgroundonthedevelopmentandapplicationoftheKBV,withaparticularfocusonSCMandPSMresearch.Thechaptercommenceswithanoutlineofthefoundationsthatcontributedtothedevelop-mentoftheKBV,goingbacktotheseminalworkofAdamSmith,butthenfast-forwardingtothelastcenturyanddiscussingthecontributionsofMachlup,Drucker,andotherswhoaidedintheformationofthetheory.Thisservesasthebackgroundforthemorerapidevolutionoftheknowledge-basedviewoverthelastdecadeofthepriorcentury.Thesemorerecentdevelop-mentswereinfluentialinshapingtheKBVasweknowittoday.Ithendescribethekeytenets,variablesanddefinitionsoftheKBV.Thisdiscoursestartswithanexpositionofthetheoryofthefirm,whichaidsinourunderstandingofcompanies’actionsbyanabstractionofcomplexitiesinherentinreallife.Thetheoryhelpsintheappli-cationofthetheoreticalperspectivestoactualcompanies.ThisisfollowedbythekeythemesanddefinitionsthatmakeuptheKBV,includingthedistinctionbetweenknowledgeandinformation,andbetweenexplicitandtacitknowledge,withthelatterpairreferringtothe118TobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

137Theknowledge-basedview119degreeoftransferabilityofknowledgebetweenindividuals.Otheraspectsdiscussedincludeanindividual’scommitmenttocreateknowledge,aswellasaggregation,whichdetermineshoweffectivelyknowledgecanbetransferred.Ialsodiscussappropriability,whichreferstohoweasilyknowledgecanbeimitated,andtheconceptofcommonknowledge,whichiscriticalasitservesasinfrastructureforhowmoreadvancedknowledgecanbeintegratedandapplied.Ifurtheroutlineknowledgeconversionandintegrationmechanisms,capturingtheevolutionarypathwaysofexplicitandtacitknowledge,anddescribehowknowledgecanhelpinbuildingorganizationalcapability.Thissectionconcludeswithabriefoverviewoforgani-zationallearning,whichservesasafoundationfortheKBV.ThemajorvariablesdiscussedaresummarizedinTable9.1,withtheirrelationshipscapturedinFigure9.1.IthenreviewsomeofthemostprominentapplicationdomainsoftheKBVwithintheSCMandPSMliterature.Thisreview,whichisstructuredintothreesubsections(knowledgemanagementandorganizationalcapabilities;strategicsourcing;andsupplierandcustomerFigure9.1OverviewofKBVtheoryelementsTobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

138120Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSupportingreferencesGrant,1996b;Nonaka,1994Grant,1996a,1996bDretske,1981;Machlup,1983;Nonaka,1994Dretske,1981;Machlup,1983;Nonaka,1994Grant,1996a,1996b;Nonaka,1994Grant,1996a,1996b;KogutandZander,1992;Polanyi,1966Grant,1996b;NonakaandTakeuchi,1995Nonaka,1994CohenandLevinthal,1990;Grant,1996bCohenandLevinthal,1990Grant,1996b;Teece,1986Grant,1996bNonaka,1994Nonaka,1994Nonaka,1994Nonaka,1994ExplanationKnowledgecreatedbyindividualsforthebenefitofthefirm,oftenconceptualizedascollectiveknowledgeresidentinthefirmProject,firmorrelationshiplevel,analysingtheeffectsofknowledgeAflowofmessages,whichisdifferenttoknowledgeAbeliefforwhichjustificationissought,aspiringforthetruthinit;knowledgeistheoutcomeofinformationflowsanchoredinthecommitmentandbeliefsofitsholderKnowledgethatcanbeeasilycodified,communicatedandtransferred;oftencapturedinbooksorpoliciesKnowledgethatisimpliedandsubjective,andpartofanindividual’sexperience,beliefs,mentalmodelsandperspectives;itisreflectedinactionsandbehaviours;itcanbedifficulttotransferthisknowledge,whichisoften‘learnedbydoing’Knowledgethatisknownandacceptedbyallmembersofthefirm,offeringafoundationandcommonunderstandingthatfacilitatestheintegrationofnon-commonknowledgeAnimportantelementinthecreationofknowledge,emphasizingthatindividualsneedtobecommittedtobeabletocreateknowledge;commitmentcanbefosteredthroughanindividual’sintention(howanindividualviewstheworld,theirvaluejudgement),autonomy(offeringfreedomandmotivationtoconsidernewknowledge)andfluctuation(makingknowledgemorerobust)Adeterminantforhowefficientlyknowledgecanbetransferredandapplied;absorptivecapacitycanaidthisendeavourThefoundationofpriorknowledgeuponwhichthenewknowledgecanbebuiltFactors‘thatgovernaninnovator’sabilitytocapturetheprofitsgeneratedbyaninnovation’(Teece,1986)Theeasewithwhichknowledgecanbesharedandappliedbysomeoneelse;basedonthedegreeoftransferability,explicitandtacitknowledgeTheinteractionbetweenexplicitandtacitknowledgedimensions,whichcantaketheformofsocialization,combination,externalizationandinternalizationTheconversionoftacitknowledgeintotacitknowledgeTheconversionofexplicitknowledgeintoexplicitknowledgeTheconversionoftacitknowledgeintoexplicitknowledgeDefinitionsofKBVvariablesTable9.1ElementsUnitofanalysisLevelofanalysisDimensionsInformationKnowledgeExplicitknowledgeTacitknowledgeCommonknowledgeRequirementsCommitmentAggregationAbsorptivecapacityAppropriabilityTransferabilityMechanismsKnowledgeconversionSocializationCombinationExternalizationTobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

139Theknowledge-basedview121SupportingreferencesNonaka,1994Grant,1996aLevittandMarch,1988;Penrose,1959Grant,1996aDyer,1996;DyerandNobeoka,2000;Grant,1991KogutandZander,2008ExplanationTheconversionofexplicitknowledgeintotacitknowledgeThewaysandeasewithwhichknowledgecanbetransferredandintegrated;integratingknowledgeformstheessenceforbuildingorganizationalcapabilityDealswiththemechanismsfornewinformationandknowledgetobeabsorbedandappliedbyindividualsAfirm’sabilitytorepeatedlycarryoutataskthatcreatesvalue;centraltothiscapabilityistheintegrationofspecializedknowledgeLong-lastingandpersistentsuperiorperformanceofthefirm,enablingittosetitselfapartfromcompetingfirmsAcompany’sabilitytocreateauniquevalueproposition,effectivelysettingitapartfromrivalfirmsElementsInternalizationKnowledgeintegrationOrganizationallearningOrganizationalcapabilityDynamiccapabilitiesSustainablecompetitiveadvantageCompetitivedifferentiationandsuccessTobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

140122Handbookoftheoriesforpurchasing,supplychainandmanagementresearchintegration),ismeanttobeillustrative,ratherthanexhaustive,withafocusonpublicationsthatappearedoverthelastfiveyears.Thefinalsectionofferssomeconcludingthoughts,includingwhethertheKBVcanbeconsideredasatheory,andwherethefutureoftheKBVmaylie.TOWARDAKNOWLEDGE-BASEDVIEWFoundationsTheimportanceofknowledgeandourtransitioningtoaknowledgesocietyhasbeenatopicofconstantdebate,exchangeanddevelopment.Assuch,ithasbeenfundamentaltoeconomicanalysis,whichhasbeenrelyingonknowledgeasafactorindecisionmaking;forinstance,intermsofinvestmentsandthedesiretoachievethebestpossibleoutcomeswiththeleastamountofresources.ThisisreflectedinAdamSmith’s(1776)TheWealthofNations,inwhichhecomparesproductionworkers‘educatedattheexpenseofmuchlabourandtime’to‘expensivemachines’,substantiatingthedifferentwagesbetweenskilledandcommonlabour.Alongsimilarlines,hepositionedknowledgeasacriticalingredientforthesuccessofamerchant.TheseearlythoughtsweredevelopedfurtherinthelastcenturybyMachlup’s(1962)dis-courseontheproductionanddistributionofknowledgeintheUnitedStates.Inthisbook,hetracestheearlybeginningsofaknowledgesocietyandpredictsthatfuturedevelopmentwillshiftthedemandfromphysicallabourto‘brainworkers’(p.9).Inadditiontonotingthatcoun-triesarebecomingincreasinglyconcernedwiththeproductionofknowledge,headvancesthehypothesissuggestingthatmoreinnovation-mindedfirmsemploywhitecollarworkerstoagreaterdegree,whichgoeshandinhandwithtechnologicaladvances.Whilethisrelationshipiswellacceptedtoday,Machlup(1962)wasoneofthefirsttocallattentiontothesedynamics,andhencetoproposethenotionofknowledgeindustries;thatis,industrieswhosesuccessisintricatelylinkedtoknowledge.TheseargumentswerefurtherextendedbyDrucker(1969),highlightingchangeshappeninginoursocietyandtheemergenceoftheknowledgesociety.Druckerarguesthatwithknowl-edgebeingthe‘centralcostoftheAmericaneconomy’,ithasbecome‘thekeytoproductivity,competitivestrength,andeconomicachievement’,aswellasacriticalingredienttoacoun-try’sinternationaleconomicstrength(p.264).AcompellinganalogywhichDruckerprovidesisthatwithsteelbeingtheeconomicmeasurementin1910,ifallknowledgeworkershadbeentakenawaybackthen,theeconomywouldhavepaidverylittlenotice,sincesteelproductionreliedonskillratherthanonknowledge.However,Druckeralsocautionsthatknowledgewillnottaketheplaceofskill,butratherthatknowledgeisthefoundationforadvancedandsophisticatedskillstodevelopandimproveproductivity.Inthisvein,Grant(1996b)stressesknowledgeasacriticalinputtoproduction,withmachinesandequipmentsimplybeing‘embodimentsofknowledge’(p.112).Drucker(1969)furtheremphasizesseveralmilestonesoverthelastcenturiesthatcontrib-utedtothisdevelopmentandthefosteringofaknowledgeeconomy.Assuch,recognizingthatknowledgecanbesystematicallyappliedwasthefoundationforthesuccessoftoolmakersinEnglandduringthe1800s,mostnotablyJosephWhitworth,whobuilttheirknowledgeintothetoolsandthuscodifiedthebestwaystocarryoutaparticulartask;the‘go/nogo’gaugesTobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

141Theknowledge-basedview123werejustsomeoftheinnovationsthatcameoutofthisdevelopment.Afurthermilestoneduringthelate1800shighlightedbyDruckerwasFrederickTaylor’sscientificmanagement,whichintroducedthenotionthatmoreworkcanbeaccomplishednotonlybyworkingharder,butalsobyworkingsmarter(andmoreeffectivelyso).PromotingknowledgetopushskillstothenextlevelwasalsotheobjectiveoftheMorrillActof1962intheUnitedStates,whichestablishedland-grantcollegestodevelopfarmingintoadisciplinefortheadvancementofknowledgeandskills.AnotherinfluentialwriterforeshadowingthechangingtimeswasBell(1973),whoenvi-sionsthestructuralchangesinapost-industrialsocietymovingtowardstheinformationage.Hecorrectlypredictstheshiftfroman‘economyofgoods’toan‘economyofinformation’.TheimportanceofknowledgeforsocietywasalsodealtwithinahighlyinfluentialdiscoursebyHayek(1945),whoemphasizestheneedforknowledgesharingandcombination,duetothedispersednatureofknowledge.Theconceptandimportanceofknowledgealsoincreasinglybecameathemeatconferences,suchastheoneheldattheTechnischeHochschuleDarmstadtinGermanyinfall1984,whosemajorcontributionswerecapturedinBöhmeandStehr(1986).Atthebeginningofthe1990s,KogutandZander(1992)forwardedthenotionthatfirmsareeffectivevehiclesforknowledgesharingandtransferamongindividualsandgroups.Thebasicpremiseofthearticleisthatinformationandknow-howcanyieldcombinativecapabilities,enabledbyinternalandexternallearning,whichinturncangenerateopportunitiesandgrowth.Theirframeworkconsidersinformationasknowledgethat‘canbetransmittedwithoutlossofintegrity’(p.386),whileknow-howreferstoaccumulatedskillofexpertisethathastobeacquired.RecentDevelopmentsBuildingontheseseminalworks,authorsinthesecondpartofthe1990sstartedtotakethesefoundationsfurthertodevelopa‘knowledge-basedtheoryofthefirm’.WhiletherearenumerousscholarsthatcontributedtothedevelopmentandrefinementofwhatwenowknowastheKBV,IwouldliketohighlightespeciallytheworksbyRobertGrant,IkujiroNonakaandHirotakaTakeuchi.Oneoftheearliestproponentsoftheknowledge-basedviewwasRobertGrant(1996a),whopositionsorganizationalcapabilitiesasakeyingredientforfirms’long-termstrategyandcompetitiveness.Takingthisconceptfurther,henotesthatwithknowledgebeinginherenttoindividuals,theobjectiveoforganizationalcapabilitiesshouldthenbetheintegrationofthisspecializedknowledge.Assuch,Grant(1996a)developsaknowledge-basedtheoryoforgan-izationalcapabilities,andindoingsoleveragestenetsfromtheresource-basedview(RBV),organizationallearningandcapabilities,andcompetitivedynamics.Alreadyinthisseminalwork,anemphasisisplacedonthemechanismsthroughwhichknowledgeisintegratedandthenapplied,ratherthanjustfocusingonitspossession.Thatsameyear,Grant(1996b)followedupthisdiscoursebyconceptualizingthefirmasan‘institutionforintegratingknowledge’(p.109)andhighlightingtheneedforcoordinationmechanismsinthisendeavour.Grant(1996b)differentiateshisperspectiveinthatknowledgeresidesintheindividual,withfirmsthenapplyingthisknowledge,ratherthancreatingit;thiswasalsoanimportantdistinctionmadelateronbyFelinandHesterly(2007).Withinthiscontext,Grant(1996b)positionsknowledgeasthemoststrategicallyimportantresourceafirmpossesses,andinthisvein,theKBVcanbeconsideredasanextensionoftheRBV.TobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

142124Handbookoftheoriesforpurchasing,supplychainandmanagementresearchOverall,Grant’s1996articleintheStrategicManagementJournal(Grant,1996b)continuestobeoneofthemostinfluentialpiecesinthedevelopmentoftheKBVandishismosthighlycitedarticle.Grant’simmersionintotheRBVcanalsobeseeninsomeofhisearlierwork(Grant,1991).TheRBVwasinitiallyproposedbyPenrose(1959)inhistheoryofthegrowthofthefirm,andlaterexpandedandrefinedbyWernerfelt(1984),Barney(1991)andConner(1991).ThebasictenetoftheRBVisthatfirmscanachievesustainablecompetitiveadvantagethroughthedevelopmentandprotectionofresources.Thisisthecasewhenaresourcecanbecharacterizedasbeingvaluable,rare,inimitableandnon-substitutable:theso-calledVRINcharacteristics(theRBVisdiscussedmorein-depthinChapter8inthisbook).WithintheKBV,theseprop-ertiesarerelatedtotheconceptofknowledge,withknowledgebeingabletorepresentsuchaVRINresource.Dynamiccapabilitiesrepresentanothercloselyrelatedtheoreticalconcept.Withdynamiccapabilitiesreferringto‘difficult-to-replicateenterprisecapabilitiesrequiredtoadapttochangingcustomerandtechnologicalopportunities’(Teece,2007,pp.1319‒1320),theconnectiontotheKBVisobvious.Assuch,theabilityto‘integrate,build,andreconfigureinternalandexternalcompetencestoaddressrapidlychangingenvironments’(Teeceetal.,1997,p.516)canbereadilyrelatedtoacompany’sknowledgemanagementcapability.Thiscapabilityhasbeenconceptualizedasknowledgemanagementcompetenciesrelatedtotheacquisition,conversion,applicationandprotectionofknowledge(Schoenherretal.,2014).EquallyasinfluentialasGrantinthedevelopmentoftheKBVwasIkujiroNonaka,mostnotablywithhisbookTheKnowledge-CreatingCompany:HowJapaneseCompaniesCreateDynamicsofInnovation,whichheco-authoredwithHirotakaTakeuchi(NonakaandTakeuchi,1995).ThescholarsstartoutthebookbynotingthatthesuccessofJapanesecompa-niescontinuestobeanenigmatoWesterncompanies,andthenshedlightonthisobservationbyemphasizingtheJapanesecompanies’capabilityof‘organizationalknowledgecreation’(p.3).NonakaandTakeuchi(1995)explainwhatmayhavecontributedtothiscapabilitytodevelopamongJapanesefirmsfirst(history,industrialdevelopment,overallstatusofinterna-tionalcompetitiveness),andpositionknowledgeasacompetitiveresource.KeytothesuccessofJapanesecompanieswastherecognitionthatknowledgecannotalwaysbewrittendown,andthatespeciallytacitknowledgehasgreatpotentialtoyieldcompetitivedifferentiation.NonakaandTakeuchi(1995)outlinethreecharacteristicsresponsibleforeffectiveknowl-edgecreation.Thefirstisaheavyemphasisonmetaphorandanalogy,whichisanattemptto‘expresstheinexpressible’(p.12).Assuch,figurativelanguagecangoalongway,especiallyinnewproductdevelopment,sinceitenablesindividualstorelatetowhattheyknowtoanewsituationwithoutanyconstraints.Withthisapproach,creativityisencouraged,andfundamen-talbreakthroughsarepossible.Thesecondcharacteristicisthatindividualknowledgemustbesharedwithothers.Assuch,thecreationoforganizationalknowledgeisnotpossiblewithoutindividualssharingknowledgewitheachother,ortherefiningandelevatingofittoanewlevelthroughdiscussionanddebate.Thethirdisthatknowledgeiscreatedamidstambiguity,whichagaintriggerscreativityandoutside-of-the-boxthinking.Ambiguity,however,iscoupledwithredundancy,whichensuresacommonunderstandingofbasicprinciples,andwhichenablesindividualstohelpeachothermanagetheambiguousenvironment.Intheextremecase,thiscanevenleadtotheinstitutionofcompetingproductdevelopmentteamspursuingdifferentapproachesforthenewproduct(Nonaka,1990),withtheensuingdebatethenbeinginvaluabletoproducethebestproductpossible.TobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

143Theknowledge-basedview125Ahighlyinfluentialpiece,precedingthepublicationofthebook,wasNonaka’s(1994)dynamictheoryoforganizationalknowledgecreation,whichoutlinesthemechanismswithwhichorganizationalknowledgecanbedeveloped.Theessenceofthisdevelopmentistheongoingdialoguebetweentacitandexplicitknowledgedimensions,capturedinfourdiffer-entpatterns,andreflectingthewaysinwhichcurrentknowledgecanbeconvertedintonewknowledge.Nonaka(1994)furtherpointsoutthatwhileknowledgeresidesinindividuals,itistheinteractionamongthemthatcanelevateandamplifyknowledge.Nonaka(1994)referstothesedynamicsas‘communitiesofinteraction’andasthe‘ontological’dimensionofknowledgecreation(p.15).SimilarlytoGrant(1996b),Nonaka(1994)stressesthatwhileknowledgeiscreatedbyandresideswithinindividuals,organizationsplayamajorpartinknowledgearticulationandamplification.KEYTENETS,VARIABLESANDDEFINITIONSTheoryoftheFirmThe‘theoryofthefirm’concepthelpsinourunderstandingofcompanies’actions,andreliesonanabstractionofcomplexitiesinherentinreal-lifecompanies.Inordertodoso,theconceptisfoundedonsinglingoutspecificbehavioursandleveraginginsightintothesetoexplaintheinfluenceofactionsorcharacteristicsonfirmstrategyandsubsequentsuccess(Machlup,1967).Alongtheselines,Grant(1996b)positionstheroleoffirmsasofferingmechanismsthroughwhichindividualscanintegrateandcombinetheirspecializedknowledgetocreatesomethingthatisgreaterthanthesumoftheindividualknowledgeassets.Infact,Grant(1996a,p.385)wentsofarastosuggestthatthe‘fundamentalroleofthefirmistheintegrationofindividuals’specialistknowledge’,andthat‘organizationalcapabilitiesarethemanifesta-tionofthisknowledgeintegration’.IncontrasttoSpender(1989),whofocusesonthegenerationandapplicationoforgan-izationalknowledge,Grant(1996b)considersthecreationofknowledgeasanindividualactivity,withfirmsthenprovidingthecontextwithinwhichthisknowledgecanbeappliedtotheprovisionofproductsandservices;appropriateincentivesforindividualstodosocanbeprovidedbyfirms.Assuch,thefirmisviewedasprovidingstructuresforcoordinatingandintegratingindividuals’contributions,whichareneededsinceanindividualcannotfeasiblylearnallneededspecializedknowledgeresidentinothers(Grant,1996a).ThisviewparallelsSimon’s(1991),andalsoexplainstheextendedlabeloftheKBVoftenused:thatis,the‘knowledge-basedviewofthefirm’.Withinthisframing,theassumptionsunderlyingGrant’s(1996a,p.385)developmentoftheknowledge-basedtheoryoforganizationalcapabilityarethat:(1)knowledgeisafirm’sprincipalproductiveresource;(2)tacitknowledge(incontrasttoexplicitknowledge)isofpar-ticularimportance,duetoitslimitedtransferability;(3)tacitknowledgeisstoredinahighlyspecializedform;and(4)awidearrayofknowledgeisneededforproduction.Theseassump-tionsserveasthefoundationfortheensuingdiscussioninwhichtheywillbeexpandedupon.TobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

144126Handbookoftheoriesforpurchasing,supplychainandmanagementresearchKnowledgeversusInformationWhiletheterms‘knowledge’and‘information’arefrequentlyusedinterchangeably,itiscriticaltonotetheirdifferences.WhileMachlup(1962)callsattentiontothedifferentialusesof‘information’versus‘knowledge’,inthatinformationisunderstoodasdisconnectedfacts,andknowledgeasanorderedorsystematicviewaboutinformation,headvocatesthat‘allinformationisknowledge’(p.8),expressingapreferenceforjustusing‘knowledge’.Nonaka(1994),alsocapturingpriorworkbyMachlup(1983)andDretske(1981),howeverdelineatesthedifferencesbydescribinginformationas‘aflowofmessages’,whileknowledgeiscreatedbythis‘veryflowofinformation,anchoredonthecommitmentandbeliefsofitsholder’(p.15).Assuch,informationisneededtogenerateknowledge.Ofparticularrelevancehereissemanticinformation,thatis,itscontent,ratherthantheforminwhichitisshared;thiscontenthastheabilitytobringnewmeaningtocontexts.ExplicitversusTacitKnowledgeCentraltotheRBVisaresource’stransferabilitysothatitsstrengthscanbeleveragedindifferentcontexts(Barney,1986).ThischaracteristicisextendedtotheKBV,wherethetrans-ferofknowledgebothwithinandacrossfirmscanbeinstrumentalinsustainingafirm’sorasupplychain’scompetitivesuccess.Whiletherearevariousdistinctionsbasedonthedegreeofknowledgetransferability,themostcommononesutilizedbySCMandPSMscholarsincludeexplicitandtacitknowledge.ThisdichotomyisalsohighlightedbyNonaka(1994),whoreferstothisdistinctionasthe‘epistemologicaldimensiontoorganizationknowledgecreation’(p.15),andnotesthattheinterplayofexplicitandtacitknowledgecanyieldnewdiscoveries.Explicitknowledgeischaracterizedbyitsabilitytobecodified,andtobeeasilycommuni-catedandtransferred(Nonaka,1994).Assuch,explicitknowledgecanbecapturedinbooksandarticles,butalsoinpoliciesandprocedures.Grant(1996b,p.111)describesitas‘knowingaboutfactsandtheories’,ratherthan‘knowinghow’,whichheassociateswithtacitknowl-edge.Explicitknowledgecanthusgenerallybeintegratedwithgreatease(Grant1996a),duetotheabilitytocaptureitreadilyinunambiguouswrittenform.Advancesininformationtechnologyinthelate1980sand1990s,primarilyintheformofenterpriseresourceplanning(ERP)systems,havefurtherelevatedthisknowledgeintegration,disseminationandretrievaltoentirelynewheights(RockartandShort,1989;BendolyandSchoenherr,2005).Incontrast,tacitknowledgeisdifficulttoconceptualize,sinceitisoftenimplicitandsub-jective,andpartofanindividual’sexperience,beliefs,mentalmodelsandperspectives,ratherthanknowledgecapturedinwrittenform.Assuch,tacitknowledgeisreflectedinactionsandbehaviours,andischaracterizedbyitsfrequentlyambiguousnature(VenkitachalamandBusch,2012);itcannotbewrittendown(Grant,1996a).Tacitknowledgealsooftencannotbeacquiredimmediatelybutdevelopsovertimeandisencapsulatedinsomeone’sskill.ThephilosopherPolanyi(1966)fittinglydescribesitasknowingmorethanonecantell;thatis,knowledgethatcannotbereadilyexpressed,butwhichbecomesevidentviaitsapplication.Alongtheselines,Grant(1996b)describesitas‘knowinghowtodosomething’.Thetacitnatureofthistypeofknowledgecanmakeitdifficultorevenimpossibletotransfer,sinceitcanalsobecontext-dependent(KogutandZander,1992).Whilethismayposechallengesforaninternalknowledgetransfer,itmayalsoofferanopportunityforthefirmtoleveragethisTobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

145Theknowledge-basedview127knowledgeasacompetitivedifferentiator,sinceitisdifficulttocopyorimitatebyotherfirms.Assuch,Nonaka(1991)attributedtacitknowledgetothesuccessofJapanesecompanies.Thesepropertiesmaketacitknowledgethemoreintriguingformofknowledgetostudy.CommonKnowledgeWhilethepoweroftheKBVreliesontheintegrationofspecializedknowledgeresidentinindividuals,akeyprerequisiteofthisintegrationistheexistenceofcommonknowledge.Asthelabelimplies,thisknowledgeisknownandacceptedbyallmembersofthefirm,offer-ingafoundationandcommonunderstandingthatfacilitatestheintegrationofnon-commonknowledge.Grant(1996b,p.115)describescommonknowledgeas‘theintersectionof…individualknowledgesets’anddrawsparallelstoNonakaandTakeuchi’s(1995)redun-dancyconceptthatcapturesknowledgeknownacrossfunctions.Grant(1996b)differentiatesbetweenfivetypesofcommonknowledge:(1)acommonlanguage,whichenablesseamlessverbalcommunicationbetweenstakeholders;(2)otherformsofsymboliccommunication,whichincludeliteracyandfamiliaritywith,forinstance,computerprograms,softwareandstatisticalprinciples;(3)commonspecializedknowledge,whichconsidersadeeperoverlapofmorespecificknowledgebetweenindividuals;(4)sharedmeaning,whichcapturesacommonunderstandingofknowledgeaspectsthataretacit;and(5)individualknowledgedomains,whichreflectanindividual’sawarenessoftheknowledgerepertoireofothers.Inthisvein,organizationalculturecanalsobeconsideredasaformofcommonknowledge(Grant,1996a).OtherKnowledgeClassificationsInadditiontothedichotomybetweenexplicitandtacitknowledgedescribedabove,otherclassificationschemesweresuggested.Forinstance,Machlup(1962)differentiatesbetweenfiveclassesofknowledge:(1)practicalknowledgeapplicableforsomeone’sworkactivities;(2)intellectualknowledgetorespondtosomeone’sintellectualcuriosity;(3)small-talkandpastimeknowledge,whichincludesaspectssuchasgossip,storiesorjokes;(4)spiritualknowledge,referringtoreligiousknowledge;and(5)unwantedknowledge,whichisobtainedbyaccident.Inalaterwork,Machlup(1980)furtherintroduced13elementsofknowledge,whichrelateto:‘(1)beingacquainted,(2)beingfamiliar,(3)beingaware,(4)remembering,(5),recollecting,(6)recognizing,(7)distinguishing,(8)understanding,(9)interpreting,(10)beingabletoexplain,(11)beingabletodemonstrate,(12)beingabletotalkabout,and(13)beingabletoperform’(p.47).WhileSpender(1996)differentiatesbetweenexplicitandimplicitknowledge,healsodis-tinguishesbetweenindividualandsocialknowledge.Individualknowledgecanbetransferredwiththeindividual,withsocialknowledgebeingpubliclyavailableorcollectiveandembed-dedwithinthestructureoffirms.AlaviandLeidner(2001),withinthecontextofinformationsystems,suggestseveralper-spectiveswithwhichknowledgecanbeviewed.Assuch,knowledgeisdescribedasastateofmind,whereinformationcontributestoabetterunderstandingandlearning.Knowledgecanalsobeviewedasanobjectthatcanbestoredandmanipulated;oraprocess,whereknowledgeisappliedandshared.Knowledgecanalsopertaintoanorganizedaccesstoinformation;oracapability,whereknowledgeisassociatedwiththepotentialtoinfluenceaction.TobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

146128Handbookoftheoriesforpurchasing,supplychainandmanagementresearchCommitmentSinceitisanindividualthatcreatesknowledge,acrucialelementinthisveinistheircommit-menttothisendeavour.Nonaka(1994)definesthreefactorscontributingtothiscommitment.Thefirstistheindividual’sintention,whichreferstohowtheyviewtheworldandaimtomakesenseofit.Inherenttothisviewisavaluejudgement,basedonwhichtheinformationreceivedisevaluatedanditsvalueappropriated.Thesecondisanindividual’sautonomy,whichenablesthemtohavethefreedomandflexibilitytoacquireandinterpretinformationandusetheirjudgementtoelevateittoknowledge.Autonomycanalsoserveasamotivationtogenerateknowledgeinthefirstplace.Thethirdfactorisfluctuation,whichfostersarefine-mentofknowledgebasedonthecontinuousinteractionwiththeenvironment,makingtheknowledgemorerobustandelevatingittogreaterapplicability.Anindividual’sidentificationwiththeirorganizationcanalsobeavaluableelementinpromotingknowledgethroughouttheorganization.Thiswasconfirmed,forinstance,byVandenHooffanddeRidder(2004),whoestablishedapositiverelationshipbetweenaffectivecommitmentandanindividual’sdesiretosharetheirknowledgewithothersintheorganization.Commitment,however,canalsobeviewedfromanorganizationallevel,anaspectthatcansubsumeindividualcommitment.Forinstance,Garrido-Morenoetal.(2014)captureorganiza-tionalcommitmentascomprisingthecommitmentfrombothtopmanagementandemployees,inadditiontotheinvestmentinappropriatetrainingandrewardsystems,aswellasexecutiveleadershipandsupport.Intheauthors’studyontheinfluenceofcustomerrelationshipman-agementtechnology(CRM)infrastructureonCRMsuccess,organizationalcommitmenthadasignificantinfluenceonknowledgemanagement,withbothofthesedimensionsfullymedi-atingtherelationshipbetweenCRMtechnologyinfrastructureandCRMsuccess.AsimilaranglewastakenbyMaoetal.(2016),whoinvestigatetheroleofresourcecommitment,whichreflectsanorganization’seffortsforimprovinginfrastructureandcapabilities.Whileresourcecommitmentdirectlyinfluencesknowledgemanagementcapability,italsowasabletoplayanenablingroleforenhancingtheimpactofhumanandrelationshipresourcesonknowledgemanagementcapability.Yetanotherwaytolookatcommitmentisfromtheinterorganiza-tionallevel,aviewwhichwastakenbyZhengetal.(2011).Intheirstudy,commitmentwaspartofrelationalembeddedness,abletoinfluenceknowledge-baseddynamiccapabilities.AggregationGrant(1996b)describesaggregationasadeterminantforhoweffectivelyknowledgecanbetransferred.Thisisacriticalaspect,sincenotonlydoesrelevantknowledgeneedtobeshared,butthisknowledgenowalsoneedstobereceivedandabsorbed,thatis,puttogooduse.Thisreceptivenessfactorhasbeenstudiedwiththeconceptofabsorptivecapacity,atermwhichwascoinedbyCohenandLevinthal(1990).Absorptivecapacityreferstothefoundationofpriorknowledgeuponwhichthenewknowledgecanbebuilt,andwhichcanbeakeydeterminantfortheinnovationcapabilitiesofafirm.Thispriorknowledgehelpsindividualsmakesenseofthenewlyacquiredknowledge,andhencesupportsindividuals‘torecognizethevalueofnew,externalinformation,assimilateit,andapplyittocommercialends’(CohenandLevinthal,1990,p.128).Grant(1996b)referstothisasthe‘additivitybetweendifferentelementsofknowledge’(p.111).TobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

147Theknowledge-basedview129AppropriabilityTheconceptofappropriabilitywithinthecontextofbusinessstrategywasintroducedbyTeece(1986),whodescribesitastheenvironmentalfactors‘thatgovernaninnovator’sabilitytocapturetheprofitsgeneratedbyaninnovation’(p.287).WithintheKBVcontext,appropriabilityessentiallythenreferstohoweasilyknowledgecanbeimitated.Inthecaseofexplicitknowledge,legalinstrumentssuchaspatents,copyrightsandtradesecretscanensureappropriabilitytosomedegree.However,ifsuchprotectionisnotavailable‒thatis,underconditionsofweakappropriability‒explicitknowledgeneedstobetightlyguarded.Whilethisisalsothecasefortacitknowledge,thepotentialforimitationisreducedduetotheknowl-edge’simplicitnature.Assuch,tacitknowledgecannotbedirectlytransferred,butmustbeappropriatedthroughitsapplication(Grant,1996b).Evenifknowledgeiseasilytransferable,whetherthisisdonedependsonanindividual’swillingness.Assuch,NickersonandZenger(2004)cautionthatopportunismassociatedwithknowledgeexchangediscouragesthesharingofknowledge,andlabelknowledgeappropria-tionasaknowledgeformationhazard.Asolutiontothiswouldbetheembeddingofknowl-edgeintosalableproducts,sothattheindividualsharingtheknowledgecanextractvaluefromit.Arelatedhazardisthatofstrategicknowledgeaccumulation,inwhichanindividualmayshapetheknowledgesearchheuristictoshowcasetheirexpertiseandthusmaketheirknowl-edgeappearmorevaluable.KnowledgeConversionMechanismsTheconceptofknowledgeconversioncanbetracedbacktoAnderson(1983),whoclassifiedknowledgeintodeclarativeknowledge(analogoustoexplicitknowledge)andproceduralknowledge(analogoustotacitknowledge),withtheformerneedingtobeconvertedtothelattertogeneratecognitiveskills.Nonaka(1994),however,extendedthisunidirectionalnotiontoacontinuousandreciprocaldialoguebetweenexplicitandtacitknowledge.Theconversionoftacitknowledge‒thatis,thesharingofone’sowntacitknowledgesothatitbecomesthetacitknowledgeofothers‒isreferredtoassocialization.Thisconversionoftacitknowledgetotacitknowledgecanbeaccomplishedbyon-the-jobtraining,apprentice-shipsorinternships.Inthismanner,experiencescanbesharedwithinthecontext,whichisessentialforthetransferoftacitknowledge.Theconversionofexplicitknowledge‒thatis,thesharingofone’sownexplicitknowledgeandcombiningitwiththeexplicitknowledgeofothers‒isreferredtoascombination.Thissharingcanhelpinthereconfigurationandrecontextualizationofone’sownknowledge.Informationtechnologyhasbeenagreatenablerinthisregard,forinstanceintheformofenterpriseresourceplanningsystemsenablingcross-functionalintegration,ortheuseofsup-plierportalsenablingthesharingofknowledgeacrosscompanies.Theconversionoftacitintoexplicitknowledgeisreferredtoasexternalization.Thiscanbeaccomplishedby‘successiveroundsofmeaningful“dialogue”’(Nonaka,1994,p.20)andisfacilitatedbytheuseofmetaphors.Assuch,aspectsarearticulatedandcultivateduntiltheybecomemoreconcrete,oftenbya‘trialanderror’approach.Theconversionofexplicitintotacitknowledgeisreferredtoasinternalization.Internalizationtakesplacewhenknowledgecreatedbyindividualsisaimedtobecrystalizedwithinthecontextofadifferentapplication.Crystallizationinvolvestestingthe‘realityandapplicability’TobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

148130Handbookoftheoriesforpurchasing,supplychainandmanagementresearchofaconcept(Nonaka,1994,p.25),enabledbyexperimentation.Theoutcomeisreferredtoastacitsincetheprocessneededforitreliesonthesocialandsynergeticinteractionofteammembers.KnowledgeIntegrationMechanismsTheKBVconsidersknowledgeintegrationastheessenceforbuildingorganizationalcapa-bility(Grant,1996a),whichhingesonthefirm’sabilitytoaccessandintegrateknowledgeeffectively.Determiningelementsinthisveinconstitutetheeffectivenessofmechanismswithwhichknowledgecanbeintegratedwithinthefirm,aswellasthefirm’slevelandsophisticationofcommonknowledge.Favourableconditionsontheseelementsmayhelpthisorganizationalcapabilitytoleadtocompetitiveadvantage.Thesustainabilityofthisadvantagethendependsonthedegreeofthecapability’sinimitability.Sinceexplicitknowledgecanbewrittendownandeasilycommunicated,itfacesless,ifany,challengesforintegration.Assuch,explicitknowledgecanbeencodedandcapturedinproce-dures,norms,processesandrules(March,1991).Similarapproachesareaimedtobeemployedfortheintegrationoftacitknowledge,althoughthisismorechallenging.Specifically,Grant(1996a)suggeststheuseofdirectionandroutines.Ontheonehand,directionscanbeprovidedintheformofanoperatingmanualaddressingalmosteveryaspectofanoperation,embodyingthecollectiveknowledgeofspecialists.Ontheotherhand,organizationalroutinesprovideforcoordinationmechanismswithouttheneedforcommunication.Routinesaredependentoninformalprocessesandanunderstandingofeveryone’sroleinthem.Thiscanbeachievedthroughtraining,observationorrepetition(Grant,1996a).Grant(1996a)identifiesthreecharacteristicsofknowledgeintegrationthatfosterthedevel-opmentofcompetitiveadvantage.Thefirstpertainstotheefficiencyofintegration,whichcapturestheeasewithwhichindividual,specializedknowledgecanbeaccessedandapplied.Efficiencycanbeenhancedbygreaterlevelsofcommonknowledge,agreaterfrequencywithwhichtasksareperformedandalowerdegreeoftaskvariability,andanorganizationalstructurethatminimizestheneedforcommunicationrequiredinknowledgeintegration(modularitycanbeagreatenablerinthisregard).Thesecondcharacteristicisthebreadthoftheknowledgethatisbeingintegrated,withagreaterbreadthbeingreflectedintermsofbothdifferenttypesandabroaderscopeofknowledge.Thesepropertiesmakeitmorechallengingforcompetitorstoimitatetheknowledgeforsimilargains.Thethirdcharacteristicistheflex-ibilityofintegration,whichcapturesthedegreetowhichknowledgecanbereconfiguredvianewformsofintegrationtoyieldnewcapabilities.OrganizationalLearningFundamentaltotheKBVisorganizationallearning,whichprovidesadeeperunderstandingofthemechanismsresponsiblefornewinformationandknowledgebeingabsorbedandappliedbyindividualswithintheirfirms.Throughorganizationallearning,inferencescanbeencodedintoroutinesthatguidebehaviour(LevittandMarch,1988),andthusformthefoundationforthegrowthofthefirm(Penrose,1959).Ofnotehereistheorganizationalcontextinwhichlearningtakesplace,whichcanbefertilegroundandprovideastructureforlearning.BrownandDuguid(1991)aptlyrefertothiscontextas‘communitiesofpractice’,andSenge(1990)coinstheterm‘thelearningorganization’.TobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

149Theknowledge-basedview131Beneficialtotheacquisitionofknowledgecanbespecialization,forwhichthelargerorganizationalsettingalsoprovidesopportunities.Duetoanindividual’sboundedrationality(Simon,1991),individualspossessalimitedcapacitytoabsorb,processandapplynewknowl-edge,whichiswhyGrant(1996b)suggeststhatindividualsspecializeinspecificknowledgeareas.Withthisapproach,newspecificknowledgecanbequicklyputtouseandapplied.APPLICATIONDOMAINSWhiletheKBVhasbeenappliedinavarietyofdomains,ouremphasisinthisillustrativereviewisontheapplicationofthetheorytothedomainsofSCMandPSM.Thisreviewisnotmeanttobeexhaustive,butratherillustrativeofhowtheKBVhasbeenappliedinSCMandPSM,withanemphasisonthelastfiveyears.TheillustrativesnapshotofSCMandPSMresearchapplyingtheKBVisstructuredaroundthefollowingthreethemes:knowledgemanagementandorganizationalcapabilities,strategicsourcing,andsupplierandcustomerintegration.KnowledgeManagementandOrganizationalCapabilitiesKnowledgemanagementpertainstotherecognition,creation,transformationanddistributionofknowledge(Goldetal.,2001),capturestheflowsofknowledge(AlaviandLeidner,2001),andhasasitsobjectivethedevelopmentofmechanismsforthebestmanagementoftheseflows.Thiscanleadtothedevelopmentoforganizationalcapabilities.Themanagementofknowledge,especiallywithinasupplychainsetting,hasreceivedsignificantattention,asillustratedbytworecentliteraturereviewsonthetopic(CerchioneandEsposito,2016;delRosarioPérez-Salazaretal.,2017).Whileknowledgemanagementacrossfirmsiscertainlymorechallengingthanitiswithinfirms,italsocarrieswithitgreaterpromisesthroughtheintegrationofdiverseknowledgeassetsfromsupplypartners.Inthisvein,Goldetal.(2001)outlinebothinfrastructuralcapabilities(technology,structureandculture)andprocesscapabilities(acquisition,conversion,applicationandprotectionpro-cesses)toenhancetheorganizationaleffectivenessinmanagingknowledge.Schoenherretal.(2014)translatetheseprocesscapabilitiestothesupplychaincontext,devisingtheconceptofsupplychainknowledgemanagementcapability(SCKMC).Specifically,knowledgeacquisi-tioncapturesapproacheswithwhichknowledgecanbeaccumulated(LylesandSalk,1996);knowledgeconversionreferstothetranslationoftheobtainedknowledgeintoformatsthatcanbeapplied;knowledgeapplicationincludesmethodstoutilizethisknowledgetosolveprob-lems;andknowledgeprotectionpertainstoapproachesaimedatshieldingtheknowledgefromoutsidedissemination(Norman,2004).Schoenherretal.(2014)thenpositionSCKMCasadynamiccapabilityabletogeneratebothexplicitandtacitknowledge,eventuallyenhancingsupplychainperformance.TheKBVhasbeenleveragedquiteabittoinvestigateandexplaintheenhancementofoperationalcapabilitiesinamanufacturingoperationscontext.Sincethedevelopmentofcapabilitiesmayhingeonthecombinationofspecializedknowledgesourceswithinthefirm,theroleofhumanresourcesmanagementcanthereforenotbeneglected(Maliketal.,2020).AnillustrativestudyisprovidedbyRoscoeetal.(2019),whorelyontheKBVtounderstandhowstructuresandprocessesaidstakeholderstointeractandshareknowledge,leadingtoTobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

150132Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtheemergenceofoperatingroutinesandoperationalcapabilities.Theauthorsdifferentiatebetweendiscreteandsystemtechnologies,whichareideallymatchedwithauthority-basedandconsensus-basedhierarchies,respectively.AfurtherillustrationisprovidedbyLametal.(2016),whoexploretheimpactofafirm’sinternalsocialmediainitiatives(enablingknowl-edgeexchange)onoperationalefficiencyandinnovativeness.Onofreietal.(2019)positionoperationalintellectualcapitalasaknowledge-basedresource,abletoenhancetheeffectoftheinvestmentinleanpracticesonoperationalperformance.AsimilarcontextofleanproductionsystemsischosenbySecchiandCamuffo(2016),whocharacterizeleanimplementationprocessesfoundedinaprinciples-basedknowledgereplicationstrategyasmoreeffectiveandefficient.Capabilitiesforthemanagementoftech-nologyarethefocusofArgoteandHora(2017),whoconsiderknowledgetobeembeddedinmembers,tasksandtoolsoftheorganization.Withinthecontextofoperationalcapabilities,knowledgeisalsoassociatedwithabsorptivecapacity.Forinstance,Ambulkaretal.(2016)considerabsorptivecapacityasasecond-orderconstructconsistingofknowledgeusage,dis-seminationandacquisition,whichisdevelopedbyanindividual’sriskmitigationorientationandwhichisabletoleadtoriskmitigationcompetency.StrategicSourcingTheKBVhasbeenrelieduponextensivelyintherealmofstrategicsourcing,asindicatedforinstanceinthereviewbyWynstraetal.(2019)onPSMbeingamultidisciplinaryresearchfield.Assuch,theauthorsidentifytheKBVtobeespeciallypopularamongstrategyandorganizationjournals.Similarly,Spinaetal.(2016),intheirreviewofexternalgrandtheoriesinPSM,suggesttheKBVtobeparticularlysuitablewhentakingabuyer’sperspective,andthetheoryhashadacontinuedpresenceinpaperspresentedattheInternationalPurchasingandSupplyEducationandResearchAssociation(IPSERA)conferences(forexample,KamannandJohnsen,2019).Anillustrativestudy,havingappliedtheKBVwithinthecontextofstrategicsourcing,isbySchützetal.(2020),wholeverageKBVtenetstoargueforthepositiveeffectofpurchasingknowledgeonbothcostsavingsandstrategicperformanceatthesametime,alsoconsideringthemoderatingroleofpurchasingintegration.Inaddition,Kilpietal.(2018)considerknowl-edgeacquiredfromthesupplymarketandthesupplybaseasleadingtobothanexploitativeandanexplorativePSMorientation,ultimatelyenhancingsupplyperformance.KnowledgeisalsoidentifiedasakeyingredientfordevelopingcompetencestodrivesustainablePSMbySchulzeandBals(2020).TheKBVisfurtherrelieduponinastudyonSCMexperienceintopmanagementteamsanditsimpactonproactiveenvironmentalstrategybyKumarandParaskevas(2018).However,italsodependsonhowknowledgeisintegrated.RevillaandKnoppen(2015)illustratethisintheirstudyonbuyer‒supplierrelationships,inwhichknowl-edgeintegrationmechanisms(specifically,jointsensemakingandjointdecisionmaking)playacriticalroleinfosteringinnovationandoperationalefficiency.Knowledgeintegrationmech-anisms,inturn,canbeelevatedbystrategicsupplymanagementandtrustinbuyer‒supplierrelationships.OutsourcingliteraturehasappliedtheKBVtoexplainfirms’motivationsforoutsourcing(MihalacheandMihalache,2016),whichmaystemfromtheabilitytoidentify,exploreandtransferknowledgefromsupplierstothefirm(Shooketal.,2009).Inthisview,sourcingisaboundaryspanningmechanismcontributingtothecompetitivedifferentiationofthefirmTobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

151Theknowledge-basedview133(CombsandCrook,2007).Inadditiontotheinternalizationoftheknowledge,thiscanalsoinvolvethehiringofknowledgeworkersfromotherfirms,thedevelopmentofjointventuresoralliances,oreventheacquisitionofotherfirmsthemselves(Shooketal.,2009).Withinthiscontext,theKBVhasalsohelpedtofacilitatethemake-or-buydecision(Tsayetal.,2018).WhiletheKBVhasmostlybeenappliedinempiricalstudies,italsoreceivedapplicationinChenetal.’s(forthcoming)game-theoreticmodellookingattheimpactofoutsourcingknowl-edgeonabuyingfirm’sdecisiontouseasupplychainintermediaryoragent.AfurtherillustrativestudyinthisdomainisVerwaal(2017),whoassociatesgreatercogni-tiveandnormativebarriersinknowledgeexchangewhenoutsourcing,leadingtoexplorativeinnovationtonegativelymediatethelinkbetweenglobaloutsourcingandfirmfinancialper-formance.Whatmayalleviatethissituation,however,isthedevelopmentofrelationalcapitalbuiltwiththeforeignsupplier.SupplierandCustomerIntegrationAlargebodyofresearchwithintheSCMandPSMdomainsfocusesonthebenefitsassociatedwithsupplierandcustomerintegration,andsometimeseventheintegrationofcompetitorknowledge(forexample,SchoenherrandSwink,2012).Whilenumerousadvantagescanbederivedfromsuchbetterintegration,includingbettercoordinationandinformationsharingabilities,aswellastheopportunityforenhancedcollaboration,acentralbenefitfromaKBVperspectiveistheintegrationandleveragingofknowledgefrombothsuppliersandcustomersforthebenefitofthefirm.Thisknowledgeobtainedfromexternalpartnershastheabilitytooffernewinsightsandinformation,enablingbetterdecisionmakingbasedonamorecompre-hensiveunderstandingofthecontextandcomplexities.Whatmakesthistypeofknowledgeintegration,whichleveragestheinsightofmanydif-ferentstakeholders,sopowerfulisthatknowledgecanbeelevatedtoanentirelynewlevel,astheresultofthisintegrationcanoftenbemuchmorethanthesimplesumoftheknowledgeassets;anexpectationthatgoesbacktoSenge’s(1992)conceptofthelearningorganization.Accesstosuchexternalknowledgecanserveasaprimarydriverforcompaniestofosterclosersupplierrelationships(Lanieretal.,2010).ThesignificantpotentialofknowledgeintegrationacrosscompanyboundarieswasalsohighlightedbyGrant(1996a),whoemphasizestheimportanceofrelationalcontractsasanefficientandeffectivemeanstoaccess,transferandintegrateknowledge.Kogut(2000)alsomakesthecaseforknowledgegeneratedwithinfirmnetworksandpositsthisknowledgeasthesourceofvalue.Howthecomplexityofsuchsupplynetworkscanimpactafirm’sfinancialperformanceisthetopicinLuandShang(2017),whorelyontheKBVtoexplainthepositiveeffectofsupplierknowledgeonafirm’sinnovationandfinancialperformance.Overall,thepredictionsformulatedbyGrant(1996a)haveheldtrue,asindicatedinthereviewofsupplychainintegrationbyDaneseetal.(2020),whoidentifytheKBVasatheorythathasbeenusedtoexplaintheeffectsofsuchintegration.Assuch,knowledgemanagementandknowledgemanagementprocessescanserveasimportantmediatorsandmoderatorstoprovidefiner-grainedinsightintotheimpactofintegrationonperformance.Theintegrationofspecializedknowledgeisalsoatthefoundationofinnovationandthedevelopmentofnewproducts(Nonaka,1990).Innovationcanbeaccomplishednotonlybytheapplicationofnewknowledge,butalsobythereconfigurationofexistingknowledge(Grant,1996a).ThesetenetswererelieduponextensivelyinSCMandPSMresearch.ForTobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

152134Handbookoftheoriesforpurchasing,supplychainandmanagementresearchexample,Schoenherr(2018)investigatesthemoderatingroleofstructural,humanandsocialcapitalontherelationshipbetweensupplierleveragingandproductinnovationperformance.Inthismodel,supplierleveragingreferstotheapplicationofknowledgeobtainedfromsuppliersforthebenefitofthefirm.Whiletheinfluenceofthisconstructoninnovationwassupported,Schoenherr(2018)alsoconfirmedthisrelationshiptobestrongerunderhigherlevelsofbothstructuralandhumancapital.Incontrast,higherlevelsofsocialcapitaldiminishtheinfluenceofsupplierleveragingoninnovation,duetosocialcapitalbeingassociatedwithgreaterautonomyandconfidence(Marcus,1988),whichinturnmaynotprovideafertilegroundforoutside(supplier)knowledgetobewelcomed(Kimetal.,2015).Whilemostresearchhastakenthebuyer’sperspective,similarbenefitscan,however,alsobederivedbythesupplier.ThiswasconfirmedbyPrestonetal.(2017),whowereabletofindsupportfortheirexpectationsofbuyer‒suppliersocialcapitalleadingtobuyer-enabledenrichmentofsupplierknowledge,eventuallyresultingingreatercostefficiencyandinnova-tiononbehalfofthesupplier.Similarly,theeffectofknowledgetransferactivitiesdrivenbythebuyingfirmonthesupplier’soperationalperformanceimprovementwasinvestigatedbyKimetal.(2015),highlightingkeysuppliercharacteristicsthatcanenhancethiseffect(thesupplier’sperceivedoverlappingknowledge,theircognitivecongruenceandtheirtrust)ordetractfromit(thesupplier’sinnovativeness).CONCLUDINGTHOUGHTSItisundeniablethattheKBVhashadafundamentalimpactontheSCMandPSMdisciplines.Itsappealiseminent,sinceitoffersafittingframeworkandassociatedapproachesforintegrat-ingandleveragingknowledgeforthebenefitofthefirm.Thisabilitytoobtain,disseminateandutilizeknowledgecanserveasauniquesourceforacompany’scompetitivedifferentia-tionandlong-lastingsuccess.Thesettingofthesupplychainoffersparticularlyintriguingandpowerfulopportunitiesfortheleveragingofknowledgefromthevariousstakeholdersinvolved.Thiscanbeattributedtotherealityofsupplychainscompetingagainstsupplychains(asopposedtocompaniescompetingagainstcompanies),necessitatingthehelpandsupportofsupplychainpartners,particularlyregardingtheirknowledgeresources,inordertoremaincompetitive–forinstancequicklybringinginnovativeproductstomarket(Schoenherr,2018).OneoftheearliestworksadaptingthisframingwasDyer(1996),whoconsideredspecializedsuppliernetworksasasourceofcompetitiveadvantage.Thepowerofsuch‘knowledge-sharingnetworks’waslateralsoillustratedbyDyerandNobeoka(2000)withthecaseofToyota.ThesefindingsfurtherparallelargumentsbyCohenandLevinthal(1990),whoviewoutsideknowledge(thatis,knowledgefromsupplychainpartners)asacriticalelementfordrivinginnovation.Eversincetheseearlystudies,theKBVhasbeenestablishingitselfasafoundationalper-spectivetobeappliedwithinasupplychainsetting.Thiswasevidenced,forinstance,inthereviewbyDefeeetal.(2010),whoprovideaninventoryoftheoriesusedinlogisticsandSCMresearch;butalsobyShooketal.(2009)intheir‘theoreticaltoolbox’forstrategicsourcing,whichincludestheKBVasoneofthetentheoriesreviewed.GiventheprevalenceoftheKBV,canitthusbeconsideredatheory?Thedebateonhowthisquestionshouldbeansweredisstillongoing.WhenGrant(1996a)firstformulatedtheKBV,hewasexplicitinnotingthatitisnotyetatheoryofthefirm,sincethereis‘insufficientTobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

153Theknowledge-basedview135consensusastoitspreceptsorpurpose,letaloneitsanalysisandpredictions’(p.110).ThereviewofEisenhardtandSantos(2002)alsoconcludesthattheKBVisnotyetatheoryofstrategythatsignificantlyextendstheRBVorthedynamiccapabilitiesperspective.TheseviewsstandincontrasttothoseofKogutandZander(1992),whoconsiderorganiza-tionsas‘socialcommunitiesinwhichindividualandsocialexpertiseistransformedintoeco-nomicallyusefulproductsandservicesbytheapplicationofasetofhigher-orderorganizingprinciples’(p.384).TheseearlyinroadsinlabellingtheKBVasatheorywerefacedbyharshcriticism,forinstancebyFoss(1996a,1996b).WhileFoss(1996a)acknowledgesthevalueoftheKBVperspective,hedoesnotagreethatitisatheory,sinceitisnotabletoprovidereasonsfortheexistenceoffirmsintheabsenceofincentives,propertyrightsandopportunism/moralhazard.HecontinuestheseargumentsinFoss(1996b),arguingthattheKBVcannotsuffi-cientlycharacterizethefirm.ThisviewwasthenagaincounteredbyKogutandZander(1996),arguingthatknowledge‘hasaneconomicvalueovermarkettransactionswhenidentityleadstosocialknowledgethatsupportscoordinationandcommunication’(p.502)Inrecentyears,anincreasingconsensusseemstobeappearingthatsuggeststheKBVconstitutesatheory.Thisisevidenced,forinstance,inSpinaetal.’s(2016)reviewofexternalgrandtheoriesappliedinthePSMdomain,whichhighlightstheKBVasoneofthemostfrequentlyappliedtheories,behindtransactioncosteconomicsandtheRBV.TheKBVwasalsoincludedasagrandtheoryinWynstraetal.’s(2019)review.TodelineatetheKBVasatheory,somearticleshavedeliberatelymovedawayfromthe‘view’labelandreplaceditwith‘theory’,thatis,referringtoitasthe‘knowledge-basedtheory’(KBT)(forexample,Spinaetal.,2016).The‘KBV’term,however,isstillthemoreprevalentlabelusedtodate.Wheredowegofromhere?Inmyview,theKBVisaperspectivethatisnowprobablymoreimportantthanithaseverbeen.Inourhyper-competitiveandrisk-proneenvironment,knowledgeisessentialforcompaniestocontinuouslytransformandreinventthemselves,tobeabletoremainrelevantandcompetitive.Substantiationforthisviewcanbedrawnfromthenotionthatdataistheworld’smostvaluableresource,ratherthanoil,asheadlinedina2017articleinTheEconomist(Parkins,2017).Thisdatacanbeequatedtoinformation;which,however,inandofitselfdoesnotnecessarilyleadtovaluegeneration.Whatneedstohappenisatransformationofthisinformationintovaluableknowledgethatcanbeappliedforthebenefitofthefirm.Whenthisisdone,knowledgecanleadtothedevelopmentofdynamiccapabilities,sustainablecompetitiveadvantage,andcompetitivedifferentiationandsuccess.TheKBVcarriesgreatpotentialinservingasthetheoreticalfoundationforamultitudeofapplications.WhileIexpectthetheorytocontinuetobeappliedtothethemesreviewedinthischapter,Ibelieveitwillbeespeciallypowerfulwhenaimingtopushcompaniestotheirnextfrontiers.Whilecompaniesmaybeabletodosothemselves,amoreeffectiveandefficientapproachmaylieintheleveragingofexternalstakeholdersandpartners,sincewiththisapproach,uniqueanddifferentknowledgeresourcescanberecombinedforthebenefitofthenetwork.Thisviewisbecomingincreasinglyprevalent,asindicatedbytheemergenceoftheterm‘businessecosystems’,whichreferstodynamic,collaborative,semi-permanent,multi-companysystems(Fulleretal.,2019).Assuch,thesesystemsarea‘middleground’betweentraditional(static)supplychainsandtheopenmarket,andarewidelyconsideredthe‘hotbedsofindustryknowledge’(ZahraandNambisam,2012,p.220).Howtoeffectivelybuild,recombineandintegrateknowledgeinthesemorecomplexsettings(comparedtothestaticsupplychain)carriesgreatpromiseforinvestigation.TobiasSchoenherr-9781839104503DownloadedfromPubFactoryat05/28/202209:10:20AMviaColumbiaUniversityLibrary

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15810.Resource-advantagetheoryDonnaF.DavisandTeresaM.McCarthy-ByrneINTRODUCTIONResource-advantage(R-A)theoryisageneraltheoryofcompetitionthatcombinesaresource-basedviewofthefirmwithheterogeneousdemandtheorytodescribeanevolu-tionaryprocessofcompetition.R-Atheorywasintroducedinthe1990sinaseriesofarticlespublishedinmarketingjournalsco-authoredbyShelbyHuntandRobertMorgan(1995,1997),culminatinginamonographthatsetsforththehistoricfoundationandbasictenetsofthetheory(Hunt,2000).SubsequentarticlesdevelopR-Atheoryacrossmultipledisciplinesincludingpurchasing,supplychainmanagement,management,economics,ethics,lawandpublicpolicy.Resource-advantagetheorypositsthatfirmspursuecomparativeadvantagesinresourcestoachievemarketplacepositionsofcompetitiveadvantagethat,inturn,generatesuperiorfinancialperformance(Hunt,2000).Here,‘superior’impliesthatafirmsurpassescompetitorsintermsofrelativeefficiencythroughreducedcostsand/orrelativeeffectivenessbydeliveringhighervalue.Feedbackloopsspurorganizationallearningandinnovationbysystematicallycyclingbackmarketplacesignalsofrelativeperformanceasinputstoinformfutureactions.Thatis,superiorfinancialperformancesignalsamarketplacepositionofcompetitiveadvan-tagewhich,inturn,signalsahigherlevelofcomparativeadvantageinresources(seeFigure10.1).Hence,R-Atheoryviewscompetitionasaninherentlydynamicprocessthatprovokesdisequilibriuminthemarketplaceasfirmsstriveforcomparativeadvantagesinresourcestosecuremarketplacepositionsofcompetitiveadvantage.Source:AdaptedfromHuntandMorgan(1997).Figure10.1Resource-advantagetheoryconceptualframework140DonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

159Resource-advantagetheory141BothR-Atheoryandtheresource-basedview(RBV)positthatfirmspossessbundlesofresourcesthatareuniquetothefirmandheterogenousacrossfirms,andthoseresourcebundlesareimperfectlymobile.However,RBVtheoristssuggestcompetitionisequilibratingwhereasR-Atheoryviewscompetitionasdisequilibratingasfirmscontinuallyattempttogainpositionsofcomparativeadvantage(HuntandDavis,2008).Further,theRBVconsidersmarketdemandasanexternalenvironmentalfactor.Incontrast,R-AtheoryextendstheRBVbyassumingheterogeneousdemand.Thatis,R-Atheoryproposesthatindustrydemandisacollectionofmarketsegmentswithsignificantlydifferentdemandcurvesthatreflectconsumer’spreferences.Thus,heterogenousdemandtheoryassumesdifferentbundlesofresourcesarerequiredtomeetexpectationsofmultiplemarketsegmentswithinanindustry.Thecombinationofheterogenous,imperfectlymobileresources,andheterogenousdemandacrossmarketsegments,generatesacompetitivelandscapecharacterizedbysignificantdiver-sityamongfirmsinthesameindustryaswellasacrossindustries.Thefollowingsectionsoutlinethefoundationalpremises,definekeyvariablesofR-Atheory,andexplainrelationshipsamongthevariables.Thedomainwherethetheoryappliesisthendescribed,alongwiththeuseofR-Atheoryacrossdisciplines.Thechapterconcludeswithopportunitiesforfutureresearch.KEYVARIABLESANDDEFINITIONSAsshowninFigure10.1,theR-Atheoryofcompetitionemphasizestheimportanceof:(1)organizationalresources;(2)marketplacepositionsofcompetitiveadvantage;and(3)finan-cialperformance.AssetforthbyHuntandMorgan(1995,1997)andfurtherdevelopedbyHunt(2000,p.106),ninefoundationalpremisesundergirdR-Atheory:●P1.Demandisheterogeneousacrossindustries,heterogeneouswithinindustries,anddynamic.●P2.Consumerinformationisimperfectandcostly.●P3.Humanmotivationisconstrainedself-interestseeking.●P4.Theorganization’sobjectiveissuperiorfinancialperformance.●P5.Theorganization’sinformationisimperfectandcostly.●P6.Theorganization’sresourcesarefinancial,physical,legal,human,organizational,informationalandrelational.●P7.Resourcecharacteristicsareheterogeneousandimperfectlymobile.●P8.Theroleofmanagementistorecognize,understand,create,select,implementandmodifystrategies.●P9.Competitivedynamicsaredisequilibrium-provoking,withinnovationendogenous.TheninefoundationalpremisesunderpinthetheoreticalframeworkdisplayedinFigure10.1.ThefollowingsectionsdefinethekeyvariablesofR-Atheory.OrganizationalResourcesFollowingtheresource-basedviewofthefirm,organizationalresourcesaredefinedas‘thetangibleandintangibleentitiesavailabletothefirmthatenableittoproduceefficientlyand/oreffectivelyamarketofferingthathasvalueforsomemarketsegment’(Hunt,2000,p.128).DonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

160142Handbookoftheoriesforpurchasing,supplychainandmanagementresearchThisdefinitionconveysthreeimportantaspectsoforganizationalresources.First,resourcescomprisenotonlytangibleresourcesbutalsointangibleentities.Second,thefirmisnotrequiredtoowntheresources;rather,resourcesmustonlybeavailabletothefirmforthepurposeofcreatingvalue.Third,entitiesareclassifiedasresourcesonlywhentheycontributetoproducingvalueforaspecificmarketsegment.AsnotedinR-Atheory’sfoundationalpremises,resourcesareheterogeneousandimper-fectlymobile.Asfirmsaccumulateportfoliosofresources,thecharacteristicsoftheseassort-mentsaredistinctive–andsomeareunique–tothefirm.Imperfectmobilityimpliesthatthesebundlesofresourcesare,tovaryingdegrees,noteasilyboughtorsoldinthemarketplace.Becausetheseresourcesareimperfectlymobile,theheterogenousnatureofresourcescanpersistovertime(DeirickxandCool,1989).Asspecifiedinthefoundationalpremises,R-Atheoryassumesheterogeneityofdemand.Thatis,consumers’tastesandpreferencesarehomogeneouswithinmarketsegments,varyacrossmarketsegmentswithinanindustry,andareconstantlychanging.Further,consumershaveimperfectinformationaboutwhichmarketoffersbestmeettheirneedsandwants.Thesecharacteristicsofconsumerbehaviourgenerateadynamiccompetitiveenvironmentascon-sumersdiscovernewwaystosatisfytheirchangingneedsandfirmsjockeyforpositionsofcomparativeadvantageinresourcestomeetorexceedconsumerexpectations.R-Atheorygroupsresourcesintosevencategories.Examplesofeachinclude:1.Financial:cashreserves,accesstofinancialmarkets.2.Physical:plants,inventory,equipment.3.Legal:trademarks,licences.4.Human:skillsandknowledgeofindividualemployees.5.Organizational:controls,routines,culture,competencies.6.Informational:knowledgeaboutmarketsegments,competitors,technology.7.Relational:relationshipswithsuppliers,customers,competitors.Anassetisaresourceonlywhenitcontributestocreatingvalueforthefirm’smarketoffering.Thispremiseimpliesthatanentitycanbea‘non-resource’whenitdoesnotcontributetocreatingvalue.Forexample,retailerscontinuetoclosebrick-and-mortarlocationsasconsum-ersincreasinglyshoponline.Giventhechangeinconsumerbehaviour,aretailer’sphysicalresourcesmaynowbeanon-resource,failingtocontributetocomparativeadvantage.Moreconcerning,anentitycanbea‘contra-resource’ifitdiminishesthevalueofafirm’smarketoffering.Considerthecaseofastrongrelationshipwithasupplierthatearnsanegativerepu-tationandtherebydamagesthefirm’svalueproposition(Nicholsetal.,2019).Thispreviouslyvaluablerelationalresourceisnowacontra-resource.MarketplacePositionInR-Atheory,amarketplacepositionofcompetitiveadvantagereferstooneofninepossiblelocationsona3x3matrixofcompetitiveadvantage,basedonafirm’srelativeresource-producedvalueforaspecificmarketsegmentandrelativecostforproducingthatvalue(Figure10.2).‘Value’herereferstothetotalofallbenefitsthatconsumersinthemarketsegmentperceiveaspartofthefirm’smarketoffering.AsshowninFigure10.2,anorganiza-tionmayhaveseveralsuchmatrices,oneforeachmarketsegmentserved.DonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

161Resource-advantagetheory143Figure10.2MarketplacepositioncompetitivematrixFirmsthatoccupymarketplacepositionsreflectedinCells2,3and6realizeacompetitiveadvantagebydeliveringhigherrelativevalueatlowerrelativecosts.Firmsthatproducelowerrelativevalueatequal(Cell4)orhigher(Cell7)relativecostareatacompetitivedisadvan-tage.Similarly,firmsthatproducerelativevalueonparwithcompetitorsbutatrelativelyhighercost(Cell8)areatacompetitivedisadvantage.InCell1,lowerresourcecostsareassociatedwithlowerrelativevalue,andthecompetitivepositionisindeterminate.Thatis,firmsinthiscompetitivepositioncouldbeinpositionsofparity,competitiveadvantageorcompetitivedisadvantage,dependingontheextenttowhichamarketsegmentiswillingtoacceptlowerpricesalongwithreducedvalue.Cell9istheoppo-sitecase,wherefirmscreatehigherlevelsofvaluebyassemblingresourcesatgreatercosts.Again,thefirmmayholdapositionofparity,competitiveadvantageorcompetitivedisadvan-tage,dependingonsomemarketsegment’swillingnesstopayahigherpriceforgreatervalue.FirmsinCell5,theparityposition,havenocomparativeadvantageineitherrelativecostorvalue.Theparitypositionisunlikelytopersistovertime,asfirmsseektomovetowardcompetitiveadvantagebyloweringrelativeresourcecostsorimprovingrelativevalue.DonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

162144Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFinancialPerformanceRecallthatcompetitionisaprocessofongoingrivalryamongfirmstoachievecomparativeadvantagesinresourcestoattainmarketplacepositionsofcompetitiveadvantagewhich,inturn,yieldsuperiorfinancialperformance.P4ofthefoundationalpremisesstatesthefirm’sobjectiveistoachievesuperiorfinancialperformance.‘Superior’impliescomparisontoabaseline,whichcouldbethefirm’sownperformanceinapreviousperiod,performanceofcompetitors,orindustryaverages(HuntandMorgan,1997).Awidevarietyofmeasuresoffinancialperformancecouldbeused,suchasprofits,returnoninvestment,returnonassets,returnonequityorstockmarketprices.Thefinancialmeasuresandreferentswillchangeovertimeasexternalfactorschangethebasisofcompetition.ExternalFactorsAfirm’scomparativeadvantagecanbeenhanced,neutralizedoreliminatedbyexternalfactorssuchaschangesinsocietalresources,societalinstitutionsandpublicpolicy,aswellaschang-ingbehaviourofsuppliers,competitorsandconsumers.Societalinstitutionsprovidestructureforcommerceintheformofregulationsorindustrynormsthatinfluencetherelationshipbetweenresourcesandcomparativeadvantage.Forexample,regulatorypressurecanconstrainafirm’sabilitytoleveragerelationalresourcesforcomparativeadvantagebylimitingorprescribingpotentialsupplychainpartners(Davisetal.,2019).Tradeagreementscanboostoreliminatethecontributionofafirm’sresourcestocomparativeadvantage.Asmentionedpreviously,changesinconsumershoppingbehaviourcanshiftbrick-and-mortarstoresfromaresourcetoanon-resource.Aglobalpandemiccanneutralizethevalueofanairlines’vastnetworkofairportfranchises.Competitorscanneutralizethecontributionofafirm’scomparativeresourceadvantagetoitsmarketplacepositionofcompetitiveadvantagebyacquiringthesameresource,identifyingastrategicallyequivalentresourceordevelopingasuperiorresource(Barney,1991).Tosummarize,thekeyvariablesofR-Atheoryare:(1)organizationalresources;(2)marketplacepositionsofcompetitiveadvantage;and(3)financialperformance.Thesekeyvariablesaresetinacontextofexternalfactors.Thefollowingsectionexplainshowkeyvar-iablesandcontextualfactorsinteractinadynamicprocesswhereinfirmscontinuouslyvieforcomparativeadvantagesinresourcestoachievecompetitiveadvantage.RELATIONSHIPSAMONGTHEVARIABLESFigure10.1illustratestherelationshipsamongthekeyvariablesinR-Atheory.Organizationsassemblebundlesofresourcesthatcontributetovariouslevelsofcomparativeadvantageinresourcesthat,inturn,predictmarketplacepositionsofcompetitiveadvantage.Inadditiontothedirectandindirecteffectsoforganizationalresourcesonperformance,feedbackloopsamongkeyvariablesarethemechanismsthatgeneratecompetitivedynam-icsproposedbyR-Atheory.Thatis,superiorfinancialperformancesignalsamarketplacepositionofcompetitiveadvantagesupportedbyhighervalueassociatedwithequalorlowercosts(thatis,Figure10.2,cells2,3or6).InferiorfinancialperformancesignalsamarketplaceDonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

163Resource-advantagetheory145positionofcompetitivedisadvantagewherelowervalueisproducedwithhigherorequalcosts(thatis,Figure10.2,cells4,7or8).Marketplacepositionssignalthelocationoffirmsinthecompetitivelandscapeintermsofmoreefficientlycreatingvalue,orefficientlycreatinggreatervalue.Basedonthefirm’scom-petitiveposition,managementisstimulatedtobettermanageexistingresourcestoenhanceefficiencyand/oreffectiveness,triggeringorganizationallearning(HuntandMorgan,1997).Aspredictedintheresource-basedview(Barney,1991),firmsmayseektoneutralizecompet-itors’advantagesbyacquisition,imitation,substitutionorinnovation.Firmscanquicklyneu-tralizeacompetitor’sadvantagethroughacquisitionwhenresourcesarerelativelymobileandavailableinthemarketplace.Imitationorsubstitutionofastrategicallyequivalentresourcerequiresinnovation.Majorinnovationseekstosurpassthecompetitionbycreatinganew,superiorresourcethatisdifficulttoimitate,therebysecuringarobustpositionofcompetitiveadvantage.Recallthatmanagement’sgoalistosecuresuperiorfinancialperformance.Managementenhancesfinancialperformancebyrefiningexistingstrategiesand/orcreatingandimplement-ingnewstrategiestostabilizeorimprovemarketplacepositionsofcompetitiveadvantage.Strategiesaimedtowardsecuringapositionofcompetitiveadvantagerelyonassemblingtheresourcesneededtoincreasevalueand/orlowercosts.Firmswillseektoneutralizecompetitors’comparativeadvantagesbyacquiringorimitatingvalue-producingresources.Importantly,firmswillalsoinnovatetosecurenewresourcesthatcanresultinamarketplacepositionofcompetitiveadvantage.AsillustratedinFigure10.1anddescribedabove,resource-advantagetheoryisatheoryofcompetition.Keyvariablesarelinkedinadynamic,evolutionaryprocess.ThefollowingsectiondescribesthedomainandlevelsofanalysiswhereR-Atheoryapplies.DOMAINWHERETHEORYAPPLIESANDLEVELSOFANALYSISThedomainofatheoryreferstowhenandwherethetheoryapplies(Wacker,2008)andwhichstakeholdersareinthetheoreticalscope(BalsandTate,2018).Asanevolutionary,dise-quilibrium-provoking,processtheoryofcompetition,R-Atheorycanbeappliedverybroadlytounderstandcompetitioninanyenvironmentwithinmarket-basedeconomies(Hunt,2000).Whereascommandeconomieslackprovisionsforstimulatingandrewardinginnovationandfinancialperformance,rewardsinmarket-basedeconomiesarerealizedbyfirmsandindivid-ualsengagedinongoing,disequilibratinginnovationresultinginnewresourcesproducingcomparativeadvantagesthatyieldmarketplacepositionsofcompetitiveadvantageandthussuperiorfinancialperformance(Hunt,2000).Atheory’sdomainreflectsitsgeneralizabilityandthepopulationtowhichthetheorycanbeapplied,andthechoiceofsampleselectedforempiricalresearch(Wacker,2008).Asageneraltheoryofcompetition,thestakeholdersandcontextstowhichR-Atheoryappliesarevast.Inmarket-basedeconomies,heterogeneityisevidentwithinandacrossfirms,industriesandcountries(Hunt,2000).Thus,thelevelsofanalysisinwhichcompetitionmanifestsincludecompetitionbetweenfirms,buyersandsuppliers,dyads,supplychains,nationsandtradingregions.Thediscussionbelowprovidesexamplesofthevariousdomainsandlevelsofanalysistowhichthetheorycanbeapplied.DonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

164146Handbookoftheoriesforpurchasing,supplychainandmanagementresearchAtthefirmlevelofanalysis,considerthatFirmAmaybecompetingwithdirectcompetitorFirmBformarketsharewithinthesameindustry.Sales,marketingandnewproductdevelop-mentareamongthebusinessunitstakeholdersFirmAmayleveragetodevelopimperfectlymobileandinimitableresourcestocaptureandgrowmarketshare.Alternatively,ifthetwofirmsarecompetingforconstrainedcapacityatanoffshorelow-costmanufacturer,FirmAmayturntoitspurchasingdepartmenttosecurethevolumebydevelopingsuperiornegoti-ationandcontractingadvantagesthatcreateuniquesourcesofvalueforbothFirmAandthesupplier.Consideranotherexampleoffirm-versus-firmlevelofanalysis,inwhichFirmAislobbyingforandpromotingpolicieswithlawmakersthatdifferfromthepolicyinterestsofcompetitorFirmC.AcomparativeadvantageforFirmAwillderivefromaccesstoexperiencedlobbyistswithestablishedpoliticalconnectionstomultiplestakeholdersinstateandfederalagencies.SuchanadvantageoverFirmCcanbefurtherenhancedwithcompetenceleveraging(Sanchezetal.,1996)asfirmsandsupplychainsapplyotherexistingresourcestothelobbyingeffort.Forexample,inthecontextofe-wasterecycling,aftermorethanadecadeofmakingsub-stantialinvestmentsine-wasterecyclingprocessesandinfrastructure,in2001Hewlett-Packard(HP)executivesbegandraftingandlobbyingtoacceleratetheadoptionofaggressivee-wastelegislationplacingtheburdenofresponsibilityonmanufacturersratherthanconsumers(FremethandRichter,2011).Consequently,thestateofCaliforniawasthefirstofmanytoenactane-wastelawin2003,therebyestablishingasourceofcompetitiveadvantageforHPwhichhadalreadyinvestedintheprocessesandinfrastructure,andacompetitivedisadvantageforrivalssuchasDellwhosenon-compliante-wasterecyclingprogrammerequiredsubstantialinvestment(DavisandSmith,2003).However,suchlegislativeactionscouldprovokedisequilibrium,bystimulatingthedisad-vantagedcompetitorstopartnerwithandleveragetheresourcesofanestablishedrecyclingcompanyortocollaboratewithsuppliersondevelopingmoreeasilyrecyclablematerials.Inadditiontothesupplychainpartners,lobbyistsandpolicymakers,otherstakeholdersincludetheenvironmentalistgroupsandtheenvironmentallyconsciousendconsumer.Anotherlevelofanalysisthatcanleadtoamarketplacepositionofcompetitiveadvantageisthebuyer‒supplierdyad.PerhapsFirmAhasrationalizeditssupplybaseanddevelopedlong-termrelationshipswithasmallgroupofpreferredsupplierswithdistinctivecapabili-tiesthatsupportFirmA’sstrategicgoals.Thesedyadicrelationshipsareoftensociallyandtechnologicallycomplexandcanresultinscaleeconomiesthroughincreasedpurchasingandproductionvolumes(HuntandDavis,2008)aswellasuniquevalueco-creation(Fawcettetal.,2012).Thus,theabilityofotherfirmsordyadstoneutralizetherelationalcompetitiveadvantageisdiminished.Ifcompetitiveadvantagederivesfromdisequilibratinginnovationamongfirms,dyadsandsupplychainsinmarket-basedeconomies,whyaresomemarket-basednationsandtraderegionswealthierthanothers?R-Atheorysuggeststhatvigorouscompetitionamongfirmsisfosteredbyafavourableinstitutionalenvironment,hencevarianceacrossnationsinpercapitaeconomicgrowthcanbeexplainedbyestablishedsocietalinstitutionsthatfavourcompetition(Hunt,2000).Therefore,competitionamongnationsandtraderegionsfallswithinthedomainofR-Atheory.Nationscanfacilitatecompetitionandthuseconomicgrowthbyestablishinginstitutionsthatprotectphysicalandintellectualpropertyrightsofindividualsandfirms(North,1990),suchaspatentsystemsandtrademarkprotection,andbyinvestingininfrastructuretofacili-DonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

165Resource-advantagetheory147tatetradelogisticsandsupplychainperformance.Forexample,theWorldBank’sLogisticsPerformanceIndex(LPI)isusedbyorganizationstoinformglobaldecisionsregardingwheretoestablishnewfacilities,outsourceprocessesandtargetnewcustomersegments.TheLPIisacomparativeassessmentofthecountry-levellogisticsperformancebasedonsixdimen-sionsoftradelogistics:customs,infrastructure,internationalshipments,logisticsqualityandcompetence,trackingandtracing,andtimeliness(Arvisetal.,2018).Indeed,a1percentimprovementinacountry’sLPIscoreincreasestradeby16percent(Arvisetal.,2018).ForanationtodevelopacomparativeadvantageintradelogisticsperformancerequiressubstantialinvestmentinandcoordinationofallsevenR-Acategoriesofresources(thatis,financial,physical,legal,human,organizational,informationalandrelational).Thecomplexityinvolvedinthedisequilibrium-provokingdecisiontocompeteontradelogisticsperformancerequiresanevolutionintheinstitutionalenvironmentinvolvingsubstantialpolicyimplicationsforgovernments,non-governmentalorganizations,privateenterprisesandotherstakeholders.Institutionalenvironmentsinwhichfirmsandindividualscandirectlybenefitfrominfrastruc-tureinvestmentandinnovationareconducivetoanation’sproductivity,economicgrowthandglobalcompetitiveposition.Asdescribedabove,R-Atheoryhasrelevanceatmultiplelevelsofanalysisincludingfirm,dyad,supplychain,nationandtradingregion,andisthuswidelygeneralizableacrossmanypopulations.Accordingly,R-Atheoryhasbeenempiricallyresearchedacrossdiversedisci-plines,aspresentedinthefollowingsection.INTERDISIPLINARYUSESOFRESOURCE-ADVANTAGETHEORYAsageneraltheoryofcompetition,R-Atheoryhasbeenappliedinawidevarietyofdisci-plines.Inhismonograph,Hunt(2000)citesdozensofconceptualarticlesinwhichthetheoryhasbeendevelopedacrossdisciplinessuchasmarketing,management,economics,generalbusinessandethics.R-Atheoryhasalsobeenbroadlytestedempirically.Thefollowingsectionsprovideselective(notexhaustive)examplesofstudiesthatapplythetheoryinthedisciplinesofmanagement,marketing,purchasingandsupplymanagement,andsupplychainmanagement.ManagementDoherty(2011)employsatheory-buildingmultiplecasestudyapproachtoidentifythecompetitiveresourcesoffirmsfoundedonasocialmission,specificallyfairtrade(FT)socialenterprises.TheauthorattemptstoidentifyhowtwoFTsocialenterprisescancompeteinthehighlyconcentratedUnitedKingdomchocolateconfectionaryandcoffeesectors.FollowingkeyassumptionsofR-Atheory(HuntandMorgan,1995),heterogeneousdemandimpliesthatdifferentdemandcurvesexistineachoftheseindustrysectors,reflectingavarietyofconsumerpreferences,includingconsumerpreferencesforsocialandethicalobjectivesthatalignwiththefirm’smissionandobjectives.Firmspossessingabundleofheterogenous,imperfectlymobileresourcestomeetthosepreferenceswillhaveacompetitiveadvantagewithinthatsegment(HuntandMorgan,1995).DonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

166148Handbookoftheoriesforpurchasing,supplychainandmanagementresearchDoherty(2011)arguesthatthestudycontributestoexplainingthesuccessofFTsocialenterprisesfoundedonasocialmission,despiteHuntandMorgan’s(1995)assertionthatsuperiorfinancialperformancemustbeaprimaryobjectivebeforesocialobjectivescanbeentertained.FindingsfromthecasestudiesrevealthestrategicimportanceforFTenterprisesofsocialresourcesasasourceofcomparativeadvantage,resultinginstrongperformanceacrossavarietyofdistributionchannels.Socialresourcesarecomprisedofthreeelements:ethicalandsocialcommitments,connectionswithpartners(upstreamanddownstream),andconsistencyofbehaviour(engenderingtrust,andabsenceofopportunism).Assuch,theauthorsuggeststhatthefoundationalpremiseP6inR-Atheoryshouldincludetheadditionofsocialresources.MarketingBuildingonR-Atheory,CacciolattiandLee(2016)analysemoderatorsofthemarketingcapability‒firmperformancerelationship,includingmarketorientation,strategicorientationandorganizationalpower.Thestudyfocusesonintangiblemarketingcapabilitiesthat,accord-ingtoR-Atheorytenets,canenablemoreefficientand/oreffectivevaluecreationforsomeheterogeneousmarketsegments(HuntandMorgan,1995).Specifically,thestudymeasuresthedirectandmoderatedeffectsofaccountabilityofthemarketingdepartment,customerconnection,perceivedcreativityofthemarketingdepartment,levelofinterdepartmentalcol-laboration,andlevelofperceivedinnovationwithinthemarketingdepartment.Theauthorssuggestthatextantmarketingresearchrevealsatensionbetweenashifttoaservice-dominantlogicandaconcurrentdiminishingimportanceofthemarketingdepart-mentwithinfirms.ApplicationofR-Atheoryguidednoveloperationalizationsofintangiblemarketingcapabilitiesandidentificationofimportantmoderators,demonstratingvariousapproachestomarketingcompetitiveadvantageleadingtoimprovedfirmperformance,thusamelioratingconcernsofdiminishedimportanceofmarketingwithinthefirm.Golicicetal.(2012)proposethatlogisticsserviceproviderscanincreasebrandequitybyleveraginganinformationalresourceadvantage.ThroughthelensofR-Atheory,thestudyrevealsthattwointangibleresources–informationquantityandinformationquality–com-priseinformationaladvantage.Themarketplaceadvantagederivesfromaccesstoinformationresourcesthataresuperiortothoseofcompetitors,includingaccurate,complete,timelyandcredibleinformation,allowingthecarriertomatchinformationcharacteristicswithuserneedsandthusmoreefficientlyandeffectivelyidentifyandserveitscustomers’needs.Becauseinformationalresourcesareheterogeneousandimperfectlymobile,theycanprovideanendur-ing,inimitablecomparativeresourceadvantage.PurchasingandSupplyManagementUnalandDonthu(2014)adoptR-Atheorytoexplorehowthetask-specificandsocialresourcesofabuyer‒supplierdyadinanexistingoutsourcingrelationshipcontributetocompetitiveadvantageandimprovedperformance.Thestudytakesaconsumerpackagedgoods(CPG)manufacturer’sperspectiveofoutsourcingthesalesandmarketingprocesstoasalesandmarketingagency(SMA).Resultsrevealthathigherlevelsofcomplementarityoftask-specificresources,andofabsorptivecapabilitiesassociatedwithlearningfromasharedunderstandingofgoalsandprocesses,resultinimprovedpartnershipperformance.DonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

167Resource-advantagetheory149Reimannetal.(2017)measuretheuseofpowerbyabuyer(supplier)tonegotiatelower-costresourcesfromtheirsupplier(buyer)inamultimarketenvironmentinwhichmultiplebusinessunitsofthefocalfirmhavebusinessrelationshipswiththetradingpartner.Usingavignetteexperimentaldesign,thecostreductionsoughtbywieldingpowerinvolvesadoptionbythetradingpartnerofastreamlineddeliveryprocessresultingincostsavingstothebuyer(supplier)andcostincreaseforthesupplier(buyer).Thedependentvariableinthisstudyisthetypeofpowerthatwouldlikelybeusedinthesituation(thatis,reward,coercionorlegallegitimate),givenvariousscenariomanipulations.Resultssuggestthatdifferentformsofpowercanbeleveragedasaresourcebybuyersandsupplierstoobtaincostsavingsfromtradingpartners,giventhelevelofmultimarketcontactandcentralizationofthefocalfirm’sbuyingorsellingprocesses.SupplyChainManagementGroundedinR-Atheory,Adamsetal.(2014)exploretheimpactofsupplychaincollaborationandintegrationonperformance,mediatedbytechnology.Thestudydistinguishescollabora-tionandintegrationasoperantresourcesandtechnologyasamoretangibleoperandresource.Operantresourcesarecharacterizedasintangiblehumanresourcesthatactonotherresources.Operandresourcesarecharacterizedastangible,physicalresourcesuponwhichanoperationisperformed,suchastechnology,capitalequipmentorrawmaterials(ConstantinandLusch,1994).Examplesofoperantresourcesinclude:skill-and/orknowledge-basedresourcespossessedbyindividualemployees;organizational-levelroutines,culturesandcompetences;informationalresources,suchthoseemergingfromsuperiorcustomer,competitorandmac-roenvironmentalanalysis;andrelationalresourceswithsupplychainpartners(MadhavaranandHunt,2008),includingcollaborationandintegration(Adamsetal.,2014).Inthisstudy,theoperantresourceswereoperationalizedastherespondents’perceptionsoftheirfirm’slevelofintegrationandcollaborationexternallyacrosssupplychainrelationships(Adamsetal.,2014).FollowingthefoundationalpremisesofR-Atheory(HuntandMorgan,1995,1997),theauthorssuggestthattheseoperantresources,comparedtooperandresources,aremoreinimitableandmoreimperfectlymobileand,thus,agreatersourceofcompetitiveadvantage.Theyalsorecognizethehierarchicalnatureofoperantresources,withthosethataremorecomplexandinterconnectedthanothersaspossessingthepotentialforgreatercompetitiveadvantage.Specifically,thecollectiveimpactofthehigher-orderresourcesofcollaborationandintegration–throughtheoperandvehicleofinterfirmtechnology–positivelyinfluenceslogisticsservicecompetencyandfirmperformance.ThestudydemonstratestheR-Apremisethatacomparativeadvantagestemmingfromaproperlybundledheterogeneousportfolioofoperantandoperandresourcesconstitutesamarketplacepositionofenduringcompetitiveadvantagegeneratingsuperiorfirmperformance.OUTLOOKONFUTURERESEARCHOPPORTUNITIESAreviewoftheliteraturerevealsthatthepreponderanceofstudiesinmanagement,purchas-ingandsupplychainmanagementthatreferenceresource-advantagetheoryareconceptualratherthanempirical.R-Atheorysuppliesarobust,detailedframeworkforexaminationofcompetitionatmultiplelevelsofanalysisandacrossseveraldisciplines.ThelackofempiricalDonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

168150Handbookoftheoriesforpurchasing,supplychainandmanagementresearchstudiesopensupseveralareasofinquirythatwouldbeusefultounderstandthephenomenonofcompetitioninthesedomains.ThedependentvariableinR-Atheory–financialperformance–needstobefurtherexploredandtested.Purchasingandsupplychainmanagementarerepletewithfinancialindicatorsofperformance.Whichfinancialperformancemeasuresprovidethestrongestsignalsofcompetitiveposition?Studiessuggestthatfinancialperformancealonemaynotbeasufficientindicatorofanorganization’spositionofcompetitiveadvantage.AssuggestedbyDoherty(2011),enterprisesfoundedonsocialmissionsalsomeasuretheirabilitytodeliversocialgoods(forexample,mealsserved,vaccinationsprovided,carbonfootprintreduced),inadditiontofinancialperformance.Arethereadditionalperformancemeasuresthatreflectanorganization’scompetitiveposition?ThefeedbackloopsinR-Atheoryarecriticalmechanismsofthedynamicnatureofcompe-tition.Theserelationshipsprovideatheoreticalbasisforexaminingtherolesoforganizationallearningandinnovationindrivingcompetition.Adamsetal.(2014)provideinsightintothecharacteristicsofresourceadvantagesthataremoreorlesslikelytocontributetoasustainablepositionofcompetitiveadvantage.Rapidtechnologicaladvancesacrossmultiplebusinessdisciplinesofferalaboratoryforexaminingwhenandhoworganizationallearningspursincrementalinnovationinadoptingbestpracticesofcompetitors,versusmajorinnovationthatdisruptsthestatusquoandsetsanewbenchmarkfortheindustry.UnderstandingexternalfactorsthatmoderateormediatetherelationshipsamongthekeyvariablesofR-Atheoryareincreasinglyimportantintoday’sglobalmarketplace.Socialresources,societalinstitutionsandpublicpolicyvarywidelyacrossregionsoftheworld,affectingthecontributionlevelsofportfoliosofresourcesoncompetitiveadvantage.Forexample,whendoespublicpolicyeffectivelyleveragetheresourcesofaregionandwhendoesitconstraintheeffectiveuseofresources?Arethereinstitutionsthataccelerateorblockinnovation?Anexaminationofnon-resourcesandcontra-resourcescouldprovideconsiderableinsightintothedynamicnatureofcompetition.Forexample,whatconditionsaremostlikelytoelim-inatethecontributionofaresourcetovaluecreation?Whichexternalfactorsmorelikelytotriggerthechange?Howdoesmanagementdetecttheshift?Whatarethechallengesassociatedwithremovingnon-resourcesandcontra-resourcesfromafirm’sresourceportfolio?R-Atheoryispremisedonanexaminationofcompetitionformarketsegments.However,competitionexistsnotonlyfordownstreamcustomersbutalsoforupstreamsuppliers.Differentbundlesofresourcesarelikelytobeantecedentstocomparativeadvantageinthecompetitionforsuppliers.Forexample,humanandorganizationalresourcescouldbemoreimportantthanotherresourcesinattractingandretainingcriticalsuppliersofscarceresources.DoesR-Atheoryprovideaframeworkforunderstandingsuperiorperformanceinthecompe-titionforsuppliers?Asageneraltheoryofcompetition,R-Atheoryiswellsuitedtotheexaminationofnotonlythemicro-phenomenonoffirm-to-firmcompetitionbutalsothemacro-phenomenaofcompetitionamongsupplychains,countriesandtradingregions.Thesehigher-levelanalysesareneededtounderstandphenomenarelevanttomanagement,purchasingandsupplychainmanagementsuchassustainability,riskmanagementandcybersecurity.Forexample,canR-Atheoryexplainthedynamicsofcompetitivepositionsoftradingregionsinthecompe-titionforadvancedmanufacturing?CanR-Atheoryaccountforcompetitionamongtradingregionsininnovationssuchasautonomousvehicles,blockchainplatformsorrobotics?DonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

169Resource-advantagetheory151CONCLUSIONInthischapter,weprovideanintroductionandoverviewofthebasictenetsandusesofresource-advantagetheory.Importantly,wehighlightR-Atheoryasageneraltheoryofcom-petitionthatopensthedoortoarichrangeofresearchinmanagement,purchasingandsupplychainmanagementatmultiplelevelsofanalysis.StudiesthatreferenceR-Atheoryarelargelyconceptual,leavingagreatdealofopportunitytoapplyandfurtherdevelopthetheoryinempiricalstudies.Asanevolutionaryprocesstheory,R-Atheoryseemstobeparticularlywellsuitedforresearchquestionsthatseektounderstandandexplainbusinessphenomenasituatedintheincreasingpaceofchangeoftoday’sglobalbusinessenvironment.ResearcherswhowouldliketoconsiderR-AtheoryasatheoreticallensfortheirstudiesshouldreadthemonographbyShelbyHunt(2000).AsHuntnotesintheintroduction,werou-tinely‘assumecompetition’asaconditionofbusinessandlife.R-Atheoryoffersaframeworkforthinkingaboutcompetitionandorganizingourstudiesinawaythatsupportsaprogrammeofresearchthatcaninformmultipledisciplines.REFERENCESAdams,F.G.,Richey,R.G.,Autry,C.W.,Morgan,T.R.,andGabler,C.B.(2014).Supplychaincollabo-ration,integration,andrelationaltechnology:Howcomplexoperantresourcesincreaseperformanceoutcomes.JournalofBusinessLogistics,35(4),299–317.Arvis,J.F.,Ojala,L.,Wiederer,C.,Shepherd,B.,Raj,A.,Dairabayeve,K.,andKiiski,T.(2018).ConnectingtoCompete:TradeLogisticsintheGlobalEconomy.Washington,DC:WorldBank.Retrievedfromhttps://lpi.worldbank.org/report.Bals,L.,andTate,W.L.(2018).Sustainablesupplychaindesigninsocialbusinesses:Advancingthetheoryofsupplychain.JournalofBusinessLogistics,39(1),57–79.Barney,J.B.(1991).Firmresourcesandsustainedcompetitiveadvantage.JournalofManagement,17(1),99–120.Cacciolatti,L.,andLee,S.H.(2016).Revisitingtherelationshipbetweenmarketingcapabilitiesandfirmperformance:Themoderatingroleofmarketorientation,marketingstrategyandorganisationalpower.JournalofBusinessResearch,69(12),5597–5610.Constantin,J.A.,andLusch,R.F.(1994).UnderstandingResourceManagement:HowtoDeployYourPeople,Products,andProcessesforMaximumProductivity.Oxford:PlanningForum.Davis,D.F.,Davis-Sramek,B.,Golicic,S.L.,andMcCarthy-Byrne,T.M.(2019).Constrainedchoiceinsupplychainrelationships:theeffectsofregulatoryinstitutions.InternationalJournalofLogisticsManagement,30(4),1101–1023.Davis,S.andSmith,T.(2003).Cororatestrategiesforelectronicsrecycling:Ataleoftwosystems.SiliconValleyToxicsCoalition.Accessedon29March2021athttp://svtc.org/wp-content/uploads/prisno_final.pdf.Dierickx,I.,andCool,K.(1989).Assetstockaccumulationandsustainabilityofcompetitiveadvantage.ManagementScience,35(December),1504–1511.Doherty,B.(2011).Resourceadvantagetheoryandfairtradesocialenterprises.JournalofStrategicMarketing,19(4),357–380.Fawcett,S.E.,Fawcett,A.M.,Watson,B.J.,andMagnan,G.M.(2012).Peekinginsidetheblackbox:Towardanunderstandingofsupplychaincollaborationdynamics.JournalofSupplyChainManagement,48(1),44–72.Fremeth,A.R.,andRichter,B.K.(2011).Profitingfromenvironmentalregulatoryuncertainty:Integratedstrategiesforcompetitiveadvantage.CaliforniaManagementReview,54(1),145‒165.Golicic,S.L.,Fugate,B.S.,andDavis,D.F.(2012).Examiningmarketinformationandbrandequitythroughresource-advantagetheory:Acarrierperspective.JournalofBusinessLogistics,33(1),20–33.DonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

170152Handbookoftheoriesforpurchasing,supplychainandmanagementresearchHunt,S.D.(2000).AGeneralTheoryofCompetition:Resources,Competences,Productivity,EconomicGrowth.ThousandOaks,CA:SAGEPublications.Hunt,S.D.,andDavis,D.F.(2008).Groundingsupplychainmanagementinresource-advantagetheory.JournalofSupplyChainManagement,44(1),10–21.Hunt,S.D.,andMorgan,R.M.(1995).Thecomparativeadvantagetheoryofcompetition.JournalofMarketing,59(2),1–15.Hunt,S.D.,andMorgan,R.M.(1997).Resource-Advantagetheory:Asnakeswallowingitstailorageneraltheoryofcompetition?JournalofMarketing,61(3),74–82.Madhavaram,S.,andHunt,S.D.(2008).Theservice-dominantlogicandahierarchyofoperantresources:Developingmasterfuloperantresourcesandimplicationsformarketingstrategy.JournaloftheAcademyofMarketingScience,36(1),67–82.Nichols,B.S.,Stolze,H.,andKirchoff,J.F.(2019).Spillovereffectsofsupplychainnewsonconsumerperceptionsofproductquality:Anexaminationwithinthetriplebottomline.JournalofOperationsManagement,65(6),536–559.North,D.C.(1990).Institutions,InstitutionalChange,andEconomicPerformance.Cambridge:CambridgeUniversityPress.Reimann,F.,Shen,P.,andKaufmann,L.(2017).Multimarketcontactandtheuseofpowerinbuyer–supplierrelationships.JournalofBusinessLogistics,38(1),18–34.Sanchez,R.,Heene,A.,andThomas,H.(1996).DynamicsofCompetence-BasedCompetition.NewYork:ElsevierScience.Unal,B.,andDonthu,N.(2014).RoleofabsorptivecapabilitiesinoutsourcingtheheadquarterssellingtaskintheUnitedStates.IndustrialMarketingManagement,43(6),1079–1084.Wacker,J.G.(2008).AConceptualunderstandingofrequirementsfortheory-buildingresearch.JournalofSupplyChainManagement,44(3),5–15.DonnaF.DavisandTeresaM.McCarthy-Byrne-9781839104503DownloadedfromPubFactoryat05/28/202209:10:23AMviaColumbiaUniversityLibrary

17111.ResourceandnaturalresourcedependencetheoriesinsupplychainsLojainAlkhuzaim,MahtabKouhizadehandJosephSarkisINTRODUCTIONTheconceptofresourcedependenceisverybroadandhasrootsinotherfields;forexample,economicsandecology.Resourcedependencetheory(RDT)isanorganizationaltheorythatexplainsandinformstheextentofrelationshipsbetweenorganizationsandtheirexternalenvironment(PfefferandSalancik,1978).Thetheoryofresourcedependenceessentiallystatesthatentitiesmaybedependentonotherorganizationsforresources,especiallywhencriticalresourcesarescarce(PfefferandSalancik,1978).Itisespeciallypertinentinsupplychainmanagement(SCM)becausethemanagementofsuppliesmeansthemanagementofresources;typically,betweentwoindependententities.Also,RDTprovidesaconceptualiza-tionoforganizationalinterrelationshipsdealingwithissuesofdependence,uncertainty,powerandscarcitywithregardtoresourcesupply(Nienhüser,2008).FromanRDTperspective,resourcescharacterizedbycriticalityandscarcitycanshapeandcontrolorganizationalrelationships(Johnson,1995).Thetheoryelaboratesuponpossibleorganizationalactionstakentodealwithinterorganizationaldependenciestomanageuncer-tainty(PfefferandSalancik,1978).Additionally,RDTexplainssupplychaininstabilityfromtheperspectiveofallinvolvedentities;forexample,suppliersandthefocalcompany(Bodeetal.,2011).ExpandingonthebasicviewofRDT,thenetworkoforganizationalrelationshipsisnotonlypartofasocio-economicenvironmentbutalsointeractsdirectlyandindirectlywiththenaturalorecologicalenvironment(Tashman,2011).ThisbroaderviewextendsRDTtonaturalresourcedependencetheory(NRDT).Tashman(2011)introducedNRDTasanextensionofRDT,highlightingtheimportanceofthedynamicmutualrelationshipbetweenorganizationsandthenaturalenvironment.SimilartoRDT,thenaturalviewofresourcedependenceaddressesuncertainty,dependenceandscarcity.Socio-ecologicalsystems(SESs)maybelinkedtoNRDTasabroader-levelper-spective.SESsconsiderorganizationsandthenaturalenvironmentastwointeractingentities(Bergmannetal.,2016;Tashman,2020).NRDTfocusesonthreeimportantrelationships:organizationaldependenceonnaturalenvironment,ecologicalimpactonorganizations,andorganizationalimpactonnaturalenvironment(Tashman,2011).FromanSCMperspective,dependenceonthenaturalenvironmentandscarcityofnaturalresourcesmaygreatlyaffectthestabilityofsupplychains(Kalaitzietal.,2018).Inotherwords,withtheincreasingconsumptionofnaturalresources,resourcedepletionbecomesaconcernespeciallyiforganizationalsurvivalisassociatedwiththeavailabilityofscarceresources.Thus,sustainabilitypracticeswithinsupplychainscanhelptomanagecomplexrelationshipsfromtheNRDTviewpoint;effortstomanageresourcesinawaythatconserves153LojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

172154Handbookoftheoriesforpurchasing,supplychainandmanagementresearchthem,orfindingsubstitutes,wouldbeexamplesofavenuesandrelationshipsthatcanbestudied.Forthischapter,thetwotheoreticallenses,RDTandNRDT,arereviewedfromabroaderSCMperspective,takingintoconsiderationtheexternalfactorsaffectingorganizations’rela-tionshipsandperformance.Also,multiplelevelsofanalysisarediscussedinrelationtothesetwotheories.Lastly,futureresearchopportunitiesarepresentedfromtheSCMviewpoint.KEYVARIABLESANDDEFINITIONSBuildingonthepremisesofopensystemstheory(KatzandKahn,1971),RDTincludesemphasisontheeffectofexternalresourcesdependenceoninterorganizationalrelationships,andthedegreeofuncertaintyassociatedwithsuchdependence.AccordingtoPfefferandSalancik(1978),keyvariablesofRDTinclude:(1)criticalityoftheresourceneededtosurviveinthecurrentenvironment;(2)power;and(3)availabilityofalternatives.Astheroleofthenaturalenvironmentbecameincreasinglysignificantwithregardtoorganizationalrelation-ships,anemergentviewoftheRDTwasdevelopedtoincludethenaturalresourcedimension.NRDTisanextensionofRDThighlightingtheimportanceofdirectandindirectdependenceoforganizationsonthenaturalenvironment(Tashman,2011).Thus,themainvariablesofNRDTare:(1)organizationalecosystemdependence;(2)ecologicalimpactsonorganizations;and(3)organizationalimpactsontheecosystem,ratherthanorganizationalinterdependence.Withregardtothelevelofanalysis,RDTismoresuitabletobeappliedwithinanorgan-izationalordyadiclevelofanalysis.However,somescholarshaveextendedthetheorytoabroaderlevelwhichwillbeexplainedinmoredetailinalatersection.AsforNRDT,themacrolevelanalysis–includingenvironmentalaswellasmultipleorganizationalrelation-ships–fitsthetheory’sconstructandelements.Table11.1summarizesthemainaspectsofRDTandNRDT,includingtheirelements,keyvariablesanddefinitions.CriticalityofResourcesFromtheRDTperspective,theabilitytosurviveinthecompetitiveenvironmentisdeterminedbytheorganizationalcapabilitytoobtaincriticalresourcesfoundoutsidetheboundaryoftheorganization.Toconsideraresourceascriticalithastobeessentialtothesurvivaloftheorganizationinagivenmarket(PfefferandSalancik,2003).PowerTheroleofpowervariesaccordingtothedegreeofcontrolandownershipofcriticalresources.Figure11.1illustratesaninterdependentrelationshipwhereorganizationAisdependentonorganizationBwhichconsequentlyhaspowerovertheformer.Dependenceonanexternalorganizationgrowsasthelatterorganizationexercisesownershipofthecriticalresourceneededbyadependentorganizationforitsownsurvival(Emerson,1962).Strategiestomanagesuchdependenciesarediscussedlaterinthechapter.Theotherdirectionisalsoaconcern,wherethesupplyingorganizationmaybedependentonthebuyingorganization.Thepowerstructureandimbalancemayoccurineitherdirection.LojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

173Resourceandnaturalresourcedependencetheoriesinsupplychains155Table11.1DefinitionsofvariablesofresourcedependencetheoryandnaturalresourcedependencetheoryTheoryElementExplanationSupportingreferencesRDTUnitofanalysisOrganizations,organizationalresourcesJohnson(1995)andorganizationalrelationshipsLevelofanalysisOrganizationallevel,focusingonPfefferandSalancik(1978)interorganizationalrelationshipsbetweenorganizationsandexternalenvironmentKeyvariables/definitionsCriticalityofresourcesResourcesessentialtothesurvivalofPfefferandSalancik(2003)theorganizationinmarketPowerDegreeofcontrolandownershipofHillmanetal.(2009);criticalresourcesWeiner(1984)AvailabilityofalternativesScarcecriticalresourcesincreasetheJohnson(1995)levelofdependenceontheexternalenvironmentNRDTUnitofanalysisSocio-ecologicalsystemBergmannetal.(2016);Tashman(2020)LevelofanalysisMacrolevel:regional,global,duetoTashman(2011)resourcesacrossgeographiesKeyvariables/definitionsOrganizationalecosystemdependenceDegreeofcriticalityofnaturalresourcesTashman(2011)EcologicalimpactsonorganizationsImpactofnaturalforcesonincreasinguncertaintyandtheabilityoforganizationstoobtaincriticalnaturalresourcesOrganizationalimpactsonecosystemImpactoforganizationalactivitiesontheecosystemAvailabilityofAlternativeResourcesScarcityofcriticalresourcesplaysaroleinthelevelofdependenceexperiencedbetweenorganizations(PfefferandSalancik,1978).Moreover,thisvariableintersectswiththeothertwovariablesindeterminingthedegreeofdependence.Forexample,ifanorganizationisinpossessionofascarcecriticalresourcethathasnosubstitutablealternatives,itspowerandcontroloverdependentpartiesincreasessignificantly.OrganizationalEcosystemDependenceNRDTassumesthatorganizationaldependenceonthenaturalenvironmentisaffectedbyhowcriticalthenaturalresourcesaretotheorganization(Tashman,2011).Thetheorystatesthatorganizationsaredirectlydependentonnaturalresourcesandservices.Thus,ifacriticalnaturalresourceisrequiredtosustainabusiness,dependenceontheecosystemincreasesproportionally.LojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

174156Handbookoftheoriesforpurchasing,supplychainandmanagementresearchNote:ThisfigureintegratestheRDTframeworkprovidedbyPfefferandSalancik(2003)andtheNRDTframeworkpresentedbyTashman(2011).Thefigureillustratesabroadpresentationofthetwotheoreticalframeworks.Figure11.1ResourcedependencetheoryandnaturalresourcedependencetheoryintegrativeframeworkEcologicalImpactsonOrganizationsThisrelationshipisreflectedbyforcesofnaturethatcancauseuncertainty,andeventuallyaffectstheabilityoforganizationstoobtaincriticalnaturalresources(Tashman,2011).Inotherwords,accordingtoNRDT,organizationswithhighdependencyonnaturalresourcesarehighlysusceptibletonaturalforceswhicharenearlyimpossibletomanage(Winnetal.,2011).OrganizationalImpactsontheEcosystemThisvariablefocusesontheimpactoforganizationalactivitiesontheecosystem(Tashman,2011).Organizationalpracticesandactivitiescangreatlyaffectthequalityofthesurroundingnaturalenvironment,whicheventuallyimpactsupontheavailabilityofnaturalresources.Forinstance,overconsumptionofrenewableandnon-renewableresourcescausesdisruptiontotheabilityoftheecosystemtoregenerate.LojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

175Resourceandnaturalresourcedependencetheoriesinsupplychains157Thefollowingsectionsprovideamoredetailedfoundationalreviewoftheconstructs,definitionsandhistoricaloverviewsofRDTandNRDT.Theyalsopresentthetheoreticalapplicationsofthetwotheoriesindifferentresearchareasanddisciplines.RESOURCEDEPENDENCETHEORYTheoreticalConstructsandHistoricalOverviewStudieshaveviewedorganizationsasanetworkofsocial,economicandprofessionalrelation-shipsthatinteractdynamicallywiththeirsurroundingenvironments.Theserelationshipsarescientificallyexplainedonthepremisesofopensystemstheory(KatzandKahn,1971).Theideaofresourcedependencewasintroducedinthe1970stoexplaineconomics-relatedissues–suchasmergersandboardinterrelations–asanattempttoprovideanalternativetheoreticalgroundingforeconomictheoriesoforganizationalrelationships(PfefferandSalancik,2003).ThefoundationoftheRDTwasbuiltaroundtheideaofcriticalresourceacquisitionfromexternalsources,insteadoffocusingoninternalresourceuseandcapabilitybuildingthathasbeenhighlightedbymanyothertheories(PfefferandSalancik,2003),especiallytheresource-basedview(Barney,1991).IntroducedintotheorganizationaltheoreticliteraturebyPfefferandSalancik(1978),RDTfocusesontheinterorganizationalrelationshipstomanagethedegreeofdependencyontheexternalenvironment.AccordingtoRDT,insteadofadoptingaself-sufficientapproachinprovidingstrategicresources,organizationsoperatewithinanopensystemthatallowsforcontinuousexchangeofmaterials,information,skillsandexperts.Thehighlyinteractiveenvironmentinwhichorganizationsfunctioncontributestodepend-enceplayingafundamentalroleinshapingorganizationaldecisionsinadditiontocontributingtouncertaintyandrisk.ThissituationhelpstoexplainhowRDTmayexplainaspectsoforganizationalbehaviourandstructurebyemphasizingtheeffectofexternalpowerrelations(Nienhüser,2008).Thedirectionofinfluencebetweenorganizationsisaffectedbydepend-enceandpowerimbalances,andisrelatedtothedistributionofcriticalresources(CasciaroandPiskorski,2005).Nienhüser(2008)supportsthetheoreticalbasisofRDTwhichconsidersuncertaintyandcriticalityandtheirrelationtothedistributionofcriticalresources.AccordingtoPfefferandSalancik(1978),organizationalinterdependenciesaredeterminedbythreefactors:(1)critical-ityoftheresourceneededtosurviveinthecurrentenvironment;(2)power,degreeofcontrolandownershipofthecriticalresource;and(3)availabilityofalternatives.Scholarshavesuggestedtwodifferentwaystoaddressresourcedependencies:bridgingandbuffering.Asregardsbridging,organizationsadapttobeingdependentonexternalpartiesforresourcessuppliesandmanagethisdependencewithanumberofactionsoractivities.PfefferandSalancik(1978)identifiedfivedifferentbridgingactivitiestoreduceinterdependencyanduncertainty:(1)mergersandacquisitions;(2)jointventures;(3)boardsofdirectors;(4)politicalaction;and(5)executivesuccession.FromtheRDTperspective,thesestrategiesareadoptedbyorganizationswithhighdependencyonexternalresourcesinanattempttoreduceinterdependenciesandthusabsorbcompetition(Hillmanetal.,2009;Pfeffer,1972a).Additionally,toreduceuncertainty,thesestrategiesareusefulinacquiringpowerandsecuringaconsistentresourcesupply,especiallywiththeincreasingcomplexityofinterorganizationalrelationships(Pfeffer,1987).LojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

176158Handbookoftheoriesforpurchasing,supplychainandmanagementresearchWithregardtotheboardofdirectors,studiessuggestthatRDTprovidesalogicalexplana-tionoftherelationshipbetweenboardsizeandexternalresources.Inotherwords,theboardofdirectorscanfacilitatetheprocurementofcriticalexternalresourcesthatareessentialtosustainanticipatedorganizationalperformance(Krolletal.,2007;Pfeffer,1972b).Asforthepoliticalactions,Hillmanetal.(2009)highlightedthelinkagesbetweenregulatoryactionsandinterdependenciesasanattemptbyorganizationstomanagetheircontroloverexternalresources.AnexampleofusingbufferingandbridgingformanagingapoliticalcrisisaretheenvironmentalissuesfacedbytheShellOilcorporationinitsenvironmentalcrisisaroundtheBrentSpardrillingplatformfromtheearly1990s(VandenBoschandVanRiel,1998).Thisrelationshipfocusesonstakeholdermanagementinadditiontobuildingbufferingcapabilitiesforthesetypesofcrises;inthiscase,acorporatesocialresponsibilityandenvironmentallyorientedcrisis.Finally,PfefferandSalancik(1978)usedRDTtoexplaintheconnectionbetweeninter-dependenciesandthetransitioningphasepriortoexecutivereplacement.Studiesshowthatintra-organizationaldistributionofcontrolandpowerisaffectedbydegreeofdependencyontheexternalenvironment(Hillmanetal.,2009;Weiner,1984).Bufferingdiffersfrombridginginthatorganizationstrytomitigateexternaluncertaintiesbyfocusingoninternalactivities(Thompson,1967);forinstance,securingsufficientinventorytoavoidsupplyuncertainty.Thebufferingaspectsmayrelatetobuildinginternalcapabilitiesandresourcessuchthatexternaldependenceimbalancesarelessened.Bufferingmayalsoprovidegreaterpowertoorganizationswhomayhavebeenmoredependentonexternalresources.Forexample,certifyingbackupsuppliers,andaccesstomultiplemodesoftransportation,helptobuildbuffersbyprovidingtheabilitytomulti-sourceortousealternativeformsoftransporta-tion(Manhartetal.,2020).Bufferingandbridginghaveasignificantinfluenceonthegrowingnumberofresearchinvestigationsaroundsupplychainriskmanagement.TheoreticalApplicationsWithintheSCMliterature,RDTisbroadlyusedtodealwithenvironmentalinterdependencyanduncertaintyissues,andhasbeenintegratedwithothertheoriestogiveaholistictheoreticalperspectiveofaspecificresearcharea(Ozturk,2021).RDThighlightstheroleofdepend-ency,uncertaintyandpower/controlaffectingthesupplychain’sstabilitywheremaintainingacertainflowofinputsandoutputsiscrucial(PfefferandSalancik,1978).Supplychainsconsistofanumberoforganizationsthatarehighlyconnectedandinvolvedinoperationalactivitiesformingcomplexrelationshipsthatrequireelucidationofsomesort(HajmohammadandVachon,2016).Inthisregard,animportantroleofRDTliesinthefactthatinterdependenciesactasacatalystforcollaborativesustainablerelationshipsbetweenrelatedparties(PaulrajandChen,2007).Accordingly,RDThasbeenusedwithintheSCMcontexttoexplainseriesofrelationshipslinkingfocalfirmswiththeirsuppliersandcustomers(CrookandCombs,2007).ThestudybyCrookandCombs(2007)discussestheeffectofresourcesqualityonbargainingpowerinsupplychains,andtheoverallimplicationsofsuchpowerondifferentsupplychainmembers.RDTisconsideredoneofthefirstorganizationaltheoriesthatanalysesinterorganizationalrelationshipsfromasocio-economicperspective;however,itdoesnotexplainthetypeofpower‒forexample,coerciveornon-coercive‒andcanbeintegratedwithotherorganiza-tionaltheoriessuchasinstitutionaltheory(IrelandandWebb,2007).LojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

177Resourceandnaturalresourcedependencetheoriesinsupplychains159ThesignificanceofsupplychaininstabilityandriskmanagementhasbeenviewedfromtheperspectiveofRDTinwhichresponsesofsuchdisruptionshavealsobeenaddressedtoreducerelateduncertainties(Bodeetal.,2011).Inlinewithmanagingsupplychaindisruption,HajmohammadandVachon(2016)addressedriskmanagementfromtwotheoreticallenses‒RDTandagencytheory‒suggestingfourdifferentstrategiestomitigaterelatedrisks:riskavoidance,monitoring‐basedriskmitigation,collaboration‐basedriskmitigation,andriskacceptance.Itisevidentthatsupplychainriskmanagementhasbeenwidelyaddressedfromtheperspec-tiveofRDT,proposingmultiplemitigatingstrategies,alongwithothertheoriessuchasorgan-izationalinformationprocessingtheory(Manhartetal.,2020).Forinstance,buyer‒suppliercontractdesignispresentedasanimportantstrategyforsupplychainpartiestomanageasso-ciatedrisks(EckerdandGirth,2017).Moreover,inanempiricalstudyinformedbyRDTprin-ciples,Elkingetal.(2017)testedthreedifferenthypotheses:supplychaindependence,leaninventory,andfinancialperformance.Similarly,Carretal.(2008)empiricallyinvestigatedtheeffectofsuppliers’dependenceonsuppliertrainingandparticipationinproductdevelopment,incorporatingRDTasatheoreticallensintheirstudy.OtherstudieshaveintegratedRDTatabroaderlevel.Darbyetal.(2020)usedRDTtoexplainsupplychainoperationsstrategiesatboththemacroandtheindustrylevel.Atthemacrolevel,studiesinvestigatetheeffectofuncertaintycausedbygovernmentpolicyonafirm’sabilitytoaccesscriticalresources.Moreover,thislineofstudysuggeststhatuncer-taintyattheindustrylevelmakesorganizationsmoreinclinedtoadoptbufferingstrategies.Thereareimplicationshereformultiplelevelsofanalysisresearch,includingindustry,supplychainandorganizational-leveljointanalyses.ArecentresearchstudyusedacasestudyofaNorwegiancoopetitionalliancetoexplaintheeffectofresourcedependenciesonthestrategicorganizationalrelationsfromtheperspectiveofRDT(Jakobsen,2020).Theideaofcoopetitionseekstojoinresourceshorizontallywithcompetitors,tobuildefficiencies(Trappetal.,2020).AnotherstudyfocusedontheeffectoftopmanagementsupportontheadoptionofSustainableDevelopmentGoals(SDGs)indevel-opingeconomiessuchasPakistanbyincorporatingRDT(Ilyasetal.,2020).AlsodrawingonRDT,Laietal.(2013)testedthefeasibilityoflogisticsintegrationandinterorganizationalrelationshipsonenhancingfinancialperformancebyhelpingorganizationsdealwiththirdpartylogisticschallengesanddependencies.Lastly,RDThasbeenintegratedtoaddressthepotentialbenefitsofimplementingtheInternetofThings(IoT)intotheservicetransformationofmanufacturerstostrengthenthebuyer‒supplierrelationship(Boehmeretal.,2020).TheselatestdirectionsarebroadlyjuxtaposedtoexemplarymajordevelopmentsofRDTinthesupplychainliterature;forexample,resource-dependenttopicssuchassustaina-bility,andriskmanagementtechnologydevelopment(KimandFortado,2021).NATURALRESOURCEDEPENDENCETHEORYTheoreticalConstructsandHistoryOverviewBecauseofthevitalsignificanceofnaturalresourcesandtheireffectonorganizationalperfor-mance,Tashman(2011)introducedanexpandedperspectiveofRDTbyaddinganecologicalperspectivetoit.ThemainfocusofNRDTisonthedependencybetweenorganizationsandLojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

178160Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtheirnaturalenvironmentasresourcesareexchangedfromonepartywithmorepowerandcontroltoadependentparty.Hence,thedifferencebetweenPfefferandSalancik’s(1978)RDTpropositionandTashman’s(2011)propositionisthatthelatterexpandedthelevelofanalysisfromaninterorganizationalleveltoanSESlevel.SESsinclusivelyaccountforinter-connectedelementsofsocial,biologicalandphysicalsystems(Chapinetal.,2009).SESsarecomprisedofcomplexecosystems,wherelargerecosystemswithgreatercomplexitygenerategreateruncertainties(Youngetal.,2006).AnSESandNRDTperspectiveallowstheoreticiansandscholarstoconsiderconflictinginstitutionallogicsandtheirimpactonhoworganizationsviewnaturalresourcesandecosystemsmanagement(Tashman,2020).Tashman(2011)introducedNRDTtoextendthetraditionalperspectiveofRDT.ThecaseexampletointroducetheconceptwastomeasurethecorporateclimatechangevulnerabilityoftheskiingindustryintheUnitedStates.NRDTstatesthatorganizationsaredirectlyandindirectlydependentonnaturalresources,suchassun,water,energy,landandair.Ecologicaleconomistshavealsousedtheterminologyofenvironmentalrentsandinternalizingexternalities–tonameacoupleofexamples–tohelpexplainthisrelationship.NRDTisconstructedaroundtheideathatorganizationsareasubsys-temofthesocialandecologicalsystemwhereorganizationsandnaturalresourcesarethetwomainelementsofitsconstruct(Bergmannetal.,2016).Tashman(2011,p.62)describesnaturalresourcedependenceas:‘afunctionoforgan-izationalecosystemdependence,ecologicalimpactsonorganizations,andorganizationalimpactsonecosystemratherthanorganizationalinterdependence’.Therefore,organizationalbehaviourandperformanceareaffectedbybothsocialsystemsandecosystems.Additionally,NRDTconstructsseektoevaluatethemutualeffectbetweenorganizationsandtheirnaturalenvironmentinawaythathasbeenignoredinsomeecologicaltheories.Thus,basedonNRDT,organizationsandthenaturalenvironmentinteractdirectlywitheachother.Theorganizationaldependenceonthenaturalenvironmentisaffectedbyhowcriticalthenaturalresourcesaretotheorganizationalsurvivor(Tashman,2011).Withregardtotheeco-logicalimpactonorganizations,thisrelationshipisreflectedbyforcesofnaturethatcancauseuncertaintyandeventuallyaffecttheabilityoforganizationstoobtaincriticalnaturalresources(Tashman,2011).Thus,theecologicalimpactonorganizationsisinfluencedbythedegreeofdependencythatorganizationshaveonnaturalresources.Withregardtothereciprocalrela-tionshipbetweenorganizationsandthenaturalenvironment,organizationalactivitiesplacenumerouspressuresontheecosystem.Overconsumptionofnaturalresources,andorganiza-tionalwaste,exemplifytheimpactthatorganizationshaveontheecologicalsystem.Ontheotherhand,someorganizationsarebecomingmoreenvironmentallyconsciousbydevelopingsustainablepracticesinitiativestoconservenaturalresources.TheoreticalApplicationsTheeffectandrelationshipofthenaturalenvironmentonorganizationshavebeenstudiedthroughavarietyoftheoreticalperspectivesandlenses,includingtheresource-basedview,thetrade-offphenomenon,andmanagerialopportunism(Bergmannetal.,2016).However,studiesthataddresshowdependencyonthenaturalenvironmentaffectsorganizationalper-formanceremainlimited.Forinstance,oneofthefewstudieshasbeenbyBergmannetal.(2016),whousedNRDTtoexplaintheeffectofextremeweatherconditionsonorganizationalfinancialperformance.LojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

179Resourceandnaturalresourcedependencetheoriesinsupplychains161Theissueofnaturalresourcescarcity–theshortageofnaturalresourcesthatcompaniesdependupon–hasrarelybeenaddressedinthesupplychainliterature.Someaspectsofmate-rialscarcityarepartofearlierresearchstreamsinmanufacturingsupplychainsthataddressedtheissuesrelatedtotheavailabilityofrawmaterialsandrareearthelements(REEs),includingmetals,waterandenergy(Alonso,2010).Naturalresourcedepletionandlimitedaccesstonaturalresourcesaresupplychainriskfactorsthatcanjeopardizebothcompaniesandsocie-ties,especiallyasanthropocentricactivitieshavecausedstressesonmanyplanetarybounda-ries(MekonnenandHoekstra,2016).Supplychainsneedtomanagetheirdependenciesonthenaturalenvironmenttodealwithuncertaintyandmitigatetheassociatedriskofpotentialdis-ruption(Bodeetal.,2011).Infact,earlyargumentsfor‘greening’ofsupplychainswerebasedonbusinesscontinuityaffordedbyenvironmentallysoundpractices(SarkisandDou,2017).NaturalresourcedependenceandscarcityhasnotbeenextensivelyaddressedintheSCMliterature.Majorsupplychainstudiesthatinvestigatednaturalresourceswereprimarilyconceptual.Forexample,Autryetal.(2013)highlightedtheimportanceofsupplychainmanagersunderstandingresourcescarcitydynamicstoachieveacompetitiveadvantage.Belletal.(2012)proposedanaturalresourcescarcitytypologybasedontheresourceconsumptionanddegradationstate.Theproposedmodelcanhelpsupplychaincompaniestochoosethebestmitigationstrategieswhileimprovingsupplychainperformance.Belletal.(2013)devel-opedaconceptualframeworkbasedontheresourceadvantagetheoryforaddressingnaturalresourcescarcityinclosedloopsupplychains.Amongthefewempiricalstudiesinthiscontext,astudybyKalaitzietal.(2018)exploredsupplychainstrategiesatdiversenaturalresourcedependencelevels,andfoundthatorgan-izationsusebufferingstrategieswhencriticalresourcesarescarce,andusebufferingandbridgingstrategieswhensuppliersubstitutabilityofthescarcenaturalresourceexists.Thelackofempiricalvalidationisagapinthestudiesthataddressnaturalresourcedependenceinasupplychaincontext.Despitethegrowingliteratureonthegreeninitiativesandsustainabil-ityinsupplychainsthatmainlyaimtosecuresustainableresources(Goldetal.,2010;Leeetal.,2012;Sarkisetal.,2011),thereisalackofresearchandempiricallytestedstudiesontheimpactofthenaturalresourcedependenceonsupplychainrelationships,structuresandperfor-mance.Supplychaincompaniesshouldcomprehendtherisksofnaturalresourcedependencyandmitigatethoserisksbyappropriatestrategiesandresponses.Figure11.1integratesandsummarizestheconstructsandelementsofRDTandNRDT(PfefferandSalancik,2003;Tashman,2011).ThetopsectionwithinFigure11.1illustratesRDTwhereinterorganizationalrelationshipsbetweentwoorganizationsarehighlighted.OrganizationAisdependentonorganizationB,whichconsequentlyhaspoweroverorganiza-tionA.ThispowercontinuesaslongasorganizationBisinpossessionofacriticalresourceneededbyorganizationAtosurvive.ButorganizationBmayalsobedependentonorganiza-tionAforfinancialresources.ThelowerpartofFigure11.1focusesontheroleofthenaturalenvironmentanditsrelationtoindividualorganizations.Organizationsaredependentonthenaturalenvironmentbyusingresourcesnaturallygeneratedbytheecologicalsystem;forexample,water,sunlight,soilandminerals.Furthermore,thenaturalenvironmentplacessomeconstraintsonorganizationalperformance;forexample,naturalforcesandcrisesfrombothshort-termandlong-termper-spectives.Alternatively,organizationalactivitiesimpactuponthenaturalenvironmenteitherpositively–forexample,greeninitiatives–ornegatively,suchaspollutantemissions.LojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

180162Handbookoftheoriesforpurchasing,supplychainandmanagementresearchOUTLOOKONFUTURERESEARCHOPPORTUNITIESRDTisagrowingareaofimportanceinSCMbutlimitedliteratureexistssupportingtheinte-grationofnaturalresourceswithintheconstructofRDTfromanSCMperspective.AlthoughRDTiswidelyusedtoaddressenvironmentaluncertaintyissues(López-Gameroetal.,2011)underrepresentedopportunitiesstillexist.Onepotentialareaforfutureresearchistheintegra-tionbetweenRDTandothertheoreticallensestoinvestigateorganizationalinterdependencies(Wryetal.,2013);specifically,highlightingthedynamicrelationshipbetweenorganizationsandtheirenvironmentbyadoptinganintegrativeapproachwithregardtothetheoreticallensesusedtoexplainaparticularorganizationalbehaviour.Moreover,currentapplicationsofRDTaresignificantlydirectedtostrategicmanagementissues;thus,thereisaneedtoexpandthetheorytomultipleorganizationalareas(Ozturk,2021).Inotherwords,futureresearchcangivemoreinsightsabouttheroleofoperationaldecisions(forexample,sourcing)inmanaginginterdependencies.Anotherpotentialareatoinvestigateisexploringupdatedmechanismstomanagedepend-enciesandorganizationalpowerthatwouldbemoretailoredtodealwithrecentchallengesofanextremelyuncertainenvironment.Also,assupplychainsexpandregionallyandglobally,differenttypesofuncertaintiesmayemerge,openingnewvenuesofunexploredaspectsofRDT.Additionalworkisneededtoinvestigatetheroleofgovernmentpoliciesandregulationsonuncertaintiesrelatedtoresourceacquisitionatanorganizationallevel(Darbyetal.,2020).Lastly,moreempiricalstudiesareneededinthecontextofRDTtotestthenetworkofrelation-shipssuggestedbythetheory(RoundyandBayer,2019).Onepotentialareaofinvestigationistheroleofintegratedandinterorganizationaltechnolo-giessuchasthosefromIndustry4.0andotherdigitalizationtechnologies(Sarkisetal.,2020).Aspecificexamplethatmayprovideincreasedre-evaluationistheissueofhowblockchaintechnologymayinfluencepowerstructuresanddependenceonresourcesthatmaybemoreeasilyavailableormonitoredduetoblockchaintransparencyandtraceabilitycharacteristics(Kouhizadehetal.,2019).AsfortheNRDT,therearemanypossiblerelationshipsthatexistbetweenthenaturalenvironmentandsustainablesupplychainmanagement(SSCM)atvariouslevels.Basedonthat,applyingNRDTintoSCMisanemergentareathatneedstobedevelopedandtailoredtoaddressSCMissuesandpractices.Wecanbeginbyconsideringindustrycharacteristics.Forexample,someindustriesareheavilydependentonnaturalresources,andfacedwithenviron-mentalrents.Extractiveindustriesthatincludeminingandpetroleumareheavilydependentonlandresources;irreversibleaffectswilloftenoccurduetotheirresourcesusage.Howirreversibility–atypeofpowerstructure–affectstherelationshipsbetweensupplychainsandthenaturalenvironmentisanimportantaspectfromthetheoreticaldevelopmentofNRDT.Agriculture,althoughmanymightconsiderthisarenewabletypeofnaturalresourceusage,isstillisinfluencedbynaturalresourcesdependence.InthiscasethetemporaleffectsmayplayalargerroleinhowNRDTrelationshipsexist.Thatis,climatechangecancauseagriculturalgeographytochangeimmensely,thereforehowpolicyandpracticesfromagriculturechangebasedonthisdependency,andatleastawareness,ofnaturalresourceuseanddepletion,canpotentiallybestudied.RelatedtotheNRDTrelationships,scarcitymaybecomeaconcernforthecontinuityofsomesupplychains.Naturalresourcedepletionprovidesgreaterpowerrelationships;corpora-tionspracticingsustainablepracticesintheseafoodindustry,forexample,canhelptomaintainLojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

181Resourceandnaturalresourcedependencetheoriesinsupplychains163abalanceinNRDT.Inthiscase,extendingtothetypeofpracticestohelpmanageresourcessuchthatthebalanceremainscanbeexplained,tohelporganizationsandtheirsupplychainbuildresilience.Thiscanhelptobuildarelationshipwithnaturewheredependencemaylessen,throughsuchactivitiesassustainablefishing;oreven,insomeotherindustries,circulareconomypracticesandalternativesourcesofnaturalresources.HowthesevariousactivitiescanhelporganizationstomanagetheirecosystemservicesandenvironmentalrentscanbeinvestigatedfromanNRDTperspective(Tashman,2020).OutsideofNRDTthereisabeliefthatnatureshouldbetreatedasanentity,orasastake-holder(DriscollandStarik,2004).However,thiscanbeverydifficultfororganizationsandsupplychainstoaccept;anditisdebatedamongstscholars(Laine,2011;Starik,1995).Althoughnaturecannotspeakforitself,therearehumanproxiesthatspeakfornature–albeitimperfectly–andcanplayaroleinthispowerstruggleoverresourcedependence.Naturerequiresmoreofabalanceaswellwithitsdependencyonanthropocentricactivities;trustingsupplychainsnottodamagebiodiversity,resourcesorthegeneralclimateareallpartofthisdependencyontheactivitiesofsupplychains.Whatlevelofdependencyandcooperationbetweennature–anditsproxies–canresultinamoresustainablesupplychainenvironmentisabasicissueandconcern.Asanexample,aresustainabilitycertificationpolicies,whetherrequiredornot,andmanagedbynon-governmentalorganizations,partofaresourcedepend-encyarrangementwithnature(SoundarajanandBrown,2016)?NRDTfromtwoinstitutionallogicperspectives–economizingversusecologizing–mayalsocauseorganizationsandtheirsupplychainstobehaveverydifferently(Tashman,2020).Aneconomizinglogicfocuseson‘win‒win’opportunitiessuchasthoseineco-efficiency,andmayhaveverydifferentresourcedependenceperspectivefromanecologizinglogic,whichfocusesonplanetaryboundariesandlimitationsofresources.Thesecompetinglogicsmayaltertheviewpointoforganizationsandtheirsupplychainsontheirdependencyperspectiveandassociatedenvironmentalactions.Finally,forboththeories,RDTandNRDT,empiricaltestingandinvestigationsoftheirelementsusingquantitativemethodologiescansignificantlycontributetothecurrentliterature.CONCLUSIONStudieshaveviewedorganizationsasanetworkofsocial,economicandprofessionalrelation-shipsthatinteractdynamicallywiththeirsurroundingenvironments.Theserelationshipsarescientificallyexplainedbythepremisesofopensystemtheory(KatzandKahn,1971).RDTfocusesontheinterorganizationalrelationshipstomanagethedegreeofdependencyontheexternalenvironmentbyusingasetofstrategiestomitigatepoweranddependence(PfefferandSalancik,1978).ExpandingthetraditionalviewofRDT,emergentperspectiveshavebeendevelopedtogiveabroaderunderstandingbyconsideringtheinteractiverelationshipbetweenorganizationsandthenaturalenvironment.NRDTwasintroducedtofillasignificantgapintheliteraturebygroundingthisrelationshiptoRDT(Tashman,2011).ThischapterprovidesareviewoftheextensionofRDTintoNRDT,explainingtheirconstructs,historicaldevelopmentandcurrentapplicationsfromanSSCMperspective.WeprovideaslightlymoredetailedevolutionaryoverviewofNRDT,asitisstillanemergentarea.Furthermore,thischapterpresentssomeofthelatestresearchthatisinvestigatingthisLojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

182164Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtopic,inashortreviewoftheliterature.Finally,somefutureopportunitiesarehighlightedforexpandingtheresearchinthisarea,especiallyforSCMandSSCM.REFERENCESAlonso,E.(2010).Materialscarcityfromtheperspectiveofmanufacturingfirms:casestudiesofplati-numandcobalt.Thesis,MassachusettsInstituteofTechnology.Autry,C.W.,Goldsby,T.J.,andBell,J.E.(2013).GlobalMacrotrendsandTheirImpactonSupplyChainManagement:StrategiesforGainingCompetitiveAdvantage.UpperSaddleRiver,NJ:PearsonEducation.Barney,J.(1991).Firmresourcesandsustainedcompetitiveadvantage.JournalofManagement,17(1),99–120.Bell,J.E.,Autry,C.W.,Mollenkopf,D.A.,andThornton,L.M.(2012).Anaturalresourcescarcitytypology:theoreticalfoundationsandstrategicimplicationsforsupplychainmanagement.JournalofBusinessLogistics,33(2),158–166.Bell,J.E.,Mollenkopf,D.A.,andStolze,H.J.(2013).Naturalresourcescarcityandtheclosed-loopsupplychain:aresource-advantageview.InternationalJournalofPhysicalDistributionandLogisticsManagement,43(5–6),351–379.Bergmann,A.,Stechemesser,K.,andGuenther,E.(2016).Naturalresourcedependencetheory:impactsofextremeweathereventsonorganizations.JournalofBusinessResearch,69(4),1361–1366.Bode,C.,Wagner,S.M.,Petersen,K.J.,andEllram,L.M.(2011).Understandingresponsestosupplychaindisruptions:insightsfrominformationprocessingandresourcedependenceperspectives.AcademyofManagementJournal,54(4),833–856.Boehmer,J.H.,Shukla,M.,Kapletia,D.,andTiwari,M.K.(2020).TheimpactoftheInternetofThings(IoT)onservitization:anexplorationofchangingsupplyrelationships.ProductionPlanningandControl,31(2–3),203–219.Carr,A.S.,Kaynak,H.,Hartley,J.L.,andRoss,A.(2008).Supplierdependence:impactonsupplier’sparticipationandperformance.InternationalJournalofOperationsandProductionManagement,28(9),899–916.Casciaro,T.,andPiskorski,M.J.(2005).Powerimbalance,mutualdependence,andconstraintabsorp-tion:acloserlookatresourcedependencetheory.AdministrativeScienceQuarterly,50(2),167–199.ChapinIII,F.S.,Kofinas,G.P.,Folke,C.,andChapin,M.C.(2009).PrinciplesofEcosystemStewardship:Resilience-BasedNaturalResourceManagementinaChangingWorld.NewYork:SpringerScienceandBusinessMedia.Crook,T.R.,andCombs,J.G.(2007).Sourcesandconsequencesofbargainingpowerinsupplychains.JournalofOperationsManagement,25(2),546–555.Darby,J.L.,KetchenJr,D.J.,Williams,B.D.,andTokar,T.(2020).Theimplicationsoffirm‐specificpolicyrisk,policyuncertainty,andindustryfactorsforinventory:aresourcedependenceperspective.JournalofSupplyChainManagement,56(4),3–24.Driscoll,C.,andStarik,M.(2004).Theprimordialstakeholder:advancingtheconceptualconsiderationofstakeholderstatusforthenaturalenvironment.JournalofBusinessEthics,49(1),55–73.Eckerd,A.,andGirth,A.M.(2017).Designingthebuyer–suppliercontractforriskmanagement:assess-ingcomplexityandmissioncriticality.JournalofSupplyChainManagement,53(3),60–75.Elking,I.,Paraskevas,J.P.,Grimm,C.,Corsi,T.,andSteven,A.(2017).Financialdependence,leaninventorystrategy,andfirmperformance.JournalofSupplyChainManagement,53(2),22–38.Emerson,R.M.(1962).Power–dependencerelations.AmericanSociologicalReview,27(1),31–41.Gold,S.,Seuring,S.,andBeske,P.(2010).Sustainablesupplychainmanagementandinter‐organizationalresources:aliteraturereview.CorporateSocialResponsibilityandEnvironmentalManagement,17(4),230–245.Hajmohammad,S.,andVachon,S.(2016).Mitigation,avoidance,oracceptance?Managingsuppliersustainabilityrisk.JournalofSupplyChainManagement,52(2),48–65.Hillman,A.J.,Withers,M.C.,andCollins,B.J.(2009).Resourcedependencetheory:areview.JournalofManagement,35(6),1404–1427.LojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

183Resourceandnaturalresourcedependencetheoriesinsupplychains165Ilyas,S.,Hu,Z.,andWiwattanakornwong,K.(2020).Unleashingtheroleoftopmanagementandgovernmentsupportingreensupplychainmanagementandsustainabledevelopmentgoals.EnvironmentalScienceandPollutionResearch,27(8),8210–8223.Ireland,R.D.,andWebb,J.W.(2007).Amulti-theoreticperspectiveontrustandpowerinstrategicsupplychains.JournalofOperationsManagement,25(2),482–497.Jakobsen,S.(2020).Managingtensionincoopetitionthroughmutualdependenceandasymmetries:alongitudinalstudyofaNorwegianR&Dalliance.IndustrialMarketingManagement,84,251–260.JohnsonJr,B.L.(1995).Resourcedependencetheory:apoliticaleconomymodeloforganizations.UniversityofUtah,DepartmentofEducationalAdministrationCollegeofEducation.Kalaitzi,D.,Matopoulos,A.,Bourlakis,M.,andTate,W.(2018).Supplychainstrategiesinaneraofnaturalresourcescarcity.InternationalJournalofOperationsandProductionManagement,38(3),784–809.Katz,D.,andKahn,R.(1971).Open-systemstheory.InMaurer,J.G.(ed.),ReadingsinOrganizationTheory:Open-SystemApproaches(pp.13–32).NewYork:RandomHouse.Kim,D.-Y.,andFortado,B.(2021).Outcomesofsupplychaindependenceasymmetry:asystematicreviewofthestatisticalevidence.InternationalJournalofProductionResearch,59(19),5844–5866.Kouhizadeh,M.,Sarkis,J.,andZhu,Q.(2019).Atthenexusofblockchaintechnology,thecirculareconomy,andproductdeletion.AppliedSciences,9(8),1712.Kroll,M.,Walters,B.A.,andLe,S.A.(2007).Theimpactofboardcompositionandtopmanagementteamownershipstructureonpost-IPOperformanceinyoungentrepreneurialfirms.AcademyofManagementJournal,50(5),1198–1216.Lai,F.,Chu,Z.,Wang,Q.,andFan,C.(2013).Managingdependenceinlogisticsoutsourcingrelation-ships:evidencefromChina.InternationalJournalofProductionResearch,51(10),3037–3054.Laine,M.(2011).Thenatureofnatureasastakeholder.JournalofBusinessEthics,96(1),73–78.Lee,S.M.,Kim,S.T.,andChoi,D.(2012).Greensupplychainmanagementandorganizationalperfor-mance.IndustrialManagementandDataSystems,112(8),1148–1180.López-Gamero,M.D.,Molina-Azorín,J.F.,andClaver-Cortés,E.(2011).Environmentaluncertaintyandenvironmentalmanagementperception:amultiplecasestudy.JournalofBusinessResearch,64(4),427–435.Manhart,P.,Summers,J.K.,andBlackhurst,J.(2020).Ameta‐analyticreviewofsupplychainriskmanagement:assessingbufferingandbridgingstrategiesandfirmperformance.JournalofSupplyChainManagement,56(3),66–87.Mekonnen,M.M.,andHoekstra,A.Y.(2016).Fourbillionpeoplefacingseverewaterscarcity.ScienceAdvances,2(2),e1500323.Nienhüser,W.(2008).Resourcedependencetheory–howwelldoesitexplainbehavioroforganiza-tions?ManagementRevue,19(1–2),9–32.Ozturk,O.(2021).Bibliometricreviewofresourcedependencetheoryliterature:anoverview.ManagementReviewQuarterly,71(3),525–552.Paulraj,A.,andChen,I.J.(2007).Environmentaluncertaintyandstrategicsupplymanagement:aresourcedependenceperspectiveandperformanceimplications.JournalofSupplyChainManagement,43(3),29–42.Pfeffer,J.(1972a).Mergerasaresponsetoorganizationalinterdependence.AdministrativeScienceQuarterly,17(3),382–394.Pfeffer,J.(1972b).Sizeandcompositionofcorporateboardsofdirectors:theorganizationanditsenvi-ronment.AdministrativeScienceQuarterly,17(2),218–228.Pfeffer,J.(1987).Aresourcedependenceperspectiveonintercorporaterelations.IntercorporateRelations:TheStructuralAnalysisofBusiness,1(1),25–55.Pfeffer,J.,andSalancik,G.R.(1978).SocialControlofOrganizations:TheExternalControlofOrganizations.NewYork:Harper&Row.Pfeffer,J.,andSalancik,G.R.(2003).TheExternalControlofOrganizations:AResourceDependencePerspective.Stanford,CA:StanfordUniversityPress.Roundy,P.T.,andBayer,M.A.(2019).Tobridgeorbuffer?Aresourcedependencetheoryofnascententrepreneurialecosystems.JournalofEntrepreneurshipinEmergingEconomies,11(4),550–575.Sarkis,J.,andDou,Y.(2017).GreenSupplyChainManagement:AConciseIntroduction.NewYork:Routledge.LojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

184166Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSarkis,J.,Kouhizadeh,M.,andZhu,Q.S.(2020).Digitalizationandthegreeningofsupplychains.IndustrialManagementandDataSystems,121(1),65–85.Sarkis,J.,Zhu,Q.,andLai,K.-H.(2011).Anorganizationaltheoreticreviewofgreensupplychainmanagementliterature.InternationalJournalofProductionEconomics,130(1),1–15.Soundararajan,V.,andBrown,J.A.(2016).Voluntarygovernancemechanismsinglobalsupplychains:beyondCSRtoastakeholderutilityperspective.JournalofBusinessEthics,134(1),83–102.Starik,M.(1995).Shouldtreeshavemanagerialstanding?Towardstakeholderstatusfornon-humannature.JournalofBusinessEthics,14(3),207–217.Tashman,P.(2011).Corporateclimatechangeadaptation,vulnerabilityandenvironmentalperformanceintheUnitedStatesskiresortindustry.Thesis,GeorgeWashingtonUniversity.Tashman,P.(2020).Anaturalresourcedependenceperspectiveofthefirm:howandwhyfirmsmanagenaturalresourcescarcity.BusinessandSociety,0007650319898811.Thompson,J.D.(1967).OrganizationsinAction:SocialScienceBasesofAdministrativeTheory.NewYork:McGraw-Hill.Trapp,A.C.,Harris,I.,Rodrigues,V.S.,andSarkis,J.(2020).Maritimecontainershipping:doescoope-titionimprovecostandenvironmentalefficiencies?TransportationResearchPartD:TransportandEnvironment,87,102507.VandenBosch,F.A.,andVanRiel,C.B.(1998).Bufferingandbridgingasenvironmentalstrategiesoffirms.BusinessStrategyandtheEnvironment,7(1),24–31.Weiner,N.(1984).Executivesuccession.Anexaminationoftheresourcedependencemodel.CanadianJournalofAdministrativeSciences/RevueCanadiennedesSciencesdel'Administration,1(2),321–337.Winn,M.,Kirchgeorg,M.,Griffiths,A.,Linnenluecke,M.K.,andGünther,E.(2011).Impactsfromclimatechangeonorganizations:aconceptualfoundation.BusinessStrategyandtheEnvironment,20(3),157–173.Wry,T.,Cobb,J.A.,andAldrich,H.E.(2013).Morethanametaphor:assessingthehistoricallegacyofresourcedependenceanditscontemporarypromiseasatheoryofenvironmentalcomplexity.AcademyofManagementAnnals,7(1),441–488.Young,O.R.,Berkhout,F.,Gallopin,G.C.,Janssen,M.A.,Ostrom,E.,andVanderLeeuw,S.(2006).Theglobalizationofsocio-ecologicalsystems:anagendaforscientificresearch.GlobalEnvironmentalChange,16(3),304–316.SUGGESTEDFURTHERREADINGForMoreInformationontheRDTandNRDTForamoredetailedreviewoftheresourcedependencetheory:Hillman,A.J.,Withers,M.C.,andCollins,B.J.(2009).Resourcedependencetheory:areview.JournalofManagement,35(6),1404–1427.Pfeffer,J.,andSalancik,G.R.(1978).SocialControlofOrganizations:TheExternalControlofOrganizations.NewYork:Harper&Row.Foramoredetailedreviewofnaturalresourcedependencetheory:Bergmann,A.,Stechemesser,K.,andGuenther,E.(2016).Naturalresourcedependencetheory:impactsofextremeweathereventsonorganizations.JournalofBusinessResearch,69(4),1361–1366.Tashman,P.(2011).Corporateclimatechangeadaptation,vulnerabilityandenvironmentalperformanceintheUnitedStatesskiresortindustry.Thesis,GeorgeWashingtonUniversity.Tashman,P.(2020).Anaturalresourcedependenceperspectiveofthefirm:howandwhyfirmsmanagenaturalresourcescarcity.BusinessandSociety,0007650319898811.LojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

185Resourceandnaturalresourcedependencetheoriesinsupplychains167GoodLiteratureReviewsontheRDTOzturk,O.(2021).Bibliometricreviewofresourcedependencetheoryliterature:anoverview.ManagementReviewQuarterly,71(3),525–552.LojainAlkhuzaim,MahtabKouhizadeh,andJosephSarkis-9781839104503DownloadedfromPubFactoryat05/28/202209:10:24AMviaColumbiaUniversityLibrary

18612.Resourceorchestration:managers’roleindevelopinganddeployingresourcestocreatedistinctiveadvantageStanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVegaandAmydeeM.FawcettINTRODUCTIONStrategy’senduringquestionis,‘Whydosomecompaniessucceedandothersdonot?’Oneoftheprimarytheorystreamsdesignedtoanswerthisquestionfocusesontheresourcesthatacompanypossesses(seeFigure12.1).Resourceorchestrationtheoryisfirmlygroundedinthisresource-basedperspective.Resourceorchestrationextendstheunderstandingofresource-basedtheoriesbyexplicitlyconsideringhowmanagersinfluenceresourceacquisi-tionanddevelopmenttocultivatedistinctivecompetitiveadvantage.Figure12.1ThehistoricaldevelopmentofresourceorchestrationtheoryThebasicpremiseofresource-basedtheoriesisthatafirmisaheterogeneous‘collectionofproductiveresources’thatareimperfectlymobile(Penrose,1959;Wernerfelt,1984).JayBarneypopularizedtheresource-basedview(RBV),notingthatthemorevaluable,rare,inimi-168StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

187Resourceorchestration169tableandnon-substitutable(VRIN)theresources,thegreaterthecompetitiveadvantageafirmcouldattain(Barney,1991).TheRBVledmanagerstoseektoacquireauniqueresourcebase.Overtime,theoriststransitionedfromwhatresourcesafirmpossessestohowafirmcon-figuresthoseresourceswithinadynamicmarketplace.Thisdynamiccapabilitiesapproachemphasizesafirm’sabilityto‘integrate,build,andreconfigureinternalandexternalcom-petences’(Teeceetal.,1997,p.516).Termssuchas‘combine’,‘coordinate’and‘integrate’describetheprocessoforganizingresourcesintoavaluedcapability(Barreto,2010;EisenhardtandMartin,2000;EttlieandPavlou,2006).Strategistsalsorecognizedthatcriticalresourcesoftenresidebeyondthefirm’sboundaries,‘embeddedininter-firmresourcesandroutines’(DyerandSingh,1998,p.650).Effectivegovernanceandknowledgesharingemergedascriticalorganizingcapabilities.Theprocessoforganizingbecamethefocusoftwofollow-ontheories:1.Resourcemanagementis‘thecomprehensiveprocessofstructuringthefirm’sresourceportfolio,bundlingtheresourcestobuildcapabilities,andleveragingthosecapabilitieswiththepurposeofcreatingandmaintainingvalue’(Sirmonetal.,2007,p.273).2.Assetorchestrationpositsthatdistinctivevalueemergesasmanagerssearchfor,select,configureanddeployresources(Helfatetal.,2007).Resourceorchestrationintegratesthesetheories.Essentially,resourceorchestrationtheoryarguesthatproactivemanagerialactionisrequiredtofindcomplementaryresourcesandfitthemtogetherintodistinctivecapabilitiesthatdeliversuperiorfirmperformance(Chadwicketal.,2015).KEYVARIABLESANDDEFINITIONSUnderresourceorchestration(RO)themostfundamentalbuildingblocksofafirmareitsassets,whichareconfiguredintoresources.ROconsidersthatresources,asclassicallydefinedinpriorresource-basedliterature,canbecomingledorintegratedinawaythatbringsdistinc-tivevaluetothefirm.Centraltothisvaluecreationprocessistheroleofthemanagers,whoactasorchestratorsresponsibleforsynchronizingfirmassetsbasedonstrategyandmarketpositiontocreatevaluablecapabilitiesinpursuitofcompetitiveadvantage.Moreover,ROrecognizesthatanycompetitiveadvantagegeneratedthroughresourceorchestrationcanandwillerodeovertime.Managerialactivitiesinvolvedinorchestratingfirmassetstocreatevaluableanduniqueresourcesandcapabilitiesmustthereforebeongoing,particularlyasthepaceofchangecontinuestoincreaseinthemarket.Inotherwords,resourceorchestrationasaneffectiveorganizationalandmanagerialprocessneedstoberoutinizedinfirmstoachievecontinuoussynchronyandsustainableadvantage.ROrecognizestwogeneralcategoriesofmanagerialactivities:resourcemanagementandassetorchestration(seeFigure12.2).Resourcemanagementcomprisesstructuring,bundlingandleveraging.Assetorchestrationinvolvessearchandselectionaswellasconfigurationanddeployment.Theseactivitiesareintertwined.Asafirmdefinesitsstrategicvisionanddesiredcompetitivepositioninthemarket,itmustassesswhetherithasthenecessaryassetstosupportitsstrategy.Oncerequiredassetsareacquired,managersbundle/configureanddeploy/leveragethederivedresourcestogaincompetitiveadvantage.Asthecompetitiveenvironmentandfirmstrategieschangeovertime,resourcesmaynotretaintheirvalue,inwhichcasetheStanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

188170Handbookoftheoriesforpurchasing,supplychainandmanagementresearchfirmcaneitherreconfigureunderlyingassetsintonewer,morevaluableresources,ordivestthemaltogether.Source:AdaptedfromSirmonetal.(2011).Figure12.2OverviewofROtheoryelementsThenatureandtypeofactivitiesthatcompriseresourceorchestrationdependontwoorgan-izationalissues:locationofresourcesacrossthefirm,andgovernancemechanismsacrosslevelsofthefirm.Sirmonetal.(2007)callthesebreadthanddepth,respectively.Becauseresourcerichnessvariesacrossdifferentstagesofthefirmlifecycle,resourceorchestrationwilllookandbehavedifferentlyovertime.BasicresourceorchestrationvariablesandtheirdefinitionsareprovidedinTable12.1.ResourceManagementActivitiesAccordingtoresourcemanagement,managerialactionsfocusonthreeprimaryactivities:structuring,bundling,andleveraging(Sirmonetal.,2007).StructuringthroughthelensofROtheoryconsidershowafirmdetermineswhatresourcestoacquire,buildanddisposeof.Structuringrecognizesthatfirmresourcesarenotsimply‘endowed’,andthattheirheterogene-ityshouldchangeasthecompetitiveenvironmentchanges.Overtime,firmsmayacquirenewresourcescorrespondingtonewneeds.Asthevalueoffirmresourcesdiminish,managersmayconsiderdivestingthem.Forinstance,RojoGallegoBurinetal.(2020)foundthatfirmscanacquireinformationtechnologycompetencetounlocksupplychainambidexterityandflex-ibility.Bycontrast,Nixonetal.(2004)arguethatresourcesnolongerservingacompetitivepurposemaybedivested.Indoingso,theunderlyingassetscanbefreedtobereconfiguredintoothervaluableresourcesthatyieldnewcompetitivecapabilities(Morrowetal.,2007).StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

189Resourceorchestration171Table12.1ResourceorchestrationvariablesandtheirdefinitionsElementExplanationReferencessupportingUnitofanalysisManagerialdecisions,suchasresource(Davis-Srameketal.,2015;Ketchenetal.,acquisitionanddeployment2014)LevelofanalysisFirmlevel,analysingmanagerialdecisionor(Chadwicketal.,2015;Chiricoetal.,2011)firmstrategieswithanemphasisonresourcesandcapabilitiesKeyvariables/definitionsResourcemanagementactivitiesStructuringAcquireanddisposeofresourcestoachievethe(Chadwicketal.,2015;RojoGallegoBurinrightassetportfolioforthefirmetal.,2020)BundlingIntegrateandcombineresourcesinaunique(Sirmonetal.,2007,2011)waytosupportfirmcompetitivestrategiesLeveragingSelectivelyandentrepreneuriallycoordinate,(Sirmonetal.,2007,2011)mobilizeanddeployresourcesinresponsetothecompetitiveenvironmentAssetorchestrationactivitiesSearchandselectionAssess,gainaccesstoandinvestinassetsthat(Helfatetal.,2007;Sirmonetal.,2011)arenecessarytosupportabusinessmodelConfigurationandDeploymentCoordinateuseofspecializedassetsacross(Helfatetal.,2007;Sirmonetal.,2011)thefirmtofulfilstrategicneedsandnurtureinnovationinaccordancetothefirm’sstrategicvisionStrategicdeterminantsofresourceorchestrationBreadthBreadthreferstoresourceorchestrationacross(Sirmonetal.,2011)thescopeofthefirmandisdeterminedbythefirm’sstrategyaswellasthecompetitiveenvironment.DepthDepthreferstoorchestrationacrossthelevels(Davis-Srameketal.,2015;Sirmonetal.,ofthefirm;complexorganizationalstructures2011)havegreatercommunicationsrequirementsforsuccessfulresourceorchestration,whichisfurtherinfluencedbyinformationflow(i.e.,top-downversusbottom-up)FirmlifecycleNewerfirms(e.g.,start-up)havedifferentgoals(Sirmonetal.,2007,2011)andassetsthanmaturefirms;properresourcemanagementcanhelpbothnewerandmaturefirmstoconfigureassetsintotheresourcesneededtosustaingrowthBundlingfocusesonproperlyconfiguringresourcestoderiveuniquecapabilitiesandmax-imizetheircollectivevalue.Properlycominglingtheseresourcesenablesmanagerstounleashthefullpotentialofthewholeoftheseresourcestobegreaterthanthesumoftheirparts.Onewayformanagerstoconfigurethefirm’sresourceportfolioistointegratethemtoachievenewcapabilities(CuiandPan,2015).Integrationshouldbecontinuousanditerative,astheunique-nessofcapabilitiestendstoerodeduetocompetitiveimitationorsubstitution.Byidentifyingresourcesforaugmentation,managerscanextendorprolongthedistinctivevalueofcapabili-StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

190172Handbookoftheoriesforpurchasing,supplychainandmanagementresearchties(Carnesetal.,2017).Visionarymanagers,inparticular,canexploitmarketopportunitiesbyconfiguringresourcesinnovelbundlesthatyieldpioneeringcapabilities(Baertetal.,2016;Carnesetal.,2017).Altogether,bundlingunderROdescribeshowmanagersconfigureandcomingleresourcestocreatedistinctivevalue.Leveragingrecognizesthatbundlingdiverseresourcestocreatevalueisnotenoughtoachievecompetitiveadvantage.Managersneedtodeploythemtomeetmarketneeds.Thisisthekeytoharnessingthevaluecreationpotentialofthefirm’sresourceportfolio.Thatis,deployingasinglecapabilitycanoffertemporarycompetitiveadvantagethatcouldquicklyerodeasmanagersfromrivalfirmsachievesimilarcapabilities.Managersneedtohaveavisionforhowdifferentfirmcapabilitiesareinterconnectedandcanpotentiallyformsyn-ergisticcapabilitiesthatcreateadefensivemoatarounditsperformanceedge(Efratetal.,2018).Indeed,marketopportunitiesemergeandevolve,requiringmanagerstoproactivelyreconfigureresourcestocontinuouslycreatetimelyandrelevantcapabilities(Badrinarayananetal.,2019).AssetOrchestrationActivitiesLookingthroughthelensofassetorchestration,managerialactionsfocusontwoactivities:searchandselection,aswellasconfigurationanddeployment(Helfatetal.,2007).Assetorchestrationactivitiesmaybeconsideredasprecursorstoresourcedevelopment,inwhichmanagersmustfirstdetermineifthefirmpossessesthenecessaryassetstobestrategicallyconfiguredintovaluableresources.Searchandselectionengagesmanagersinunderstandingandacquiringtheassetsneededtoachievemarketsuccess.Specifically,managersmustassesstheassetswhichthefirmcurrentlypossessesthatareofpotentialuse,aswellasthoseassetsneededtoachievedesiredcompetitiveoutcomes.Often,theseassetsareeitheralreadypossessedbythefirmorundercontrolofotherfirms.Onceausefulassetisidentified,managersneedtodeterminewhether,andhow,toacquirethatasset.Iftheassetisnotunderthefirm’sdirectcontrol,managersneedtoconsiderhowtoengagethefirmcontrollingtheassetinordertogainaccess.Ultimately,assetcontrolreliesonorganizationalandsupplychaingovernancestructures(DyerandSingh,1998;GrossmanandHart,1980).Configurationanddeploymentrecognizesthatassetsarerarelysingle-purposed.Theyarealsonotomni-purpose.Importantly,someassetsarelocalizedwithinthefirm,whereasotherassetsareundersimultaneouscontrolandaccessiblebymultiplefunctionalgroups.Assetownershipmayenableorinhibitmanagers’abilitytoaccess,configureanddeploytheassetaspartofadistinctivecapability.Anoverarchingfirmstrategy,oftencommunicatedthroughvisionandmissionstatements,canhelpmanagerstounderstandhowbesttoachievecompetitivegoalsthroughresourceconfigurationandprovideadirectionforresourceinnovation.Avisionalsohelpsmanagerstounderstandtheirroles,andfacilitatesthecross-functionalcollaborationneededtominimizeconflictoverco-specializedassets.Managersmustevolveconfigurationanddeploymentini-tiativestocorrespondtonewcompetitivemanoeuvresandtorespondtomarketopportunities.Searchandselection,andconfigurationanddeployment,performessentiallythesameroleasstructuring,bundlingandleveraging:thatis,managersperformtheseactivitiestoturnassetsintodistinctivecapabilitiestoachievecompetitiveadvantage.Simplyput,resourceorchestra-tionistheprocessofcapabilitydevelopment.StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

191Resourceorchestration173STRATEGICDETERMINANTSOFRESOURCEORCHESTRATIONRObuildsoffthenotionthatafirmisaheterogeneous‘collectionofproductiveresources’thatareimperfectlymobile(Penrose,1959;Wernerfelt,1984).Somefirmsareresourcerich;someareresourcepoor.TheRBVwouldarguethatresource-richcompanieswouldpossesssignif-icantcompetitiveadvantageinafree-marketeconomy.Yet,manyresource-disadvantagedfirmsdonotjustsucceed,theygrowintoindustryleaders;thinkaboutthestart-upsnowknownasAmazon,Microsoft,NucorSteelandWalmart.ROexplainsthisincongruitybypositingthatmanagerscanproactivelymanageassetstocreateuniquecapabilities.Thefundamentalresearchquestionis,‘How?’.Threestrategicdeterminantsinfluencehow,andhoweffectively,managerscanorchestrateresourcestocreatedistinctivecapabilities:breath,depthandstageinthefirm’slifecycle.BreadthFirmassetsareallocatedacrossfunctionsandgeography.Organizationalboundaries–bothstructuralandpsychological–definewho‘owns’theseassets.Theseboundariesalsohindermanagers’effortstoidentify,accessanduniquelyconfiguretheseassetstocreateuniquevalue.Breadthreferstoorchestrationthattakesplaceacrosstheseboundarieswithinthefirm.Thebreadthofamanager’sresourceorchestrationeffortsisprimarilydeterminedbythreedifferentmoderatingfactors.Thefirstistheextentofmarketdiversification.Therangeofresourcesneededtosyn-chronizeeffortsincreasesasproductassortmentandphysicalpresencewiden.Forinstance,managersmusttapintodifferentsupplierandcustomerbases.Effectiveresourceorchestrationenablesmanagerstoco-createvaluewithbothsuppliersandcustomers.Ineffect,newlyavail-ableresourcescanbeusedtocreatenewcompetitivecapabilities.Thesecondmoderatingfactorisbusinessstrategy.Strategicchoicesregardingcostlead-ershipversusdifferentiation(e.g.SnowandMiles,1983;ThornhillandWhite,2007)influ-encemanagers’ROefforts.Differentiationrequiresmanagerstoinvestinandsynchronizeprocessesthatcreateandsustaininnovativecapabilitiesbeyondthoseofcompetitors.Costleadership,bycontrast,requiresmanagerstocoordinateresourcesamongupstreamentitiesinternally(forexample,procurement)andexternally(forexample,suppliers)toeffectivelydrivedowncost.Thethirdmoderatingfactoristhecompetitiveenvironment.Intensecompetitionnotonlyresultsinheatedrivalryforcustomersandresourcesbutalsoinfluencestheoverallneedandpaceofinnovation(Sirmonetal.,2011).Inhighlycompetitiveanddisruptiveindustries,managersmustrecognizenecessaryshiftsinfirmstrategyandtactics.Assetportfoliosmustbeadjustedandquicklyreconfiguredtobringnewcapabilitiestomarket.Inlesscompetitiveenvironments,orchestrationmustenableincrementalinnovationsthroughextractingmorevaluefromexistingresourceportfolioswhilemaintainingsomeeffortstodevelopnovelcapabilities.Sirmonetal.(2011)emphasizethatbridgingboundariesinvolvesintegratingassetsandcoordinatingeffortsacrossthefirm.Theynotethatgovernance,measurementandincentives,andinformationsharingarecriticaltotheseorchestrationinitiatives.StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

192174Handbookoftheoriesforpurchasing,supplychainandmanagementresearchDepthDepthreferstoorchestrationacrosslevelsorhierarchyofthefirm.Extantresearchfocusesonupper-levelmanagerswhosupposedlypossesstheinfluencetodirectresourceorchestration;arealitythatisseldomtrue.Abetterunderstandingofmanagerialbehaviouracrosslevelsofthefirmisneededbecausetheideasthatunderliedistinctivecapabilitiescanemergeanywherewithinanorganization.Indeed,trulydistinctivecapabilitiesemergeasmanagersupanddownafirm’shierarchyworktogetherinuniqueways.Bower’s(1970)workonstrategydevelop-menthighlightstheimportanceandchallengeofdirection,eithertop-downorbottomup.●Top-downmanagerialaction.Whenideasfordistinctivecapabilitiesemergeatthetop,capabilitydevelopmentfollowsadirect‒implement‒conformsequenceasideasmovefromtop-leveltomid-leveltooperationalmanagers.●Bottom-upmanagerialaction.Whenideasfordistinctivecapabilitiesaregeneratedbyoperationalmanagers,thecapabilitydevelopmentprocessfollowsanexperiment‒champion‒ratifysequence.Manycompaniespursueahybridbi-directionalcapabilitydevelopmentprocess,invitingbothtopmanagersandoperationalmanagerstogenerateideasfordistinctivecapabilities.Sirmonetal.(2011,p.1404)positthat‘thestructuring,bundling,andleveragingsubpro-cessesofresourceorchestrationlikelydifferbymanageriallevel’.Thus,ROlikelylooksandbehavesdifferentlydependingonwhereaninitiativeemerges.Forinstance,howinfor-mationiscommunicatedcanimpactuponperformanceoutcomesofresourceorchestration.Davis-Srameketal.(2015)showedthatacentralizeddecisionmakingstructureweakensthelinkbetweenresearchanddevelopmentinvestmentandfirmperformance.ThisresultechoestheROtenetthatincreaseddepthrisksinformationdistortion(Sirmonetal.,2011).Similarly,hierarchycomplexityinfluencesRO.Complexhierarchicalstructuresrequiremoreclearlydefinedmanagerialrolesandresponsibilities,whichmustbealignedwithaunifiedstrategy.Bycontrast,relativelyflatorganizationalhierarchiesarelikelyeasiertoorchestrate.FirmLifeCycleOrchestratingresourcestoachievesupernormalreturnsisalsolikelytodifferbasedonthelifecyclestageofthefirm.1.Start-upstage.Managersatentrepreneurialstart-upsprizeacquiringandstabilizingassetscriticaltoassurethefirm’sviability.Further,experimentalresourceconfigurationpatternsprovidethenecessaryagilitytopursuedistinctiveprocessesandproducts.2.Growthstage.Managersguidingfirmsthroughthegrowthstagefocusondevelopingcapa-bilitiestoprofitablyexpandtheiroperatingscale.Forinstance,managersmustdeveloptheskillstoaccessandbuildrelationshipswithsupplychainpartners,includinginvestors,tosupportcontinuedgrowthandrapidlyturnideasintonewrevenuestreams.3.Maturitystage.Managerialeffortsinmaturityshifttowardacquiringandbundlingresourcestoenhanceprocessefficiency.Managersseekambidexteritytosimultaneouslyinnovatenewproductsandservicesinordertoenternewmarketstorekindlefirmgrowth.StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

193Resourceorchestration1754.Declinestage.Managersnavigatingdeclinefocusonrationalizingresourceportfolios.Specifically,resourcesthatnolongerserveafirm’snewstrategicpurposeshouldbejudi-ciouslydivestedtofreeupresourcestoinvestinanew,morerelevantassetportfolio.Regardlessoflifecyclestage,thequestionis,‘Whatarethemanagerialskillsandorganiza-tionalroutinesthatenablethecoordinationandcollaborationneededtotransformfirmassetsintohighlyvaluedcapabilitiesineachstageofthefirmlifecycle?’RELATIONSHIPSBETWEENTHEVARIABLESResourceorchestrationisbothacontingencyandadynamicprocesstheory.Sirmonetal.’s(2011)explicitdiscussionofstrategicdeterminantshighlightstheimportanceofcontextandstrategicresponse.Thisisthecontingentenvironment‒strategy‒performancerelationship.RO’sfundamentalquestion–thatis,‘Whatistheroleofmanagers’actionstoeffectivelystructure,bundleandleveragefirmresourcestodevelopdistinctivecapabilities?’–focusesonthedynamicprocessofhowafirmusesitsresourcestoachievecompetitivesuccess.ThenatureofROtheorycallsoutseveralkeyrelationshipsamongvariables:1.Contextualvariables–thatis,competitiveenvironmentandcompetitivestrategy–definethenatureofthecapabilitiesthatmanagersneedtoinvestinanddevelop.2.Contextualvariablesanddesiredcapabilitiesdefinetheassetportfoliothatmanagersneedtoassemble.3.Desiredcapabilitiescreateaneedtogainanuancedunderstandingofhowtouniquelystructure,bundleandleverageassetstobuildandmanagedistinctivecapabilities.4.Thenatureofstructuring,bundlingandleveragingdeterminethemanagerialskillsandorganizationalroutinesthatfirmsmustinculcatetoconsistentlyandeffectivelyorchestrateresourcestobuilddistinctivecapabilities.5.Managers’abilitytoeffectivelyorchestrateresourcestocultivatedistinctivecapabilitiescontributestoafirm’sabilitytocraftandexecuteasuccessfulcompetitivestrategy.Importantly,acyclicalinterplayexistsbetweenstrategyandcapabilitydevelopment.Managers’abilitytoconsistentlyincubateandcultivatedistinctivecapabilitiesenablesafirmtoadoptmoredisruptivestrategies,whichmaydrivesupernormalreturns.Thesereturnscanbeinvestedinassetsandorchestrationcapabilities,whichpromoteavirtuouscycleofnewcapabilitiesandcompetitiveadvantage.DOMAINWHERETHETHEORYAPPLIESAssetmanagementandresourceorchestrationtheorieshaveinspirednumerousstudiesonhowfirmresourcescontributetouniquecompetenciesandsuperiorperformance.Sinceresourceorchestrationemergedasanintegratedtheory,scholarshavecontinuedthisgeneralfocusontranslatingfirmassetsintocompetitiveadvantage.ROhasbeenappliedtospecificfieldssuchasinformationandcommunicationtechnologies,e-commerce,entrepreneurship,manufactur-ing,innovationandsalesmanagementatbothindividual(manager)andorganizational(firm)levels.StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

194176Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable12.2ROstreamsinorganizationalresearchStreamTopicAuthorE-commerceManufacturer’se-commerceadoptionusingtheRBVandROCuiandPan(2015)E-commerceenabledsocialinnovationbysocialentrepreneursusingCuietal.(2017)ROEntrepreneurshipROprocessestoenableexplorationandexploitationofnewBaertetal.(2016)opportunitiesinventureportfoliosROasenhancerofentrepreneurialorientationandfirmperformanceWalesetal.(2013)ROprocessesasenablerstoachievesustainablegrowthofuniversityWrightetal.(2012)spin-offsInnovationROprocessesatdifferentstagesofthefirm’slifecycletosustainCarnesetal.(2017)innovationManufacturingROascentraltocompetitiveadvantagewhendefiningmanufacturingEfratetal.(2018)strategyandresourceconfigurationSalesmanagementSalesmanagersasresourceorchestratorsinachievingstrategicsalesBadrinarayananetal.(2019)forceandsellingorganizationoutcomesWithinsupplychainmanagement(SCM),RO’sfirm-levelfocushasbeenextendedtoevaluatethecoordinationofresourcesacrossfirmboundaries.ThisextensionofROtoaninterorganizationalperspectiveisanalogoustotherelationalview’sextensionofclassicRBVtheory.Thatis,consideringhowtoorchestrateassetsthatresidebeyondthefirm’sboundarieswasnotexplicitlypartoftheoriginalROlens.InSCM,ROhassofaronlybeenemployedontheorganizationallevelanddoesnotdirectlyaddresstheindividualormanagerialcompetencelevel.HOWHASRESEARCHORCHESTRATIONTHEORYBEENUSED?ApplicationofROinOrganizationalResearchTheorganizationalROresearchprimarilyevaluatestheunderlyingfundamentalsofRO;thatis,theroleofstructuring,bundlingandleveragingincultivatinguniquecapabilitiesthatleadtoenhancedperformance.Resourceorchestrationtheoryhasbeenusedbydifferentscholarstoexplaintheperformanceeffectoftechnologyadoption,socialentrepreneurshipandinno-vation.StudiesthatarerepresentativeoftheextantresearcharepresentedinTable12.2.Theextantresearchisquitelimited.ApplicationofROwithinSCMResourceorchestrationtheoryhasbeenadoptedandadaptedbysupplychainresearchers.Specifically,thetraditionallyinternallyfocusedperspectiveofROisextendedtoincludeassetsthatresidebeyondthefirm’sorganizationalboundaries.AlthoughHitt(2011)andHittetal.(2016)specificallysuggestthatRObeemployedasatheoreticallensforSCMresearchbasedonthisinterorganizationalview,RO-basedSCMresearchremainslimited.WeidentifiedtwostreamsofSCMliteraturearoundthenotionofresourceorchestration.Thefirst(e.g.Gongetal.,2018;Liuetal.,2016)employsROasanextensionoftheRBVthatbroadenstheviewofROtoincludeintercompanyresourcesandrelationships.ThesecondStanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

195Resourceorchestration177Table12.3ROstreamsinSCMStreamTopicAuthorROasextensionofRBVResourceorchestrationandintegrationtosuccessfullypromotesustainabilityGongetal.(2018)learninginthefirm’ssupplychainResourceorchestrationasasolutionforresourceunderutilizationinproductKetchenetal.(2014)recallsResourceorchestrationasenablerofbettersupplychainintegrationofLuietal.(2016)informationtechnologysystems3PLassupplychain3PLsasparticularlywell-positionedneutralarbitratorsthatcoordinateZachariaetal.(2011)orchestratorinteractionsbetweenfirmswithfullvisibilityofthewholesupplychainwhilebeingonestepremovedfrominternalpoliticsstream(Zachariaetal.,2011)conceptualizesthird-partylogisticsproviders(3PLs)assupplychainorchestrators.However,theymerelyintroducethe‘orchestrator’terminologyfortheestablishedconceptofaproactivesupplychainmanager.Thus,wefindthatROinSCMresearchhasbeenunderutilized.Potentialexiststoestablishandbetterunderstandorches-trationasasupplychaincapability.TopicsunderbothstreamsarehighlightedinTable12.3.SummaryoftheUseofROROhasbeenemployedasanextensionandelaborationoftheRBV.Specifically,theemphasishasbeenonhowresourcesareused,oversimplypossessinguniqueresources.Thereviewedstudiesemployboththebreadthversusdepth,aswellasthestructuring,bundlingandlever-agingperspectiveofRO.However,theextantliteraturelacksamoredetailedanalysisoftheactualtenetsofRO.EspeciallyintheSCMrealm,thereviewedmanuscriptstendtoemploythelanguageofRO,withoutactuallyapplyingthetheoryinasystematicwaybyfleshingoutthedetailsofhowresourcesarestructured,bundledandleveraged.Further,althoughcompanyresourcesandcapabilitiesarediscussedfromanorchestrationperspective,currentresearchdoesnotaddresshowspecificmanagerialskillsandorganizationalroutinesenableorimpedestructuring,bundlingandleveraging.ThisgapprovidesanopportunityforamorenuancedandimpactfulapplicationofRO.THEORETICALPREDICTIONS(FACTUALCLAIMS)ThetheoreticalpredictionsofROcanbegroupedintotwomaincategories:directpredictionsandmoderatingpredictions.Directpredictionsinformhowresourceorchestrationenablesorsupportscompanystrategyand,byextension,firmperformance.Alternatively,directpredi-cationsmayinformtherelationshipbetweenhowmanagerialskillsandorganizationroutinesenableuniquestructuring,bundlingandleveragingprocesses.ModeratingpredictionsexplorehowROchangesandevolvesasbreadthanddepthofthemanagementprocessesincreaseandmatureovertime.WedetailsomeofRO’spredictionsastheyrelatetogeneralorganizationalresearchaswellastheirapplicationinSCM.StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

196178Handbookoftheoriesforpurchasing,supplychainandmanagementresearchDirectOrganizationalPredictionsofROImprovedassetandresourceorchestrationcanimprovefirmperformanceifthoseorchestra-tioneffortsarealignedwithandembeddedincompanystrategy.Assuch,ROpredictsthatacompany’smanagerialcapabilitiescanenhanceafirm’scompetitivepositioninthefollow-ingways(Sirmonetal.,2007,2011):1.Coordinationandcollaborationcapabilitiesdifferentiatemanagerialattemptsatsynchro-nizingassetorchestrationandresourcemanagementcapabilities.2.Greaterunderstandingofthefirm’scompetitivestrategyandmarketpositionwillleadmanagerstomakemoreeffectiveassetsearchandselectiondecisionsaswellasresourcestructuringanddeploymentdecisions.3.Visionaryleadershipwillallowmanagerstomoreeffectivelycoordinateassetsandresourcesintoinnovativecapabilities.4.Providingtimelyandaccurateinformationrelatedtocompetitiveoutcomeswillleadtosuperiorassetorchestrationactivities.DirectSCMPredictionsofROAccordingtoRO,themanagerialcapabilitiesofafirmextendbeyonditsboundariesintothesupplychain,bothupstreamanddownstream.Importantly,appropriateinternalalignmentofresourcesandstrategymustprecedeattemptstocoordinateresourcessuccessfullyacrosscompanyborders(Gongetal.,2018;Liuetal.,2016).Specifically,ROpredictsthefollowing:1.Successfulinternalresourceorchestration(depth)isanantecedenttosuccessfulinteror-ganizationalresourceorchestration(breadth).2.Successfulproactivemanagementofafirm’ssupplychainrequireseffectivestructuring,bundlingandleveragingofresources,bothwithinandacrosscompanyboundaries.3.Leveragingresourcesacrosscompanyboundariesrequiresanalignmentoftheindividualwiththeorganizationallevelsofresourceorchestration.4.Theabilityofafirmtoactasthesupplychain‘orchestrator’dependsonitscapabilitytosuccessfullyinfluencetheROprocessesofotherfirmsinthesupplychain.Thisinfluencecaneitherbederivedchannelpowerortheabilitytoactasaneutralarbitrator.ModeratingGeneralPredictionsofROTheimpactandinfluenceofROactivitieswillchangeovertime.Asfirmselaborateandrefinetheirstrategyandorchestrationprocessesoverthecourseoftheirlifecycle,resourceorches-trationoffersadditionalbenefitsaswellasposingnewchallenges(Carnesetal.,2017).Wepositthefollowing:1.Thebreadthoforchestrationactivitieswillincreaseasfirmcompetitivestrategyentailsmoreproductsand/orapresenceinmoremarkets.2.ThecomplexityanddifficultyofROwillincreaseasbreadthoforchestrationactivitiesincreases.3.Thedepthoforchestrationactivitieswillincreaseasfirmadoptsanincreasinglycomplexorganizationalhierarchy.StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

197Resourceorchestration1794.ThecomplexityofROwillincreaseasinformationfeedbackbecomesbidirectional.5.DemandsofROdifferamongfirmsindifferentlifecyclestages:a.start-upswillfocusonROactivitiesthatmostdirectlyinfluenceshort-termviability;b.growingfirmswillfocusonROactivitiesthatallowthemtoeffectivelyscaleupoperations;c.maturefirmswillfocusonROactivitiesthatallowthemtostrikeabalancebetweenimprovingcostperformanceandidentifyingnewinnovations;d.decliningfirmswillhavetofocusonROactivitiesthatwouldallowthemtotransformtheirbusiness;e.needforinnovationwillbethegreatestforstart-upanddecliningfirms;f.needforstabilitywillbethegreatestforgrowingandmaturefirms.ModeratingSCMPredictionsofROThebenefitsandchallengesofresourceorchestrationincreaseandevolvealongwithmaturityinthelifecycleofthefirmbutalsowithitslevelofsupplychainintegration.Thisinteractionbetweenresourceorchestrationprocessesandsupplychainintegrationleadstoincreaseddetailanddynamiccomplexity(Gongetal.,2018;Liuetal.,2016).Specifically,ROpredictsthefollowing:1.ThebreadthofROwillincreaseasproactivesupplychainmanagementextendsbeyondthefirsttierofsuppliersandcustomers.2.ThecomplexityofROwillincreasedisproportionatelyasthebreadthofROextendsacrossmorethanonetierofcompaniesinasupplychain.3.BothbreadthanddepthofROwillhavetoevolveandchangeascompaniesinasupplychaintransitionbetweendifferentstagesintheirlifecycle.4.InterorganizationalhierarchiesanddynamicsaffectbreadthanddepthofRO,determiningwhichcompanycanfulfilthedifferentrolesofsupplychain‘orchestrator’.OUTLOOKONFUTURERESEARCHOPPORTUNITIESInmanyrespects,ROresearchhasfollowedthetrajectoryofprecedingresources-basedthe-ories;thinkRBV,dynamiccapabilitiesandtherelationalview.Asageneraltheory,itiseasytociteasaframeorlensforawidevarietyofresearchthatfocusesonthequestion,‘Whydosomecompaniessucceedandothersdonot?’However,muchoftheresearchremainsrathersuperficial.Further,manyresearchissuesidentifiedbySirmonetal.(2011)haveyettobeexplored(seeFigure12.3).Amorenuancedapproachisneededthathelpsdecisionmakerstobetterunderstandthedynamicprocessesinvolvedinorchestratingassetsintodistinctivecapabilities.Morespecifi-cally,researchneedstodigmuchmoredeeplyintotheunderlyingtenetofRO;thatis,whatistheroleofmanagersinbuildingdistinctivecapabilitiesthatimprovefirmperformance?Threehigh-levelquestionsmeritfurtherinvestigation.First,whypursueresourceorchestration?Managersorchestrateresourcestocreatedistinc-tivecapabilities.Moreresearchisneededtounderstandappropriatemotivations.ROcanbeusedtotakecostsoutofprocesses;todevelopuniqueprocesses,productsandservices;andStanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

198180Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFigure12.3ResearchissuesidentifiedbySirmonetal.(2011)tocreateuniquecustomerexperiences.Eachmotivationmayrequiredistinctivemixingandmeshingofassets.HowdoesmotivationinfluenceROprocesses?Second,whentopursueresourceorchestration?ROisneitherfreenoreasy.Somecircum-stancescallforeffortstocreatedistinctivecapabilities;otherspushback.ToknowwhentopursueRO,wemustexaminediverseboundaryconditions.Externalcontext(forexample,competitiveintensity,marketdynamism,technologyemergence)matters.ReadinessatthefocalfirmaswellasamongsupplychainpartnersalsolikelyinfluencesRO.Third,howtopursueresourceorchestration?‘How’buildson‘why’and‘when’;arealitythathasnotbeencriticallyexploredintheextantresearch.Weneedresearchthatdelineatesandexplicatesthecapabilitydevelopmentprocess,especiallyasitrelatestomanagers’roleinmixingandmeshingorganizationalandsupplychainresources.Specifically,whatarethemanagerialskillsandorganizationalroutinesthatareneededtoproactivelystructure,bundleandleverageassets/resourcesunderdifferentmotivationsandboundaryconditions?SeeTable12.4forexamples(thisisnotacomprehensivelist).Similarly,howdomanagersusetheseskills/routinestodefinesystemboundaries,evaluateassetfit,enhanceassetvalue,understandenvironmentalshiftsandenablechange,andexplorenewpossibilities?Ultimately,whatarethedynamicsofresourceorchestration,andhowdotheyvaryacrossdifferentmotivationsandboundaryconditions?HOWWILLTHISTHEORYEVOLVE?ROpositsthatmanagerscanproactivelyassembleandconfigureassetstocreatedistinctivevalue.Itexplicitlyasks,‘Whatistheroleofmanagers?’Thenitidentifiesavarietyofrolesthatmanagersmustperform,includingstructuring,bundlingandleveraging.Asconceptualizedandoperationalized,ROisprimarilyfocusedonhowassetsfittogether;thatis,howtheycanStanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

199Resourceorchestration181Table12.4OpportunitiesforfutureresearchStructuringBundlingLeveragingManagerialskillsChangemanagementHowcanmanagersuseresourceHowcanmanagersmotivateHowcanmanagersconvinceacquisitionandnewpartnerfunctionalmanagers(internal)andfunctionalmanagers(internal)andselectiontomotivateandsustainsupplychainpartners(external)tosupplychainpartners(external)tochangeneededtodevelopnewreconfigureresourcestosupportsynchronouslydeployresourcescapabilities?newsupplychainstrategies?tosupportnewsupplychainstrategies?EmpowermentHowcanmanagersempowerHowcanmanagersdeterminetheHowdodifferentlevelsandtypesteammemberstomoreeffectivelyappropriatedegreeoffunctionalofempowermentenablemanagersacquireanddevelopaunique(internal)andsupplychaintoorchestratedeploymentofresourceportfolio?partner’s(external)autonomousresourcesresidingwithinthefirmcontrolovercertainresourcestoacrossdifferentfunctions,andsupportnewcapabilitiesandnewoutsidethefirmamongsupplysupplychainstrategies?chainpartners,toexecutenewsupplychainstrategiesinresponsetothecompetitiveenvironment?InfluenceHowcanmanagersdetermineWhatinfluenceleversHowcanmanagersconvinceandexertthenecessarydegreemosteffectivelypromotesupplychainpartnerstoofinfluenceinordertoacquirecross-functionalcominglingandsynchronouslydeployresourcesinformalaccesstoandcontrolofconfigurationofresources?Howandcapabilitiestoexecutesupplydesirableresourceslocatedoutsidedoestheroleofinfluenceleverschainstrategies?thefirm?changebasedoncontext?StorytellingHowcanmanagerscraftHowcanmanagersusestorytellingWhichnarrativesbestpromoteanarrativetosuccessfullytranslatetopromotethecollaborationagiledeploymentofnewlynovelsupplychainstrategiesintoneededtoconfigureresourcestodevelopedcapabilities?Whonecessaryresourceportfolios?builduniquenewcompetencies?shouldcreateandsharethesestories?TeambuildingWhatdifferencesexistbetweenHowcanmanagersengageandHowcancustomerandsupplierresourceportfoliosandhumanencouragesupplychainpartnersadvisoryboardsimprovethespeedresourceportfoliosintermsofcostwithcomplementaryresourcesandagilityofuniquecapabilityandeasetoacquire,divestandandcapabilitiestoworktogetherdeployment?reconfigureassets?tocominglethemtocreateuniquevalue?Trustconstruction:HowdoestrustsignallinginfluenceHowcanmanagersbuildtrustWhatistheroleofsignallingandswiftacompany’sabilitytogainaccessinternallyamongfunctionsandinterorganizationaltrustintrustdevelopmenttoscarceresources?externallyamongsupplychainsynchronizedexecutionofsupplypartnerstoincreasesharingofchainstrategies?co-specializedresources?OrganizationalroutinesRecruitmentandhiringHowcanmanagersassessandHowcanmanagersassessnewHowcanmanagerspromotethedevelopthetalentneededtohires’abilitytoeffectivelyworkimprovizationneededtorapidlycollaboratewithsupplychainacrossboundariestoreconfiguredeploynewcapabilitiesinpartnerstoacquireadistinctiveresourcesintouniquecapabilities?adynamicanddisruptivemarket?resourceportfolio?StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

200182Handbookoftheoriesforpurchasing,supplychainandmanagementresearchStructuringBundlingLeveragingLeadershipDoescross-functionaltrainingofTowhatextentdoeshiringfromWhatleadershipstylemostdevelopmentmanagersenhancethevalueofsupplychainpartnersimproveeffectivelymotivatesfunctionsandresourceportfolios?capabilitydevelopment?supplychainpartnerstobehavesynchronously?Doesitdifferbycontext?MeasurementandHowdomeasuresinfluenceWhatistheroleofincentivesHowcanmanagersdesignrewarddesignafirm’sabilitytoacquireauniqueinconfiguringco-specializedincentivesystemstoencourageresourcebase?resourcesamongfunctionsandfunctionsandsupplychainpartnerssupplychainpartners?tosynchronouslydeploystrategicresourcesandcapabilities?InformationsharingWhatisthelongevityofsharedWhattypeofdata,andhowHowcaninformationsharinginformation’svalueasaresourcetimelyshouldtheybeshared,toamongsupplychainpartnersandhowdoesitinfluenceportfolioenhancethespeedandprocessfacilitatesynchronoustacticalstructuring?ofconfigurationtocreatenewexecutionunderaunifiedsupplycapabilities?chainstrategy?beconfiguredandreconfigured.AlthoughSirmonetal.(2011)refertoenrichingandpioneer-ing,ROdoesnotemphasizethenotionorneedtoelevateassets,especiallythehumanasset.Fawcettetal.(2020)arguethatintoday’sdynamicanddisruptivemarketplace,developinguniquecapabilitiesanddistinctivecorecompetenciesrequiresmorefocusonunleashingtheideationofeverymemberofanorganizationandsupplychain.Buildingonthenotionoforchestration,theyproposethatsupplychainchoreographyisthenextstepintheevolutionofresource-basedtheoryandcapabilitydevelopment.Theydefinechoreographyasfollows:Choreography=Orchestration+ElevatedEmpowerment+ImprovisationSpecifically,choreographypositsthatfitisanecessarybutnotsufficientconditionforthecre-ationofdistinctiveandenduringcompetencies.Elevatedempowermentleveragesthe‘living,collectivelearning’ofeveryonewhotouchesavalue-addedprocess,invitingopenideationandensuringthatthebestideasrisetothetop.Elevatedempowermentacknowledgesthatvaluecreationultimatelybelongstothepeoplewhodotheworkandinteractwithpartners–bothsuppliersandcustomers–todeliveranexperiencethatbuildsdeepcustomersatisfactionandloyalty.Improvisationrecognizesthatglitcheshappen.Whentheydo,improvisationistheprocessofeffectivelyadapting‘onthefly’.Itcanonlyexistasaspontaneouscapabilityinacultureofelevatedempowerment.Together,elevatedempowermentandimprovisationinviteexper-imentation,theabilityandwillingnesstoask,‘Ifanidea,element,orsystemdoesn’twork,whatwill?’.Thesecapabilitiesarevitallyimportantinadisruptivemarketplacewhereresponsetimemattersmoreandmore.Theyenabledecisionmakersto‘designoutproblems,buildincontingenciesandbuildbubblesaroundpainpoints’(Fawcettetal.,2020,p.44).Aswithresourcemanagementandassetorchestration,therearesimilaritiesanddifferencesbetweenorchestrationandchoreography.Thedifferencesare,importantly,complementary.Specifically,choreographyputsforthtwocentralpropositions:1.Choreographyisthealphacompetencethatprecedesthedevelopmentandperpetuationofvaluedandvaluablecorecompetencies.StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

201Resourceorchestration1832.Choreographyisasharedorcollaborativedesign/developmentprocessthatencouragesmoreideastobeshared,assuresthatthebestideasareadopted,andenablesimprovisationtomeettheneedsofademandinganddisruptivemarketplace.Figure12.4depictsfivemanagerialrolesthatcomprisechoreography.Thesefiverolesareco-requisitetothechoreographicprocess,whichactivelyinvolveseveryactor–withinandacrossfirms–inthedevelopmentofdistinctivecapabilities.Asaprocess,choreographygoesbeyondfocusingonmanagers’roleincompetencedevelopment,toincludeindividualworkers.Thesearetheindividualswhoanalysethedata,operatethemachinesandinteractwithcustomers.Theirempowerment,improvisationandexperimentationenablethehighlevelsofefficiencyandagilityrequiredtoearnsupranormalreturnsinadisruptivemarket.Choreographyisthenextstageforexploringhowresourcescanbedevelopedanddeployedtoachievedistinctiveadvantage.Figure12.4ThenatureofsupplychainchoreographyTosummarize,ROextendstheRBVbymoredeeplyexploringthe‘how’behinddistinctivevaluecreation.ROfocusesonmanagers’roleinbringingtogether,configuringanddeployingresourcesinawaythathelpsacompanytobettermeetmarketdemandsandcustomerneeds.ROresearchremainsunderdeveloped.Thetimehascometomorethoroughlyexplorethe‘why’,‘when’and‘how’questionsrelatedtomanagers’influenceonthedevelopmentoftruecorecompetencies.Researchthatprovidesmorenuancedinsightintohowspecificmanagerialskillsandorganizationroutinesaffectstructuring,bundlingandleveragingresourcesisneededtohelpcompaniessucceedintomorrow’schaoticmarketplace.StanleyE.Fawcett,Yao‘Henry’Jin,SebastianBrockhaus,DiegoVega,andAmydeeM.Fawcett-9781839104503DownloadedfromPubFactoryat05/28/202209:10:26AMviaColumbiaUniversityLibrary

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20413.AgencytheoryinpurchasingandsupplymanagementGeorgeA.ZsidisinINTRODUCTIONAgencytheory,initsessence,concernssettingsinwhichoneparty(theprincipal),whetheranindividualororganization,delegatesworktoanotherparty(theagent)toperform.Agencytheoryhasbeenappliedinvariousorganizationalcontextsfordecades,suchasexecutivecom-pensation(JensenandMurphy,1990),auditing(Adams,1994;Morris,1987),incentivizingsalesforcepersonnel(AndersonandOliver,1987)andfranchising(CarneyandGedajlovic,1991;Lafontaine,1992).Inthedomainofsupplychainmanagement,scholarshavegroundedtheirresearchapplyingagencytheoryinstudyingtopicssuchasoutsourcingandchannelrelationships(CellyandFrazier,1996;LassarandKerr,1996;Logan,2000),servicesupplychains(KudlaandKlass-Wissing,2012;SelviaridisandNorrman,2014;Tateetal.,2010),security(BelzerandSwan,2011),vendor-ownedinventorymanagement(Rungtusanathametal.,2007),quality(WhippleandRoh,2010;ZuandKaynak,2012),risk(ZsidisinandEllram,2003;Zsidisinetal.,2004;ZsidisinandSmith,2005)andsustainability(KudlaandKlass-Wissing,2012;Shafiqetal.,2017;Wilhelmetal.,2016).Severalofthesearticles,includingZsidisinandEllram(2003),ZsidisinandSmith(2005)andTateetal.(2010),focusonpurchasingandsupplymanagement(PSM)anditsmanagementofsuppliers.Althoughtheseandothersupplychainscholarshaveusedagencytheoryasatheoreticalframeworkintheirresearch,thesestudiesrepresentonlyasmallportionofpublishedsupplychainacademicresearch.Fayezietal.(2012),intheirstructuredliteraturereviewofagencytheoryinsupplychainmanagement,discoveredonly19publishedjournalarticlestoincludeintheiranalysis.Further,Defeeetal.(2010)foundthatagencytheoryonlyrepresents1.9percentoftheoreticalincidentsintheiranalysisof364logistics(supplychainmanagement)publicationsusingatleastonetheory.Despiteagencytheorystillnotquitegarneringthesamelevelofadoptioncomparedwithrivaltheoriessuchastransactioncosteconomicsandtheresource-basedviewofthefirm,thefoundationsofagencytheoryalignwellforstudyingfacetsofthePSMphenomenon.Theunitofanalysisinagencytheoryistheanalogyofa‘contractbetweenprincipalandagent’(Eisenhardt,1989,p.59),wheretheprincipaldelegatesworktotheagent(LassarandKerr,1996).Agencytheoryassumesthatthereispartialgoalconflictanddifferentriskpreferencesbetweentheprincipalandagent.Theformofthe‘contract’isdichotomizedintobehaviour-orientedandoutcome-orientedcontracts.Behaviour-orientedcontracts,tradition-allyconceptualizedintermssuchassalariesandhierarchicalstructures,servetoreducetheriskexposureoftheagentwhenworkingfortheprincipal.Outcome-orientedcontracts,ontheotherhand,placetheburdenofriskontheagentinfulfillingitsdutiestotheprincipal.Examplesofoutcome-orientedcontractsincludecommissions,stockoptions,transferofprop-ertyrightsandmarketgovernance(Eisenhardt,1989).Insomeways,agencytheoryparallels186GeorgeA.Zsidisin-9781839104503DownloadedfromPubFactoryat05/28/202209:10:30AMviaColumbiaUniversityLibrary

205Agencytheoryinpurchasingandsupplymanagement187transactioncosteconomicswithregardtodeterminingwhetheritismoreefficientfortheprincipaltostructurecontractsandincentivesbasedonhierarchiesandverticalintegration(behaviours)ormarkets(outcomes)asthedependentvariable.Eisenhardt(1989)providesaseminalanalysisofagencytheoryanditsrespectiveappli-cationsinbusiness,includingmentionofitsutilizationinbuyer‒supplierexchanges.InthecontextofPSM,agencytheoryhasusuallybeenappliedinthecontextofabuyingorganiza-tionbeingtheprincipal,whichdelegatesworktoasupplierorganizationservingastheagent(Camuffoetal.,2007;Norrman,2008;ZsidisinandEllram,2003).However,aswillbedis-cussedinthischapter,thereareothersettingsandunitsofanalysiswhichmaybeappropriateforutilizingagencytheoryinPSMscholarship.Forexample,agencytheorymaybeapplicableinsettingswherethePSMfunctionservesasanagentforinternalcustomers,suchastheproductionandmarketingfunctionsofacorporation,aswellasotherunitsofanalysis,suchasindividualbuyersandcommoditymanagersworkingasagentsforsuperiorsinthesamefunctionorexternalfunctionpersonnel.ThischapterconinueswithadiscussionofagencytheoryvariablesthroughthelensofPSMscholarshipandpractice.ThechapterconcludeswithsuggestionsastohowagencytheorycanbeutilizedinthefutureforguidingandinformingPSMpracticeandscholarship,andspecificallywithregardtodifferentunitsofanalysisandapplicationsofPSMphenomenaandpractice.AGENCYTHEORYINPURCHASINGANDSUPPLYMANAGEMENTThefollowingsectionbeginswithadescriptionofthedependentvariable,whichisthemeta-phorofcontracts,followedbyitsindependentvariables.Theessenceofagencytheoryoffersinsightastohowandwhyvariablessuchasinformationsystems,outcomeuncertainty,riskaversion,programmability,relationshiplengthandgoalconflictinfluencethemostefficientcontracttoimplement.Itiscriticaltonotethattheterm‘contract’isusedasametaphorinthegreatmajorityofsupplychainresearchadoptingagencytheoryasitstheoreticalunderpinning.Inresearch,‘contracts’haveoftenbeenassociatedwithaspecificovertmanagementtechniquebuyingfirmswouldadopttomostefficientlyalignasuppliertoperformasneededtomeetthebuyer’srequirementsinagivensetting(Eisenhardt,1989).Aspreviouslyhighlighted,thesesettingshaveincludedactivitiessuchasoutsourcing,sustainability,inventorymanagement,qualitymanagementandriskmanagement.DEPENDENTVARIABLE:THEMETAPHOROFBEHAVIOUR-ANDOUTCOME-BASEDCONTRACTSThedependentvariableinagencytheoryistheformofthecontract,whichismostfrequentlyappliedasabinomialofeitherbehaviour-oroutcome-basedcontracts.Abehaviour-basedcontractaddressesagent(supplier)processesratherthansimplyoutcomes(AndersonandOliver,1987;ChoiandLiker,1995).Agentsareevaluatedontheirbehaviours,whichwouldthenhaveaneffectonoutcomes.GeorgeA.Zsidisin-9781839104503DownloadedfromPubFactoryat05/28/202209:10:30AMviaColumbiaUniversityLibrary

206188Handbookoftheoriesforpurchasing,supplychainandmanagementresearchBehaviour-basedcontractshavebeenappliedanddescribedinavarietyofways,dependingonthecontextoftheresearch.CellyandFrazier(1996),intheirstudyofsupplier‒distributorrelationships,utilizetheconstruct‘behaviour-basedcoordinationefforts’,consistingofsellingtechniquesusedbydistributorsalesrepresentatives,extentofdistributorpromotionalefforts,anddistributor’scustomereducationandsupportactivities.Inadifferentinvestigationofincentivizingdistributors,LassarandKerr(1996)usetheterm‘behaviororientation’,describ-inghowmanufacturersattempttoapproximateabehaviour-basedcontractwithdistributors.Thethreeitemscomprisingthescalefocusonthelevelofeffortbythemanufacturerinmoni-toringdistributors’conformancetospecificbehaviouralstandards.ZuandKayank(2012)framebehaviour-basedapproachesassociatedwithqualitymanage-mentintermsoftasksandactivitiesassociatedwithsuppliers’processes,subsequentlyleadingtopositiveoutcomes.Examplesofbehaviour-basedapproachesintheirstudyincludesupplierqualitycertification,supplierqualityaudits,supplierprocessmanagementandsupplierqualitydevelopment.Researchinvestigatingsupplyriskmanagementprocessesclassifysuppliercerti-fication,qualitymanagementprogrammes,targetcosting,supplierdevelopment(ZsidisinandEllram,2003)andearliersupplierinvolvement(ZsidisinandSmith,2005)asbehaviour-basedmanagementapproaches.Prosmanetal.(2016)utilizetheterm‘behavior-basedgovernancemanagement’intheirstudyofsuppliersdefaultingontheircontractsandtheviabilityofimprovingtheirperformance.Thechallengeassociatedwithbehaviour-basedcontractsisthattheagent’sbehaviourhastobemonitored.AssummarizedbyWhippleandRoh(2010),thismayrequiretheprincipaltoinvestininformationmonitoringcapabilitiestoreduceinformationasymmetry(Fama,1980;FamaandJensen,1983;LassarandKerr,1996).Informationmonitoringcapabilitiesareinvestmentsthatprovidetheprincipalwithinformationwhichrevealstheagent’sbehaviour(Eisenhardt,1989)andcanincludeinvestmentssuchasexternalaudit/inspectionservicesorinformation/instrumentationtechnology.Inmoremodernapplications,thesemayincludetheuseofIndustry4.0approachestomonitorsupplierprocesses(Arcidiaconoetal.,2019).Theseactivitiesarenotsonecessarywhencircumstanceswarranttheuseofoutcome-basedcontractswhereriskisminimalandsubsequentlynolongerrequirethebuyertoactivelymonitorsup-plierbehaviours.Outcome-basedcontractsormanagementemphasizeresultsregardlessofhowtheagentsachievethem(ChoiandLiker,1995).Insupplier–distributor(principal–agent)relationships,CellyandFrazier(1996)examineoutcome-basedcoordinationeffortsintermsoftotalsalesvolume,marketshareperformanceandsalesgrowth.ZuandKaynak(2012),fromaqualitymanagementperspective,viewoutcome-basedqualitymanagementintermsofpenaltiesforqualityfailureinspections,fromnoinspection,samplinginspection,to100percentinspec-tion.However,somestudiesdonotelaborateonoutcome-basedcontractsormanagement,suchasProsmanetal.(2016),ZsidisinandEllram(2003)andZsidisinandSmith(2005).Inabuyer‒supplierrelationship,outcome-basedcontractswouldtypicallyinvolvesometypeofpricepremium(KleinandLeffler,1981)inordertomakecheatingunprofitable(Mishraetal.,1998).Thus,outcome-basedcontractsinaliteral‘contracting’applicationcanrangefromcost-plusincentivesand/orrisk/gainsharing,whichplacesomeoftheriskburdenonsuppliers,tofirmfixedpricecontracts,whichplacemosttoalloftheriskonsupplierstofulfiltheirobligationstothecustomer.Withthismechanismbothprincipalsandagentscanobserveoutcomes,andtheprincipalsrewardagentsbasedonmeasuredperformanceoutcomes(Ekanayake,2004).GeorgeA.Zsidisin-9781839104503DownloadedfromPubFactoryat05/28/202209:10:30AMviaColumbiaUniversityLibrary

207Agencytheoryinpurchasingandsupplymanagement189Outcome-basedcontractsareoftenconceptualizedandexaminedintermsofperformance-basedcontracting(Randalletal.,2010;SelviaridisandWynstra,2015).AssummarizedbyRandalletal.(2010),performance-basedcontracting(PBC)promotescus-tomervaluebyspecifyingcontractualoutcomes(DattaandRoy,2011)forimprovinggoalalignmentandincentivesinthesupplychain(Randalletal.,2011),increasingriskandrewardsforthesupplierbyaligningfinancialbonusesand/orpenaltiesonperformanceandenablingco-creationofspecifiedoutcomes(GuoandNg,2011).SelviaridisandNorrman(2014)summarizePBCintermsofspecifyingserviceperformanceandlinkingthattopayment,therebytransferringsomeoralloftherisktotheprovider/agent(Doerretal.,2005;SelviaridisandWynstra,2015).However,onechallengeisthatthesesystemsoftenrequireelaborateprocessesformeasuringandreportingperformance(DattaandRoy,2011).SelviaridisandNorrman(2014)provideexamplesof‘fixedpriceplusincen-tivefee’structuresinthetransportationindustry,wheretheincentivefee(bonus)islinkedtoproductavailabilityandsupplychaincostreductiontargetsspecifiedbythecustomer(principal).Inthecontextofperformance-basedlogistics(PBL)andpost-productionsupport,Randalletal.(2011)arguethatPBLinvolvescontractingforperformance,oranoutcome,ratherthanrepeatedlycontractingfordiscreteproductsandservices.However,itisalsosug-gestedthatperformance-basedcontractingshouldmovetowardsamoresystemicapproachforunderstandingbehaviouralaswellascontractualapproachesforincentivizingsuppliers(SelviaridisandNorrman,2014).Thechallengeisthatincentivealignmentisnotwellestab-lishedinpractice.Instead,simplemechanismsthatareperformance-oroutcome-basedaremorecommonlyused,ascomparedwithbehaviour-basedcontractsthatareconsideredmoresophisticatedtoemploy(NorrmanandNaslund,2019)andoftenrequireextensivemonitoring(WhippleandRoh,2010).INDEPENDENTVARIABLES:FACTORSINFLUENCINGCONTRACTSELECTIONThereareseveralfactorsinagencytheoryinfluencingwhetherbehaviour-oroutcome-based‘contracts’areappropriate.Someofthemoreprevalentfactorsarediscussedbelow,whichareinformationsystems,outcomeuncertainty,riskaversion,programmability,relationshiplengthandgoalconflict.Table13.1providesdefinitionsofagencytheoryindependentvariables(factors)andexamplesinPSM,whileTable13.2summarizestheappropriate‘contract’giventheindependentvariable,where‘x’signifiesapositiverelationshipbetweenthevariableandcontractform.InformationSystemsInformationsystems,withinthecontextofagencytheory,consistofapproachesforaccumu-lating,processinganddisseminatinginformation(Eisenhardt,1989).Fromtheperspectiveoftheprincipal,informationsystemscanbeusedtomonitorthebehaviouroftheagent,therebymorecloselyaligningtheirworkwiththerequirementsoftheprincipal,aswellasreducingriskassociatedwithadverseselection(misrepresentationofability)andmoralhazard(lackofagenteffort)(Logan,2000).Informationasymmetryanditsmonitoringchallengesisoneofthetwoessentialagencyproblems(withgoalcongruency)thatarisewhenaprincipaldel-GeorgeA.Zsidisin-9781839104503DownloadedfromPubFactoryat05/28/202209:10:30AMviaColumbiaUniversityLibrary

208190Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable13.1AgencytheoryindependentvariabledefinitionsandPSMexamplesIndependentvariableDefinitionPSMexampleInformationsystemsApproachesforaccumulating,processingandIndustry4.0tools;supplierdesigneddisseminatinginformationrepresentative;vendormanagedinventoryOutcomeuncertaintyDegreeofuncertaintyaboutobtainingdesiredCommoditypricevolatility;newproductresultsdevelopment;demandvolumeheterogeneityRiskaversionTheextenttowhichaparty(principaloragent)Capitalinvestments;developingtechnologiesdesirestoavoidriskProgrammabilityThedegreetowhichappropriateagentbehavioursSpecificationsorstatementofworkcanbespecifiedinadvanceRelationshiplengthThelengthoftimethattherelationshipisExperiencewithsupplieranticipatedtoendureGoalconflictTheextenttowhichalignmentexistsbetweentheSupplierprovidingproducttocompetitors;goalsoftheprincipalandthoseoftheagentsupplierascompetitor;profitability;futurestrategicdirectionSources:DefinitionsadaptedfromEisenhardt(1989)andZsidisinandSmith(2005).Table13.2AgencytheoryvariablesandcontracttypeBehaviour-basedOutcome-basedXInformationsystemsXOutcomeuncertaintyRiskaversion(principal)XXRiskaversion(agent)XProgrammabilityXRelationshiplengthGoalconflictXSource:AdaptedfromEisenhardt(1989).egatestaskstoanagent(Norrman,2008;WhippleandRoh,2010).AsshowninTable13.2,theuseofinformationsystemsispositivelyassociatedwiththeuseofbehaviour-orientedcontractsduetotheabilitytomonitorandassesstheagent’sbehaviour.InthecontextofPSMscholarship,thereareseveralexampleswhereinformationsystemsareconceptualizedandmeasuredformonitoringsupplierbehavioursandperformance.Maestrinietal.(2018)examineinformationsystemsintermsofmonitoringsupplierquality,deliveryandorderaccuracy.ZuandKaynak(2012)describehowbuyerscanreduceinfor-mationasymmetriesassociatedwithqualitymanagementbycollectingdataassociatedwithsuppliers’processqualityperformanceandcapabilities,theirqualitycontrolprocedures,theirqualityimprovementprogrammesandtheresultsoftheseprogrammes.LassarandKerr(1996)examinedistributor(supplier)monitoringintermsofmonitoringability,taskobserv-abilityandclarityofoutcomemeasures.ZsidisinandSmith(2005)describeinformationsystemsintheirapplicationwithearlysupplierinvolvementforassessingsuppliercapabilities,monitoringsupplierprocessesandprovidinginformationtosuppliersduringnewproductdevelopmentinordertoreduceriskexposure.GeorgeA.Zsidisin-9781839104503DownloadedfromPubFactoryat05/28/202209:10:30AMviaColumbiaUniversityLibrary

209Agencytheoryinpurchasingandsupplymanagement191Informationsystemsarearguablynecessaryforbothbehaviour-andoutcome-basedcontractsinaPSMcontext;theyarejustappliedindifferentways.Astraditionallyconcep-tualized,informationsystemscanbeusedformonitoringsupplierbehavioursbyreducingthebuyingorganization’sriskassociatedwithsupplieradverseselectionandmoralhazard(Eisenhardt,1989;ZsidisinandSmith,2005).However,fromaperformance-basedcontract-ing(outcome-basedcontracts)perspective,informationsystemscanbeviewedintermsofassessingsupplierperformanceandrewarding/penalizingsuppliersbasedonthoseresults(Randalletal.,2011;DattaandRoy,2011).Therefore,dependingonthecontext,informationsystemsandsuppliermonitoringmaybenecessarywhenincentivizingsupplierswitheitherbehaviour-oroutcome-basedcontractsormanagementapproaches;itistheapplicationandintentionsofthesemonitoringsystemsthatmaydiffer,puttingadifferenttwistonthewayweperceiveandcontextualizetheuseofinformationsystems.OutcomeUncertaintyOutcomeuncertaintyisassociatedwiththeextenttowhichtheagentcaneffectivelycontrolitsperformanceoutcomeswhenmeetingtherequirementsoftheprincipal(Eisenhardt,1989;WhippleandRoh,2010).Uncertaintyinbusinessandsupplychainisprevalentinmanyways.Theseinclude,butarenotlimitedto,governmentpolicies(Eisenhardt,1989),economicclimate(CellyandFrazier,1996),competitoractions,technologicalchange,demandvola-tility,productchurning(Claycombetal.,2002),commoditypricevolatility(Gaudenzietal.,2018)andforeignexchangevaluationshifts(Gaudenzietal.,2021;Zsidisinetal.,2020).WhippleandRoh(2010)examineoutcomeuncertaintywithregardtoquality‘fade’fromshippers.Zsidisinetal.(2004)arguethatthepurchasingorganizationsintheirstudyareabletoreducethelevelofuncertaintyassociatedwithinboundsupplythroughtheuseofformalriskassessmenttoolsandproactivesupplymanagementtechniques.ZuandKaynak(2012)proposewhenbuyingfirmsperceiveahighdegreeofsupplieruncertaintyinattainingqualitylevels,behaviour-basedapproachesaremoreappropriate.Likewise,SelviaridisandNorrman(2014)arguethatoutcome-basedcontractsareappropriateunderconditionsoflowoutcomeuncertaintyperformance,becausethecostoftransferringriskislow.Overall,thecentralargumentisthatunderconditionsofsignificantoutcomeuncertaintyitisverydifficultforthebuyertoefficientlytransfertheassociatedrisktosupplierswithouthavingtopayariskpremium,andinsteaditisbettertoincentivizesuppliersbasedontheirbehavioursandeffortstoattainperformancerequirements.RiskAversionZuandKaynak(2012)statethat,inessence,riskaversionisaboutsettlingforalowerprofittoavoidtheriskofanuncertainreturn;orinotherwords,beingwillingtopaymoretoavoidrisks.Whenthelevelofagents’riskaversiondecreasesorprincipalsbecomemoreriskaverse,itiseasiertotransferrisktoagentsandoutcome-basedcontrolispreferred(MacCrimmonandWehrung,1986).Forsupplierswhoaremoreriskaverse,itbecomesincreasinglyexpensivetopassrisktothesesuppliers,andthenbehaviour-basedapproachesbecomemoreappealing(Eisenhardt,1989).Fromaqualitymanagementperspective,riskaversesuppliersaremorelikelytoapplystrictqualitycontrolproceduresandinvestinqualitymanagementpracticestoimprovetheirGeorgeA.Zsidisin-9781839104503DownloadedfromPubFactoryat05/28/202209:10:30AMviaColumbiaUniversityLibrary

210192Handbookoftheoriesforpurchasing,supplychainandmanagementresearchprocessandproductquality,sothattheycanreducetheproportionofdefectivegoodsgoingintoeachdeliveredlotanddeliverbetter-qualityproductstobuyers(Starbird,1994).Undertheseconditions,behaviour-basedapproachestomanagingsupplierquality,especiallysup-plierprocessmanagementandsupplierqualitydevelopmentpractices,aremoreeffectiveinmanagingsupplierqualitythanoutcome-basedapproaches,becauseriskaversesuppliersaremorewillingtocooperatewithbuyerstoimprovetheircapabilities,therebyreducingtheirriskofqualityproblemsandfailures(ZuandKaynak,2012).Inthecaseofnewproductdevel-opment,suppliersareoftenexposedtoriskassociatedwithdesignfailuresinmeetingtheircustomerrequirements.Strategicsupplychainprocessessuchasearlysupplierinvolvementhelptoreduceriskexposureandimprovegoalcongruencebetweenthebuyerandstrategicsuppliers(ZsidisinandSmith,2005).However,inothercircumstanceswherethereisminimaluncertainty,andhenceriskinthetransaction,itisusuallymoreefficienttotransferwhatlittleriskthereistothesupplier,andinsteadfocusonperformanceoutcomes.ProgrammabilityProgrammabilityreferstothestandardizationandclarityofprocessesandproceduresintasks,jobresponsibilityandresults(Goodaleetal.,2008;Strohetal.,1996).InthecontextofPSM,taskprogrammabilityoccurswhenbuyerscanspecifyappropriatesupplierbehav-iours(Eisenhardt,1989;ZuandKaynak,2012).Itbecomeseasiertoobservethesuppli-er’sworkwhentasksaremoreprogrammable(Rungtusanathametal.,2007;Strohetal.,1996).Therefore,wheninformationaboutasupplier’sbehaviourcanbeeasilyobtained,behaviour-basedapproachesarepreferable(Eisenhardt,1989).Astandardproductimplieshightaskprogrammabilitybecausetherequiredproductionprocesscanbepreciselydefined;whereasauniqueproductimplieslowtaskprogrammability(Keebler,2001).Whenpur-chasingstandardproductsfromsuppliers,itiseasierforbuyerstoknowwhattheproductionprocessshouldbeandtoevaluatewhethersuppliersaremanagingqualityastheyshould.Itisthuseasiertoapplybehaviour-basedapproacheswithsuppliers,suchasmonitoringsuppliers’processes,performingqualityaudits,orofferingtechnicalassistanceandguidance.Theseapproachescanhelpbuyerstostipulatesuppliers’behaviourtowardtheirdesiredperformancelevel(Eisenhardt,1989).RelationshipLengthRelationshiplengthfromanagencytheoryperspectivesimplyreferstothedurationofbuyer‒supplierrelationshipsinasupplychainsetting(Eisenhardt,1989),andisusuallytestedusingthenumberofyearsdoingbusinesswithasupplier(BuvikandHaugland,2005;Kotabeetal.,2003).ZuandKaynak(2012),basingtheirargumentsontheworkofFlynnandFlynn(2005),Fynesetal.(2005)andKaynakandHartley(2008),statethatsuccessfullong-termrelationshipsencouragesupplierstobecomeinvolvedinproductorservicedesignprocessimprovementefforts,therebyleadingtoimprovementsinproductandservicequality.Long-termrelationshipsprovideaplatformwherethepurchasingorganizationwilllearnaboutthesupplierandestablishorganizationalroutines(Lietal.,2015;Zsidisinetal.,2004).Earlysupplierinvolvement(ESI)innewproductdevelopment,whichrequiresalong-termrelationshipandorientationwithsuppliers(ZsidisinandSmith,2005),hasbeenfoundtoserveasabehaviour-basedmanagementapproachformanagingsupplyrisk(ZsidisinandEllram,GeorgeA.Zsidisin-9781839104503DownloadedfromPubFactoryat05/28/202209:10:30AMviaColumbiaUniversityLibrary

211Agencytheoryinpurchasingandsupplymanagement1932003).ZsidisinandEllram’s(2003)studydiscoveredthatrelationshiplengthhasapositivemoderatingeffectontheinfluenceofsharinginformationaboutriskandfirmperformance.ESItendstoextendrelationships,increasingthelikelihoodofgoalalignmentbetweenthesupplierandthebuyer(ZsidisinandSmith,2005).GoalConflictGoalconflictisthesecondofthetwoessentialagencyproblemsthatarisewhenaprincipaldelegatestaskstoanagent(Norrman,2008;WhippleandRoh,2010).Goalconflict(con-gruence)concernstheextenttowhichalignmentexistsbetweenthegoalsandstrategiesoftheprincipalandagent(Eisenhardt,1989;Rungtusanathametal.,2007;ZsidisinandEllram,2003;ZsidisinandSmith,2005),whereconflictimpliesdifferentoropposingdirections,andcongruencereferstoalignment.Goalconflict(congruence),fromanagencyperspective,hasbeenstudiedinseveraldif-ferentcontextsinthesupplychainliterature.ZuandKaynak(2012)examinegoalconflictintermsofthedegreetowhichbuyingfirmsperceivethatsuppliersdisagreeongoalsandstrate-giesforensuringquality.Maestrinietal.(2018)foundempiricalsupportforgoalcongruencepositivelymoderatingtheinfluenceofsuppliermonitoringandincentivesonsupplieropera-tionalperformance.ZsidisinandSmith(2005)arguethatgoalcongruencebetweenbuyersandsuppliersispositivelyassociatedwithESI,abehaviour-basedriskmanagementapproach,inattainingfinalcustomers’product/servicerequirements.SUMMARYANDFUTUREDIRECTIONSAsdiscussedinthischapter,thecoreofagencytheoryconcernsaligningandincentivizinganentity(individualororganization)viathemetaphorofacontract.Agencytheoryiscurrentlyoneofthelesser-utilizedtheoreticalframeworksinsupplychainscholarship,buthasthepotentialtoprovidescholarswithinsightandgroundingwheninvestigatingPSMphenomena.Stock(1997)positsthatagencytheorymayassistmanagersinunderstandingsupplychainissuessuchasthedevelopmentofinter-andintra-organizationalrelationships;themaintenanceofcomplexrelationshipsbetweensuppliers,customersandthirdparties;thedynamicsofrisksharing,capitaloutlay,powerandconflictbetweenchannelintermediaries;andidentifyingthecostsandbenefitsofsupplychainintegration.Thesetopics,andothersettingsandphenomenawhereabuyer,whetherintermsoftheorganization,PSMfunctionorindividual,delegatesorisdelegatedworktoorfromanotherorganization,functionorindividual,canpotentiallygleaninsightfromthetheoreticalunderpinningsofagencytheory.However,thegreatmajorityofagencytheory-informedpurchasingandsupplychainmanagementscholarshipfocusesonbuyer‒supplierdyads(Fayezietal.,2012;SelviaridisandNorrman,2014).OneopportunitythathasnotyetbeenfullyseizedinPSMresearchisadoptingagencytheoryfromdifferentunitsofanalysis.FutureresearchapplyingagencytheoryinPSMshouldcontinueextendingbeyondthedyadsofbuyerandsupplierfirms.Agencyproblemscanexistwithinthefirm,involvingthePSMfunction.Forexample,itcanbearguedthatinsomecapacitiesthePSMfunctionhasanagencyrelationshipwithproduction,wherePSMistheagentperformingthetaskofarrangingandprovidingtheinputsformanufacturing,whereasmanufacturingservesastheprincipal.Althougheachfunctionworksforthesamecompany,GeorgeA.Zsidisin-9781839104503DownloadedfromPubFactoryat05/28/202209:10:30AMviaColumbiaUniversityLibrary

212194Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtheremaybeinstanceswherethereisgoalconflict,suchasengineersorplantmanagerswantingtouseaspecificsupplierduetoreputationorperceivedquality,andPSMseekingtouseasupplierprovidingthebestbusinessvaluetothecompany.Anotherexamplecanconcerntheindividuallevel,suchasacommoditymanagerastheagenttaskedbyadirectorofsupplymanagementformanagingarespectivespendcategory.Althoughthecommoditymanagermayhavedoneduediligenceinselectingasupplier,theremayalsobeoutcomeuncertainty,suchaschangingmarketconditionsandprices,detrimen-tallyaffectingcostorproductavailability;aswellasprogrammabilityorinformationsystemfactorsinfluencinghowthecommoditymanagershouldbeevaluatedandincentivizedintheirperformanceevaluationorcompensationstructure.However,agencytheorymayhavelimitationsextendingbeyondtheinvestigationofdyadicrelationships.Supplychainresearchduringthelastdecadeandahalfhasextendedtowardsinvestigatingthedynamicsofsupplychainandservicetriads(Wynstra,2010)andnetworks(ChoiandDooley,2009).Severalscholarshaveattemptedtomakeinitialassociationsofagencytheoryappliedtosupplychaintriadsandnetworks,butonlywithhigh-levelgenerali-zations.ChengandKam(2008)provideanddiscussaconceptualframeworkusingthesettingofmultipleprincipal‒agentrelationshipsinasupplynetwork,butnoneoftheassumptionsorvariablesofagencytheoryareexaminedorintroduced.Zhangetal.(2015)adoptanagencyperspectiveoftriadrelationshipsinfranchiser‒franchisee‒customerrelationships,butthekeydependentvariableof‘contracts’isnevermentioned,noranyempiricalexaminationofitsindependentvariables.Wynstraetal.(2015)brieflystatethat‘agencytheoryhasimmediaterelevanceforthestudyofcontractingintriads,duetoitsfocusonstructuringarrangementsbetweenentities’(p.10),butdonotprovideanyspecificguidanceonhowthiscanbedone.Tateetal.(2010)providearareexceptionbyinvestigatingagency‘triads’inthepurchasesofmarketingservices,withmarketingandsupplymanagementfromthesameorganizationservingastheprincipalsandthesupplierastheagent.Studiessuchasthisillustratethecom-plexityofinterorganizationalandintra-organizationalgoalsandbehaviours,whereintheirstudymarketingmanagementprefersbehaviour-basedcontractsfocusingontherelationshipandbuildingloyaltysothatthesupplierwilldoa‘goodjob’.Incontrast,supplymanagementprefersoutcome-basedcontractsthattrackfulfillmentofrequirementsalongthepurchasingprocess(monitoring)andinitiateconsequenceswhennecessaryiffailuresarise.Thisstudyprovidesarareglimpseintointra-organizationalrelationships,butwithtwodifferentbusinessfunctions(marketingandPSM)servingasprincipals,andthecomplexdynamicsofincen-tivizingsupplierperformance.Theydiscoveredconflictingguidanceandincentivesbetweenpurchasingandmarketinginincentivizingsupplierperformance.Further,theworkofTateetal.(2010)isoneoftheonlysupplychainstudiesdirectlyadoptingthecoretenetsofagencytheoryassumptions,itsdependentvariable,andselectindependentvariables(informationsystems/monitoring,goalconflict,andprogrammability)intheiranalysisofatriadicrela-tionship.However,onekeydifference,inrelationtoothersupplychaintriadicornetworkstudies,isthatitisstillfocusedontwodistinctcompanies:theprincipalisdichotomizedbythetwobusinessfunctionsofPSMandmarketing,andthesupplierservesasanagentintherelationship.Agencytheorycanprovideinitialinsightintosomeoftheconflictingdynamicswithmul-tiplerelationships,buttranslatingthoseinitialinsightsintocreatinganeffectivesystemofcontractsamongthoseentitiesisarguablybeyondourcurrentunderstandingandutilizationofagencytheoryinPSMandsupplychainresearch.Asdiscussedinthischapter,thereareGeorgeA.Zsidisin-9781839104503DownloadedfromPubFactoryat05/28/202209:10:30AMviaColumbiaUniversityLibrary

213Agencytheoryinpurchasingandsupplymanagement195numerousvariablesinfluencingwhetherbehaviour-oroutcome-basedcontractsaremostappropriate.Triadsandnetworksexponentiallycompoundthisanalysisbysimultaneouslyconsideringmultiplerelationshipsamongthreeormoreentitiesatarguablytwoormoreunitsofanalysis.InsomewaysthiswasidentifiedbyFayezietal.(2012),whonotedthatextendednetworksoffirms,whichcharacterizemostsupplychainstoday,arenotwelladdressedwithinagencytheoryresearchduetothosecomplexities.Thismayalsobeareasonwhyagencytheoryisnotasfrequentlyusedascomparedwithothertheoriesinsupplychainscholarship.Mostscholarstodaywouldarguethatsupplychainsneedtoconsistofaminimumofthreeentities;usuallythebareminimumbeingasupplier,producerandcustomer.Therealitiesofsupplychainmanagementtodayisthattheyaremoreofacollectionornetworkoffirms.AgencytheoryisoneofmanytheoreticalframeworksthatPSMscholarscanconsideradoptingintheirresearchagendas.Thischapterprovidesahigh-levelviewofagencytheoryinscholarship,withafocusonPSMandsupplychainmanagementresearchexaminingfactorsinfluencingtheefficientuseofbehaviour-oroutcome-based‘contracts’.Althoughmostsupplychainresearchhasfocusedontheuseofbuyer‒supplierdyads,agencytheoryisripeforexaminingPSMphenomenainavarietyofsettingsanddyadicunitsofanalysis,butalsohasitslimitationswhenextendingintonetworks.Ihopethischapterencouragesyoutoconsideragencytheoryinyourtoolboxoftheoreticalframeworks.REFERENCESAdams,Michael(1994),‘Agencytheoryandtheinternalaudit’,ManagerialAuditingJournal,9(8),8–12.Anderson,E.andR.L.Oliver(1987),‘Perspectivesonbehavior-basedversusoutcome-basedsalesforcecontrolsystems’,JournalofMarketing,51(4),76–88.Arcidiacono,F.,A.Ancarani,C.DiMauroandF.Schupp(2019),‘Wheretherubbermeetstheroad.Industry4.0amongSMEsintheautomotivesector’,IEEEEngineeringManagementReview,47(4),86–93.Belzer,M.H.andP.F.Swan(2011),‘Supplychainsecurity:agencytheoryandportdrayagedrivers’,EconomicandLabourRelationsReview:ELRR,22(1),41–63.Buvik,A.andS.A.Haugland(2005),‘Theallocationofspecificassets,relationshipduration,andcon-tractualcoordinationinbuyer–sellerrelationships’,ScandinavianJournalofManagement,21(1),41–60.Camuffo,A.,A.FurlanandE.Rettore(2007),‘Risksharinginsupplierrelations:anagencymodelfortheItalianair‐conditioningindustry’,StrategicManagementJournal,28(12),1257–1266.Carney,M.andE.Gedajlovic(1991),‘Verticalintegrationinfranchisesystems:agencytheoryandresourceexplanations’,StrategicManagementJournal,12(8),607–629.Celly,K.S.andG.L.Frazier(1996),‘Outcome-basedandbehavior-basedcoordinationeffortsinchannelrelationships’,JournalofMarketingResearch,33(2),200–210.Cheng,S.K.andB.H.Kam(2008),‘Aconceptualframeworkforanalysingriskinsupplynetworks’,JournalofEnterpriseInformationManagement,22(4),345–360.Choi,T.Y.andK.J.Dooley(2009),‘Supplynetworks:theoriesandmodels’,JournalofSupplyChainManagement,45(3),25–27.Choi,T.Y.andJ.K.Liker(1995),‘BringingJapanesecontinuousimprovementapproachestoUSmanu-facturing:therolesofprocessorientationandcommunications’,DecisionSciences,26(5),589–620.Claycomb,C.,C.DrögeandR.Germain(2002),‘Appliedproductqualityknowledgeandperfor-mance’,InternationalJournalofQualityandReliabilityManagement,19(6),649–671.GeorgeA.Zsidisin-9781839104503DownloadedfromPubFactoryat05/28/202209:10:30AMviaColumbiaUniversityLibrary

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215Agencytheoryinpurchasingandsupplymanagement197Maestrini,V.,D.Luzzini,F.CaniatoandS.Ronchi(2018),‘Effectsofmonitoringandincentivesonsupplierperformance:anagencytheoryperspective’,InternationalJournalofProductionEconomics,203,322–332.Mishra,D.P.,J.B.HeideandS.G.Cort(1998),‘Informationasymmetryandlevelsofagencyrelation-ships’,JournalofMarketingResearch,35(3),277–295.Morris,R.D.(1987),‘Signalling,agencytheoryandaccountingpolicychoice’,AccountingandBusinessResearch,18(69),47–56.Norrman,A.(2008),‘Supplychainrisk-sharingcontractsfromabuyers’perspective:contentandexpe-riences’,InternationalJournalofProcurementManagement,1(4),371–393.Norrman,A.andD.Naslund(2019),‘Supplychainincentivealignment:Thegapbetweenperceivedimportanceandactualpractice’,OperationsandSupplyChainManagement,12(3),129–142.Prosman,E.J.,K.ScholtenandD.Power(2016),‘Dealingwithdefaultingsuppliersusingbehav-ioralbasedgovernancemethods:anagencytheoryperspective’,SupplyChainManagement:AnInternationalJournal,21(4),499–511.Randall,W.S.,D.R.NowickiandT.G.Hawkins(2011),‘Explainingtheeffectivenessofperformance‐basedlogistics:aquantitativeexamination’,InternationalJournalofLogisticsManagement,22(3),324–348.Randall,W.S.,T.L.PohlenandJ.B.Hanna(2010),‘Evolvingatheoryofperformance‐basedlogisticsusinginsightsfromservicedominantlogic’,JournalofBusinessLogistics,31(2),35–61.Rungtusanatham,M.,E.Rabinovich,B.AshenbaumandC.Wallin(2007),‘Vendor‐ownedinventorymanagementarrangementsinretail:anagencytheoryperspective’,JournalofBusinessLogistics,28(1),111–135.Selviaridis,K.andA.Norrman(2014),‘Performance-basedcontractinginservicesupplychains:Aserviceproviderriskperspective’,SupplyChainManagement,19(2),153–172.Selviaridis,K.andF.Wynstra(2015),‘Performance-basedcontracting:aliteraturereviewandfutureresearchdirections’,InternationalJournalofProductionResearch,53(12),3505–3540.Shafiq,A.,P.F.Johnson,R.D.KlassenandA.Awaysheh(2017),‘Exploringtheimplicationsofsupplyriskonsustainabilityperformance’,InternationalJournalofOperationsandProductionManagement,37(10),1386–1407.Starbird,S.A.(1994),‘Theeffectofacceptancesamplingandriskaversiononthequalitydeliveredbysuppliers’,JournaloftheOperationalResearchSociety,45(3),309–320.Stock,J.(1997),‘Applyingtheoriesfromotherdisciplinestologistics’,InternationalJournalofPhysicalDistributionandLogisticsManagement,27(9),515–539.Stroh,L.K.,J.M.Brett,J.P.BaumannandA.H.Reilly(1996),‘Agencytheoryandvariablepaycompen-sationstrategies’,AcademyofManagementJournal,39(3),751–767.Tate,W.L.,L.M.Ellram,L.Bals,E.HartmannandW.VanderValk(2010),‘Anagencytheoryper-spectiveonthepurchaseofmarketingservices’,IndustrialMarketingManagement,39(5),806–819.Whipple,J.M.andJ.Roh(2010),‘Agencytheoryandqualityfadeinbuyer‒supplierrelationships’,InternationalJournalofLogisticsManagement,21(3),338–352.Wilhelm,M.M.,C.Blome,V.BhakooandA.Paulraj(2016),‘Sustainabilityinmulti-tiersupplychains:understandingthedoubleagencyroleofthefirst-tiersupplier’,JournalofOperationsManagement,41,42–60.Wynstra,Finn(2010),‘Whatdidwedo,whodiditanddiditmatter?Areviewoffifteenvolumesofthe(European)JournalofPurchasingandSupplyManagement’,JournalofPurchasingandSupplyManagement,16(4),279–292.Wynstra,F.,M.SpringandT.Schoenherr(2015),‘Servicetriads:aresearchagendaforbuyer–supplier–customertriadsinbusinessservices’,JournalofOperationsManagement,35,1–20.Zhang,J.J.,B.LawrenceandC.K.Anderson(2015),‘Anagencyperspectiveonservicetriads:linkingoperationalandfinancialperformance’,JournalofOperationsManagement,35,56–66.Zsidisin,G.A.andL.M.Ellram(2003),‘Anagencytheoryinvestigationofsupplyriskmanage-ment’,JournalofSupplyManagement,39(2),15–27.Zsidisin,G.A.,L.M.Ellram,J.R.CarterandJ.L.Cavinato(2004),‘Ananalysisofsupplyriskassess-menttechniques’,InternationalJournalofPhysicalDistributionandLogisticsManagement,34(5),397–413.GeorgeA.Zsidisin-9781839104503DownloadedfromPubFactoryat05/28/202209:10:30AMviaColumbiaUniversityLibrary

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21714.Playingtowin:applyinggametheorytopurchasingandsupplymanagementStevenCarnovaleandMylesD.GarveyINTRODUCTIONSincethedawnoftime,existencehasbeendefinedbycompetition.Withtheincreasinglengthandcomplexityofmodernsupplychains,coupledwithheightenedgeopoliticalinterconnect-edness,businessesareforcedintocompetitiononaglobalscale.Suchcomplexityrequiresamethodologicalwayinwhichtostudyandanalysethesecompetitivedynamics.Onesuchapproachisgametheory.Gametheory,atitscore,istheanalyticalprocessbywhichthedynamicsofcompetitionaremodelledandanalysed.Though,perhaps,implicitinthepsychol-ogyofhumanbeingsforever,gametheorywascodifiedasaformalmathematicalapproachtounderstandingstrategybyMorgensternandVonNeuman(1953)inthebookTheoryofGamesandEconomicBehavior,andwidelypopularizedbyJohnNash(1951),whentheso-calledNashequilibriumwasformalized.Asinputs,gametheorytakesintoaccountallpossiblecoursesofactionforeachplayerinthegame,theresourcesthateachplayerhas,andthevaluethatthoseplayersputonthoseresources.Theultimategoalofusinggametheoryistodeterminetheoptimalcourseofactiontomaximizethegainfortheplayer(s).Formally,gametheorystudiestheintersectionofthreethings:(1)rationaleconomicagents;(2)whatthoseagentsvalue(thatistheirutilities);and(3)thepay-offs/consequencesofvariousstrategies/actions.InthedecadessinceMorgensternandVonNeuman’sbook,gametheoryhasfirmlyenteredintothetoolboxesofresearchersindisciplinessuchascomputerscience,economics,politicalscience,business,biology,andmanymore.Indeed,theproliferationandexpansive-nessofgametheoryoverthepasteightdecadessuggestsjusthowusefulitisinansweringimportantbasicresearchquestions,suchas:1.Whatisthenatureofcompetitionwithinmyindustry?2.How/whydoesone,orshouldone,cooperateinthepresenceofcompetition?3.Whatisthebeststrategytotake,givenhowmycompetitormightreact?4.Isitbettertobethefirstmoverintoamarket/product,orthesecond?5.HowshouldIreacttomycompetition,inthepresence(orabsence)ofcompleteinformation?Andmanymore.Indeed,evenacursoryreviewoftheliteratureingametheorywouldrenderthereaderover-whelmedandwonderingwheretobegin.So,howmightscholarsgetstartedinunderstandingwhatgametheoryis,whatitincludes,andwhichproblemsithelpspurchasingandsupplyresearcherstosolve?Further,wheremightgametheorybeusedinpurchasingandsupplyresearchinthecomingdecades?Thesearethequestionsthatthischapterseekstoanswer.Inwhatfollowswefirstdescribethelensthatweusetothinkaboutsupplychainmanagement’smanyintricaciesandlayers.Then,leveragingtheframeworkestablishedinWacker(2008)199StevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

218200Handbookoftheoriesforpurchasing,supplychainandmanagementresearchweadvanceanontologyofgametheorythroughfourkeyelements:(1)the‘who’and‘what’ofgametheory(thatis,definitions);(2)the‘when’and‘where’ofgametheory(thatis,itsdomain);(3)the‘how’and‘why’ofgametheory(thatis,itsrelationships);andfinally(4)the‘should’,‘could’and‘would’ofgametheory(thatis,itspredictions).Wethentransitionintoabrief,yetpointed,literaturereviewfocusingonsomekeyapplicationsofgametheorythatarerelevanttopurchasingandsupplymanagement.Finally,wetieitalltogetherwithaheu-risticofsortsfortheaspiringgametheoryresearcher,providingexamplesofwhenandwhygametheorymightbeapplicable.Asabrief,andnecessaryaside,weshouldremarkonwhatpurposethischapterwillserveand,perhapsmoreimportantly,whatpurposeitwillnotserve.Inwhatfollowswewillexploregametheoryfromagroundinglens.Thatis,wewillfocusonbreakingitdowntotheatomiclevel,andthenbuildingupitsfoundationsothatthereadercanunderstandwhethergametheoryisanappropriatewaytostudytheresearchproblemathand.Certainly,thereadermayholdtheviewthatgametheoryismoremathematicalandformulaic,ratherthangrounding.Whileitistruethatapplicationsofgametheoryutilizeafairbitofmathematics,thelogicofwhy/when/wheretousegametheorydoesnot.Whatthischapterisnot:thisisnotacompre-hensivereviewofthehistoryandtheoreticaldevelopmentofgametheory.Forthatpurpose,wedirectthereaderstoWeintraub(1992)andWalker(1995).Inaddition,ifafterreadingthischapterthereaderiscuriousabouttheanalyticalapproachestoderiveclosedformmathe-maticalsolutions,wereferthereadertoMorgensternandVonNeumann(1953),Nash(1950,1951),Hamilton(1992)andMazalov(2014).Further,withintheworldofgametheory,thereareseveralnuancesthatabriefreviewoftheliteraturewillyield.Thingssuchas:cooperativeversuscompetitivegames;symmetricversusasymmetriccompetition;simultaneousversussequentialgames;perfectversusimperfectinformation;andsoon.Thischapterdoesnotcoverthosedynamics,insteadwewoulddirectthereadertoBonanno(2018a,2018b)foracomprehensiveoverviewinnon-cooperativegametheory,andPelegandSudholter(2007)foracomprehensiveoverviewofcooperativegames.FOURELEMENTSOFGAMETHEORYWhatisGameTheory?Dependingonthelensthroughwhichoneviewsgametheory,itispossibletodatethehistoricrudimentsbacktotheBabylonianTalmudasthesourceofstrategyinthefaceofcooperativedecisionmaking.ServingasthebedrockoftheJewishreligioustraditions,theTalmuddetailsa‘marriagecontractproblem’where,inthecaseofonemanwiththreewives,hebequeathsasumtoeachoneindifferingquantities.Specifically,theproblemisstatedas:‘amanhasthreewiveswhosemarriagecontractsspecifythatinthecaseofhisdeaththeyreceive100,200and300respectively’(Walker,1995,p.1).Theallocation,itturnsout,isincontradictionwithwhattheprescriptionsoftheTalmudadvise,whicharecontingentonthesizeoftheestate.Leveraginggametheory,specificallyaspecificbranchofgametheoryknownas‘cooperativegametheory’,AumannandMaschler(1985)resolvethecontradiction,andestablishthefactthatthepartsoftheTalmudarereminiscentofcooperativegametheorywherebysomeofthewivescould/shouldgrouptogethertogarnerahigherportionoftheestate(Walker,1995).StevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

219Applyinggametheorytopurchasingandsupplymanagement201Transitioningoutofantiquity,andintotheeighteenthcentury,thebedrockofmoderngametheorywasborn.In1713,JamesWaldegravearticulatedtheideaofaminimaxapproach/strategytoatwo-playergamecalled‘leHer’inhiscorrespondencewithNicolasBernoulliandPierre-RemonddeMontmort(Walker,1995).‘LeHer’is‘agameofstrategyandchanceplayedwithastandarddeckoffifty-twoplayingcards’(BellhouseandFillion,2015,p.27),andaperfectbackdropagainstwhichtounderstandan‘optimal’strategy.Thesimplestcaseofthisproblemfocusesonatwo-playerscenariowhereplayerAdealsacardtoplayerB,andonetothemself.PlayerBhastheoptiontoswitchforplayerA’scard,andplayerAisonlyallowedtoswitchifplayerAisholdingaKing.AfterplayerBchoosestheircourseofaction,playerAnowcaneitherholdthecarddealt,orswitchwithonefromthedeck.If,however,playerAdrawsaKingfromthedeck,playerAmustretaintheoriginalcarddealt.Theplayerwiththehighestcardwinsthesumofmoneyinthepot.Thus,thisgamerequiresinformationpertainingto:(1)theprobabilitiesassociatedwiththedrawingofeachofthe52cards,andthelikelihoodofsubsequentcardsbeingdrawn,contingentonwhatthecarddealtis;and(2)informationontheopponent,suchthattheirrelativerisktolerancecanbeestimated.Ultimately,itrepresentsanoutstandingearlyexampleofstrategyandinterdependence.Thecorrespondencebetweenthesegentlemenyieldedtheideathatsolvingthegame(thatis,determiningthebestcourseofaction)wouldbethestrategythatensuresthebestminimalgain,laterdeemedtheminimaxapproach.Sincethesetwoearlyexamplesofstrategy,otherprofoundadvanceshavebeenmade.Forexample:(1)inAugustinCournot’sanalysisofpoliticaleconomy,hediscussedasolutionforoptimalityinduopolistic1competition;(2)ErnstZermeloadvancedthenotionofrationalityandpay-offingamesthatarestrictlydetermined;2and(3)EmileBoreladvancedtheideaofamixed(asopposedtoapure3)strategyfordeterminingtheminimaxsolution,undercertaincircumstances(thatis,gameswithasmallnumberofstrategies),amongseveralotherdevel-opments.Arguably,though,themostimportantworkinthemoderncanonofgametheoryisbyOskarMorgensternandJohnVonNeuman(1953)inthebookTheoryofGamesandEconomicBehavior.Thisworkwassogroundbreakingbecauseitprovidedanaxiomatictakeonthetheoryofutility,whichprovidedforaconcretewayinwhichtogaugehowplayerswillact/reactbasedontheirvalues.Ultimately,thisprovidedscholarsworkinginthefieldwiththemathematicalgroundingtoanalytically,andcomprehensively,understandcompetitivedynamicsandreaction.Fromthere,itwas‘offtotheraces’withgametheory.Thecommonandfrequentlyrefer-enced(includinginthischapter)gamecalled‘ThePrisoner’sDilemma’wascreatedthroughworkattheRANDCorporationin1950.Thisfamoustwo-persongameexamineshowtwoallegedcriminals,recentlyapprehendedinconnectionwiththecommissionofacrime,shouldreactinthepresenceoftwointerdependentchoices:cooperate,ordefectfromlawenforce-ment.Then,intheyearsthatfollowedthecreationofthisgame,JohnNashestablishedthemodernnotionofequilibrium(moreonthisbelow),namedthe‘Nashequilibrium’,whichisasolutionconcept4wherebyaplayerinagamehasnoincentivetodeviatefromtheirinitialstrategy,assumingthatthecompetitorinthegamealsochoosestheirinitialstrategy.Thiscontributionwasprofound,asitestablishedanoptimaloutcomebasedontheinteractionofthestrategiesofdecisionmakers.Sincethiswork,gametheoryhasmadeitswayintothefieldsofeconomics,computerscience,internationalrelationsandbusiness,amongseveralothers.Infact,on24August2020weconductedaninitialsearchoftheliteratureusingthephrase‘gametheory’.Thepreliminarysearchyielded24,649resultsinthedisciplineofeconomics,19,881StevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

220202Handbookoftheoriesforpurchasing,supplychainandmanagementresearchinengineering,13,688inbusiness,12,840inmathematics,and12,436incomputerscience.Fromthehumblebeginningsofanalysingasimplegameofchance,tothemodellingofnuclearwar,gametheoryhasforgeditswayasafundamentaltheoryofanalysingbehaviour.Forreadersinterestedinamorecomprehensivehistoryofgametheory,wesuggestreadingWeintraub(1992)andWalker(1995).Wacker’sFourElementsAsestablishedabove,gametheoryisanelegantlensthroughwhichtostudythedynamicsofcompetition.Fundamentally,wecananalysethebestcourseofactiontotake,contingentonourunderstandingofouropponent’sutility,potentialpay-offsandstrategy.Further,thelevelsofsupplychainanalysisprovidedaboveallowforadelineatedframeworkforunderstandingwhoiscompetingagainstwhom,andatwhatlevelofthesupplychainthegameisbeingplayed.Yet,inordertoprovideausefulguideforresearchers,wemustboildowngametheorytoitsmostfundamentalcomponents.Todoso,weuseWacker’s(2008)framework,wheretheoryisdefinedas‘anexplainedsetofconceptualrelationships’,andwhereallofthesesharefourcommonelements:1.Definitions(the‘who’and‘what’).2.Domain(the‘when’and‘where’).3.Relationships(the‘how’and‘why’).4.Predictions(the‘should’,‘could’,‘would’).Abriefcommentregardingthenuancesandcomplexitiesofgametheory,asthereadermaybeanecdotallyfamiliarwiththem,isrequired.Asnotedabove,thereareoverarchinglytwobranchesofgametheory:competitiveandcooperative.Thegreatestdistinctionbetweenthetwoisthatone(cooperative)allowsforpotentialopponentsbandingtogether(thatis,acartel)againstanothergroup.Thisdoesnotdetractfromtheframeworkweestablishbelow(thatis,competitionisstillattheheartofthisbranch).Ourapproachisgeneralandappliestobothbranches.Inaddition,thereareothernuancesassociatedwithsimultaneity,informationasym-metry,sequencing,andsoon.Thesenuances,too,aretakenintoaccountinourframework,andcanbeinducedusingit.GameTheoryElement1:WhoandWhat(Definitions)Inscience,definitionsarecritical.Preciselycrafteddefinitionsallowforthecommunicationofwhatphenomenaareunderscrutiny.WeofferapertinentsummaryofthedefinitionsforgametheoryinTable14.1,withmoredetailtofollow.WhoThe‘who’essentiallyreferstotheobjectsbeingstudiedingametheory.Broadly,therearetwoconstituenciestowhichwerefer:1.Actors,typicallymadeupofindividuals,organizations(eitherindividualsgroupedtogetherinafirm,orsomeothergroupofindividuals).Inthepurchasingandsupplymanagementspace,thiscanbeapurchasingagentorabuyingcentre,forexample.2.Theenvironmentinwhichtheactorsexistandparticipateinthegame.StevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

221Applyinggametheorytopurchasingandsupplymanagement203Table14.1GameTheoryElement1SummaryWhoActorsTypicallymadeupofindividuals,organizations(eitherindividualsgroupedtogetherinafirm,orsomeothergroupofindividuals,thatis,apurchasingagent/department).EnvironmentTheexternalsettinginwhichtheactorsexistandparticipateinthegame.WhatPropertiesofactorsInformationIngametheory,informationispower.Gametheoryrequiresinformationinordertomapoutthepossiblestrategyforanactortotake.Thisinformationisnot,however,unidimensional.PayoutTherewardasaresultofanactionthatcanoccurinagame.Ineffect,thisistheincentivefortheplayertocompete,andalsorepresentswhatthepotentialoutcomeisfortheplayer’scompetitor.ResourceTheresourcereferstosomethingthattheactorvaluesanddesires;hencethecompetition.BehavioursofactorsStrategyAplayer’sstrategyrepresentsaroadmapforchoosingamove,contingentonthepossibleactionsofaplayer’scompetitor.Ineffect,astrategycanbethoughtofasanalgorithmofsorts,guidingtheplayeronthebestcourseofactionastheplayer’scompetitormakestheirmoves.Optimalstrategyisdeterminedbyenumeratingallofthepossibleoutcomesinagivengame,forboththeplayerandtheircompetitor.ReactionfunctionSometimesreferredtoasa‘bestresponse’,theplayer’sreactionfunctionisthecourseofactionthatyieldsthebestresultsfortheplayer.Recallthatacoreassumptionunderpinninggametheoryisthattheactorsoperatingwithinthegamearedoingsorationally.PropertiesofenvironmentInformationMuchliketheinformationenumeratedabove,theplayersareabletoascertaininformationabouttheenvironmentinwhichtheyarecompeting.Thisultimatelyfeedsintotheirdecisionmaking.ResourceandallocationThesourceofthescarcitythatdrivescompetitivebehaviourisscarcityassociatedwithfiniteresourcesintheenvironment.Thedegreetowhichtheseresourcesareallocated,aswellastheirupperbounds,arecriticalpiecesofinformationforplayerstohaveindeterminingtheirstrategies.ActorsTheparticipantsinthegamesbeingplayedinaparticularenvironment.BehavioursoftheenvironmentTimeTheincrementsthatgovernthedurationofthegame,andthehorizonoverwhichitistobeplayed.EventsThedecisionpointswhichimpactupontheplayersofagame.Thatis,foreveryactionofaplayer’scompetitor,thatplayerwillalsohaveareaction.OutcomesoftheenvironmentCompetitionTheprincipaloutcomeoftheenvironment,specificallyinthecontextofgametheory,isstrivingtobeatone’sopponentandgainmoreresources.IfeitherfirmislookingattheoutcomesofeachcourseofactiontheymightmapouttheelementsasshowninFigure14.1.WhatIndefiningthe‘what’ofgametheory,werelyonthreeconcepts:properties,behavioursandoutcomes.Propertiesdescribetheunique,game-theoreticelementsofthe‘who’describedabove.Behavioursdescribetheunique,game-theoreticactionsthatthe‘who’ofgametheorytakeinresponsetothepropertiestheyhave.Outcomesdescribetheunique,game-theoreticconsequencesattheintersectionofthepropertiesandbehaviorsofthe‘who’participatinginthegame.Specifically:1.Propertiesofactors:StevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

222204Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFigure14.1Fourelementsofgametheorya.Information.Ingametheory,asinmanythings,informationispower.Gametheoryrequiresinformationinordertomapoutthepossiblestrategyforanactortotake.Thisinformationisnot,however,unidimensional.Asapropertyofanactor,informationcancomeintheformof:i.Informationabouttheactors(themselvesandotheractorsinthegame).ii.Informationabouttheenvironment.iii.Informationaboutthepayout.iv.Informationaboutthestrategy.v.Informationaboutresources.vi.Informationaboutreactionfunctions.b.Payout.Therewardasaresultofanactionthatcanoccurinagame.Ineffect,thisistheincentivefortheplayertocompete,andalsorepresentswhatthepotentialoutcomeisfortheplayer’scompetitor.c.Resource.Theresourcereferstosomethingthattheactorvaluesanddesires,hencethecompetition.2.Behavioursofactors:a.Strategy.Aplayer’sstrategyrepresentsaroadmapforchoosingamove,contingentonthepossibleactionsofaplayer’scompetitor.Ineffect,astrategycanbethoughtofasanalgorithmofsorts,guidingtheplayeronthebestcourseofactionastheplayer’scompetitormakestheirmoves.OptimalstrategyisdeterminedbyenumeratingallStevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

223Applyinggametheorytopurchasingandsupplymanagement205ofthepossibleoutcomesinagivengame,bothfortheplayerandtheircompetitor.Onceeachoftheseoutcomesareenumerated,methodssuchasbackwardsinductionorotheranalyticaltechniquesusedtodeterminetheoptimalstrategyfortheplayertotakeinordertomaximizetheirownutility.Thespecificanalyticaltechniquesanddetailsofthesemethodsareoutsidethescopeofthischapter,butforreferenceweguidethereadertoMazalov(2014).b.Reactionfunction.Sometimesreferredtoasa‘bestresponse’,theplayer’sreactionfunctionisthecourseofactionthatyieldsthebestresultsfortheplayer.Recallthatacoreassumptionunderpinninggametheoryisthattheactorsoperatingwithinthegamearedoingsorationally.Thus,theyeachhaveanimplicitutilityfunctionthatgovernswhatalternativestheyvalue.Inaddition,andassumingfullinformation,theplayerseitherknow,orcanestimate,theircompetitor’sutilityfunctions.3.Propertiesoftheenvironment:a.Information.Muchliketheinformationenumeratedabove,theplayersareabletoascertaininformationabouttheenvironmentinwhichtheyarecompeting.Thisulti-matelyfeedsintotheirdecisionmaking.b.Resourceandallocation.Thesourceofthescarcitythatdrivescompetitivebehaviouristhatscarcityassociatedwithfiniteresourcesintheenvironment.Thedegreetowhichtheseresourcesareallocated,aswellastheirupperbounds,arecriticalpiecesofinformationforplayerstohaveindeterminingtheirstrategies.c.Actors.Theparticipantsinthegamesbeingplayedinaparticularenvironment.4.Behavioursoftheenvironment:a.Time.Theincrementsthatgovernthedurationofthegame,andthehorizonoverwhichitistobeplayed.b.Events.Thedecisionpointswhichimpactupontheplayersofagame.Thatis,foreveryactionofaplayer’scompetitor,thatplayerwillalsohaveareaction.5.Outcomesoftheenvironment:a.Competition.Theprincipaloutcomeoftheenvironment,specificallyinthecontextofgametheory,isstrivingtobeatone’sopponentandgainmoreresources.Leveragingtheframeworknotedabove,thiscompetitioncanoccurinthefollowingmanner:i.Internal:actorswithinaspecificfirm,competinginthesupplychain.ii.External:firmscompetingwithotherfirmsinthesupplychain.iii.Mixedlevel:thisisarareformofcompetition,whenafirmandanactor(withinasupplychain)arecompetingagainsteachother.Take,forexample,afirmcom-petinginaprocurementauctionagainstoneindividualoperatingindependently.Arare,butstillpossibleexampleofcompetition.iv.Bi-level/hierarchicalcompetitionthatoccursatdifferentlevels,withinaspecificfirm.GameTheoryElement2:WhenandWhere(Domain)Equallyasimportantasappropriately,andconcisely,definingtheelementsthatexistingametheoryistoestablishtheboundariesaroundwhichgametheoryisapplicable.Gametheoryisapplicablewhenthereexistscompetitionoverresources,betweenoramongactors.Thatis,whenscarcityexists(eitherperceivedoractual)thedrivetoacquiremoreresourcesthanyourStevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

224206Handbookoftheoriesforpurchasing,supplychainandmanagementresearchcompetitornaturallyfollows.Whilethisgeneralizedscenarioisclear,itisnecessary,however,tounderstandtheassumptionsthatgoverntheapplicabilityofgametheory’suse.Specifically,theseassumptionsare:1.Actors.Asnotedabove,actorsrepresenttheoft-referencedplayersofagame.Typically,weassumethat‘actors’referstoparticipants,thatisorganizations,people,orinfrastructurewiththeabilitytomakedecisions(forexample,artificialintelligence-drivenmachines),competingforresources.2.Humannature.Inorderforgametheorytobeappropriateasanapproachtoansweraresearchquestion,theremustbeanotionofutility.Broadly,allactorsplaceautilityontheresourceoverwhichtheyarecompeting,andthisutilityisspecifictotheindividualactorscompeting.Assuch,wefurtherassumethefollowinggoverningprinciplesabouthumannature:a.Utility:eachactorcompetingmusthaveanotionofwhattheyvalue.Allactorshavesomeuniqueutilityfunction.b.Boundedrationalityisassumedinallactorsparticipatinginthegame.Inthiscontext,boundedrationalityreferstothenotionthatactorswillmakedecisionsbasedontheinformationtheyhaveaboutotheractors,andtheenvironment,suchthatthosedeci-sionswillmaximizetheirindividualutility.c.Opportunism,wealsoassume,willexistinthecontextofhumannature.Inthiscase,opportunismrefersto‘selfseekingwithguile’(Williamson,1985,p.30),andrelatestotheideathatwhenpossibleanactorwillmaximizetheirutilitytotheintentionaldetrimentofanotheractor.3.Resources.Asnotedpreviously,resourcesaresomethingtheactorsincompetitionvalueanddesire.Itisnecessarytoassumethatthereexistresourcesoverwhichthecompetitionisbeingplayed,otherwisethenotionofcompetitionbecomesmeaningless.4.Scarcity.Gametheoryrequirestheideathattherearelimitedpoolsofresourcesoverwhichactorswillcompete.Thisscarcity,eitheractualorperceived,istheantecedentofcompeti-tion,andisthusanecessaryassumption.5.Competition.Theessenceofgametheory,competitionassumesthatormorepartiesstriveforthesameresourcetomaximizetheirutility,underconditionsofscarcity.Competitionexistswhenthereislittleornocentralizedallocationofresources,andactorsarepermittedtomakedecisionsthattheybelievecouldleadtotheacquisitionofresources.6.Marketstructure.Inorderforthedynamicsofgametheorytowork,thereneedstoexistacollectionofactors(asdefinedabove)whereatleasttwoarecompeting.Thisorgani-zationofamarketallowsforcompetitiontoexist,andrendersgametheoryaneffectivemeansthroughwhichtostudyit.GameTheoryElement3:HowandWhy(Relationships)Wacker(2008)suggeststhatagood‘theoryisinterpretedtomeana“new”theorymayexplainthecurrentphenomenabutalsooffernewareastoresearch’(p.10).Indeed,whilegametheoryisnotnew,atthetimeofitsconceptionandformulationitcertainlymetthisstandard.NoteworthyisthatmuchofWacker’s(2008)requirementfor‘relationships’iscertainlyframedbyanempirical(thatis,statistical)testingapproach.Whilegametheoryincertaincir-cumstancescanleveragesuchanapproach,moreoftenthannottheanalysisofmathematicalStevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

225Applyinggametheorytopurchasingandsupplymanagement207models(thatis,settingupasystemandderivingaclosedformsolution)isusedtounderstandthelogicalactionsandreactionsofactorsparticipatinginthegameathand.Themostdesirableoutcomeistoderiveaclosedformsolutionwithequationsfromwhichtheresearchercanderivemeaningfulinsight.Thus,whileWackerdiscussesnotionsofstatisticalparsimonyandrelatedconcepts,thissectionwilllargelyfocusonthedeterminantsofanactor’sstrategy,fromagame-theoreticperspective.The‘how’and‘why’ofgametheoryareasfollows:1.How?Inordertounderstandhowanactorcan/shouldformulatetheirstrategy,thecriticalelementistounderstandthepurposeofthecompetition(thatis,whytheactorsarecom-peting).Typically,thepurposeisfortheactortowin,therebyincreasing/maximizingtheirutility.Asnotedabove,suchcompetitionisdrivenbyscarcity,andwinning(inthemostgeneralsense)isfortheactortoacquiremoreresource(s)thanitpreviouslyhad.Notethatthisdoesnotimplythattheotheractor(s)inthegamenecessarilyhavetoacquirenoresources,justthatthefocalactorhastoacquireenoughsuchthatitsutilityismaximized.Hencewenotethefollowing:a.Winningisacontinuum,onwhichtherearetwoabsolutes:0percentand100percent.Onthiscontinuum,theresultofthecompetitioncanyieldthefollowing:i.Iwinitallandyouloseeverything;orofthetotalpotofresourceweallocateitinsomemannerin-between(so-calledzero-sumgames).Inthesettingofpur-chasingandsupplymanagement,consideracontractnegotiationwhereonesidecompletelydominatestheother.ii.Yet,inorderfortheconceptofawintomakeanysense,theutilityhastobetakenintoaccountanddefined.Asnotedabove,utilityisthatthingwhichtheactorsplayingthegamevalue.Hence,thedefinitionoftheutilityissuchthatitisindi-vidualizedtothefocalactor.Thisutilityinformsstrategy,andgovernshowtheactorwillplaythegame,inresponsetothecompetitorsofthegame.2.Why?Perhapsthebestwaytotacklethequestionof‘whygametheory’istoframeitasadiscussionofsorts.Thatis:a.Whyiscompetitionnecessary?Well,thishasbeenratherstraightforwardlyansweredabove:scarcity.Forcompetitiontomakesenseasaconstruct,theremustexistadegreeofscarcity.Indeed,theoutcomeofthecompetitionwillbegovernedbyeachplayer’sstrategy,utilities,initialresourceallocations,andthetimeallotment;butsimplyput,competitionandscarcityhaveasymbioticrelationshipwitheachother.b.Whydoactorschoosethestrategiesthattheydo?Theydosoinresponsetotherulesofthegame,theirstrategyandthestrategiesoftheotherplayersinthegame,theirreactionfunctionsandtheirutility.c.Whydothesequences/eventsofgamesunfoldastheydo?Thismakesdirectref-erencetoeachplayer’sstrategy.Theoft-referencedPrisoner’sDilemmaisagreatexampleofthis.AsdescribedbyStevenKuhn(2019):TanyaandCinquehavebeenarrestedforrobbingtheHiberniaSavingsBankandplacedinsep-arateisolationcells.Bothcaremuchmoreabouttheirpersonalfreedomthanaboutthewelfareoftheiraccomplice.Acleverprosecutormakesthefollowingoffertoeach:‘Youmaychoosetoconfessorremainsilent.IfyouconfessandyouraccompliceremainssilentIwilldropallchargesagainstyouanduseyourtestimonytoensurethatyouraccomplicedoesserioustime.Likewise,ifyouraccompliceconfesseswhileyouremainsilent,theywillgofreewhileyoudothetime.IfyoubothconfessIgettwoconvictions,butI'llseetoitthatyoubothgetearlyparole.IfyoubothremainStevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

226208Handbookoftheoriesforpurchasing,supplychainandmanagementresearchsilent,I'llhavetosettlefortokensentencesonfirearmspossessioncharges.Ifyouwishtoconfess,youmustleaveanotewiththejailerbeforemyreturntomorrowmorning.’The‘dilemma’facedbytheprisonershereisthat,whatevertheotherdoes,eachisbetteroffcon-fessingthanremainingsilent.Buttheoutcomeobtainedwhenbothconfessisworseforeachthantheoutcometheywouldhaveobtainedhadbothremainedsilent.ThePrisoner’sDilemmaelegantlyprovidesananswertothequestionofwhytheeventsunfoldastheydo:thereisadelicatebalancebetweenmyactionsandyourreaction,andmyutilityandyourutility.Thisversionofthegameinvolvestwoparticipants,butextensionshavebeenmadeforlargernumbersofactors.Ofcourse,thedecisionmakingbecomesmorecomplex(hencetheuseofvariousmathematicalmodellingtechniques).Ultimately,byunderstandingtheproperties,behavioursandoutcomesofthegame,eachactorcanestablishasoundstrategywithaclearcourseofaction.Itisthisverypreciseandcalculatedenumerationof(interdependent)outcomesthatmakesgametheorysoappealinginmanysituations.d.Whataretherelationshipsthatgametheoryseekstounderstand?Wecananswerthisquestionbyaskingthefollowingquestions:i.Howdo/willallactorscompetetoachievetheirobjectives?Thereisadynamicinterplaybetweentheactorandtheenvironmentinwhichtheactorcompetes.First,theactorhasanaprioristrategywhichisinducedbasedontheenvironment(thatis,whoelseiscompeting,resourcescarcity,andsoon).Then,afterinteract-ingandobservingwiththeenvironment,theactorisleftwithasubsetofpossiblestrategies(thatis,basedontheobservations/responses).ii.Whyareactorscompetinginthefirstplace(thatis,wheredoesthescarcityexist)?Inshort:tomaximizetheirutility.GameTheoryElement4:Should,CouldandWould(Predictions)So,whygametheory?Whatcanitdoforusaspurchasingandsupplymanagementscholars?Whatwillitpredict?Inthesimplesttermspossible,gametheorysuggeststhatactorsplayingthegamewillgravitatetowardstheirequilibrium,orthebestpossibleoutcomegiventhecon-straintsandrulesofthegame.What,exactly,doesthatmean?Generally,whenpeoplerefertothisconcepttheyarereferringtothesocalled‘Nashequilibrium’,5whichasnotedabovereferstoasolutionconceptwherebyaplayerinatwo-plusplayergamehasnoincentivetodeviatefromtheirinitialstrategy,assumingthatthecompetitorinthegamealsochoosestheirinitialstrategy.Inotherwords,thisisthechoicethat(conditionally)maximizestheplayer’sutility.Keybehindthisnotionaretheassumptionsthatwehaveenumeratedabove.Forthepurposesofexposition,letususeanexample.Inclassicaleconomics,anoligopolyexistswhenthereisastateoflimitedcompetitionsuchthatbuyersinthemarkethavefewchoicesamonglarge,typicallypowerfulsellers.Theselargeandpowerfulsellerstypicallycontrolamajorityofthemarket,oratleastadominantone.Fromapracticalsetting,taketheexampleofsoftdrinks.Letusassumethattherearetwolargesellers(thatis,aduopoly)ofcola:BigCola1andBigCola2,andtheyproducetwocolas:cola1andcola2.Letusfurtherassumethateachoftheseproductsaresubstitutes6(intheeconomicsense)foroneanother,andthatthegoalofeachfirmistomaximizetheirownmarketshare,respectively.Insuchanindustry,dominatedbyfewlargecompaniesandwheretheproductsaresubstitutesforoneStevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

227Applyinggametheorytopurchasingandsupplymanagement209Table14.2Exampletwo-playergamepay-offmatrix(%marketshare)BigCola2PricedecisionsDecreaseto$1.00Decreaseto$1.50Keepat$2.00BigCola1Decreaseto$1.00(50%/50%),reducedBigCola1:75%BigCola1:100%profitsBigCola2:25%reducedBigCola2:0%reducedprofitsprofitsDecreaseto$1.50BigCola1:25%(50%/50%),reducedBigCola1:75%BigCola2:75%reducedprofitsBigCola2:25%reducedprofitsprofitsKeepat$2.00BigCola1:0%BigCola1:25%(50%/50%),maintainBigCola2:100%reducedBigCola2:75%reducedprofitsprofitsprofitsanother,priceandquantityendupbeingthetwofactorsthatimpactuponafirm’smarketshare.Ofcourse,thenotionofbrandpreferencecomesintoplay,butforthepurposesofthisexamplewehaveassumedthattheproductsaresubstitutesforoneanother,andthuswithoutlossofgeneralityitwillnotposeanissue.Now,letusframethegame-theoreticproblem.Thisisaclassiccasewherecompetitionisspawnedbyafiniteresource‒thesize(indollars)ofthemarket‒andthecompetitionbetweenBigCola1andBigCola2istocaptureasmuchaspossible.Thisalsoworkswellforourframeworkbecausetheassumptionsofhumannature(namely,rationality)willgovernthefirms’decisionsandformulatetheirstrategies.Inthisscenario,wealsoassumethatpriceisthecompetitivedimensiononwhichthefirmsarecompeting.Inothercases,qualityoradvertisingmayalsobeused.Thereareseveralexamplesofthisintheliterature,butforthepurposesofparsimonyweassumethatonlypriceisbeingmanipulatedinthisexample.Letusassumethatthesizeofthemarketis$1million,andthattheycurrentlyeachhave50percentshareofthemarket.Letusfurtherassumethatthecostofeachcolais$2.00perunit.Now,therearethreepossiblesituationsforeachfirm:keepingthepricethesame,raisingthepriceofthecola,orloweringtheprice.Ifbothcompanieskeepthepricethesame,thennothingchangesandthe50percentmarketsharesaremaintained.Letusalsoassumethefollowingdynamicssurroundingtheelasticityoftheproducts:Ifcola1’spriceisdecreasedto$1.50,andcola2’spriceiskeptconstant,thenthemarketshareofcola1increasesto75percentandthemarketshareforcola2decreasesto25percent(theoppositeisalsotrue);ifcola1furtherdecreasesthepriceto$1.00,cola1willownallofthemarketandcola2willownnoneofthemarket(with,ofcourse,theoppositealsobeingtrue).Thereisatrade-offthatmustbetakenintoaccount,andthatisthenetprofitthateachfirmgainsorlosesasitincreasesordecreasesitsprice.Whileeitherfirmcancertainlyreduceitspricedownto$1.00,andcapturetheentiremarket,whatifthecostofthatis90percent,or95percent,orevennearly100percentofitsprofits?Clearly,becauseweassumethatthesefirmsarerationalintheirdecisionmaking,andthattheirgoalismarketsharewhilekeepingprofitinmind,theywillnotchoosetheoptionthatsacrificesprofitattheexpenseofmarketshare.So,howmightthissimplegamebeanalysed?Well,ifeitherfirmislookingattheoutcomesofeachcourseofactiontheymightmapoutthematrixshowninTable14.2.Thesedynamicsperfectlyillustratetheideaofequilibrium:eachfirmknowsthatbyreducingitsprice,thecompetitorwillrespondinkindsoastomaintainmarketshare,therebynegativelyaffectingeachone’sprofit.So,whenthetransitionisexaminedfrom$2.00eachtoStevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

228210Handbookoftheoriesforpurchasing,supplychainandmanagementresearchareduction(byeithercompetitor),therationalchoiceistoreducepricingbytheexactamountthatthecompetitordid,thusminimizingthemaximumloss,maintainingmarketshare,andkeepingtheoligopolisticdynamicsthesameasthepreviousstate(withtheconsumersurplusnowbeinghigher,ofcourse).So,arationalfirm(inthiscase,bothfirms)willgravitatetowardstheoutcomeofmaintainingpricesat$2.00,therebyadheringtothefundamentalpredictionofgametheory:actorswillchoosetheoptionthatmaximizestheirutility.Ofcourse,itmustbesaidthatthisoptionissimplisticandreductive.Therearemyriadcon-siderationsthatwouldgointothedecisionmakingprocesstoreduceprices,andwehaveonlycapturedonedecisionmakingcriterion:marketshare.Consider,forexample,ifproductionquantitiesandeconomiesofscalearetakenintoaccount.Thiswouldshifttheunitcosttotheproducer,andlikelychangethedecisionmakingprocesswhereoneoftheactorsinthegamemaybeabletoreduceprices,gainmarketshare,andstillmaintainprofitsatanacceptablelevel.So,whilethissimplisticexample,wehope,isillustrativeofhowgametheorytendstogovernandpredictbehaviourinsuchsituations,itcertainlydoesnotencapsulateallofthepossibilities.Hopefully,theresearchthatthereaderwillconduct,canfillthesegaps.LEVELSOFSUPPLYCHAINANALYSISInordertounderstandthestructureofcompetition,utilityandstrategy,itisnecessarytounderstandtheethoswithinwhichalloftheseconceptsexist;presently,thisethosissupplychainmanagement.Assuch,toreconcilelanguageandmessaging,weofferthissectionasanorganizingmechanism,andatoolwithwhichtolookatwheregametheoryandpurchasing/supplychainmanagementcanintersectfavourably.First,inordertostudyanyconceptswithinthebodyofknowledgeknownassupplychainmanagement,onemusthaveanunderstandingofwhatspecificallyisbeingmanaged;thatis,thesupplychain(Carteretal.,2015).So,whatisasupplychain?Manyacademicsdifferintheirdefinition,butgenerallyagreethatitcanbethoughtofasthecollectionofentities,begin-ningattherawmaterialssourceandendingattheindividualconsumer,allofwhichengageinactivitiestoplan,source,make,deliverandreturnaproduct,usuallythroughthehelpofvalue-addingandnon-value-addingprocessesthroughoutthevariousentitiesinvolvedinthesefivemajoractivities.Supplychainsareusuallyconceptualizedasnetworks(CarnovaleandYeniyurt,2014,2015;Carnovaleetal.,2017,2016;Carnovaleetal.,2019),andthevariousapproachestotheirstudy,betheyconceptual,empiricaloranalytical,tendtousethismathe-maticalconceptualizationtobetterunderstandthestrategiesundertakenacrosstheentitiesinthesupplychain.Commonpractice,whenanalysingafirm,istorestrictthescopeofinquirytotheleveloftheorganization.Thescholarofanysubdisciplinewithinbusinessisusuallyawarethattheirstudiesareprimarilyrelevanttomicroormacrolevelsofthebusiness.Theusualconceptu-alizationoftheselevelsisitselfinahierarchicalstructure,andentailsthestrategiclayer,thetacticallayerandtheoperationallayer,fromtoptobottom,respectively,andinthatorder.However,scholarsofsupplychainmanagementoverthepriortwodecadeshaverarelytran-scendedthisconceptualizationtowhenmultiplefirmsareinvolved.Justasacademicswithinanyareaofstudyofbusinessmustbecognizantastowhichleveloftheorganizationtheyintendtobetterunderstand,supplychainscholarsmustalsohaveasimilarconceptualizationofthesupplychain.StevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

229Applyinggametheorytopurchasingandsupplymanagement211Indeed,therearevastconstituenciesofpeople,processesandorganizationsthatimpactupon,andareimpacteduponby,thesupplychain’sveryexistence.Sowhydomanyscholarshavedifferentdefinitionsofwhatconstitutesan‘entity’andwhatconstitutesa‘link’withinasupplychain?Itissimplyduetotheirbackgroundandareaofexpertise.Moreappropriately,weargue,itisduetoalackofexistenceofahierarchyoflevelsofthesupplychain.Scholarscancertainlyagreethattheyarestudyingdifferentfacetsofanorganization,betheystrategicoroperational.Yettheystillagreeonthedefinitionof‘theorganization’.Thesupplychain,notsomuch.Wearguethatinordertogroundanytheory,includingourgroundingofgametheory,withinthecontextofsupplychainmanagement,onemustfirstagreethatasupplychainisasupplychain,andthatthedisagreementamongscholarsovertheprior20yearshasnotactuallybeenaboutthedefinitionof‘whatis’,butrather,adisagreementabout‘atwhichlevel’.So,inordertoproperlygroundhowgametheorymaybeausefultoolforsupplychainmanagementresearch,weadvanceaconceptwhichwerefertoasthehierarchicallevelsofthesupplychain.Establishingthishierarchyallowsfortheusefulnessofgametheoryinpurchas-ingandsupplymanagementtobecomeclear,andallowsforscholarsapplyinggametheoryinpurchasingandsupplymanagementtoknowatwhatlevelofanalysistheirgameisbeingplayed.Effectively,wearguethatthishierarchycomprisesfivefoundationallevels:people,infrastructure,agents,processesandorganizations.Theuseoftheword‘hierarchy’isdeliber-ate.Thereisanecessaryorderingofeachoftheselevels,andtheybuildoneachotherinordertodeveloptheoverallframingofsupplychainmanagement.Theprimarymotivationofthishierarchycomesfromtheobservationofthetraditionalviewofthefirmbeingcomposedofthreelevels.Weexpandbeyondthethreelevels,sinceconnectionsamongentitiesinasupplychainaremorecomplexandall-encompassingthanthosewithinatraditionalorganization.Wecanthinkofeachlevelbeingitsownnetworkofentities(witheachrespectiveentitydescribedbelow)andconnections.Atthenextlevelupinthehierarchy,asingleentitycouldbeacollec-tionofentitiesandconnectionswithinanetworkonalowerlevelofhierarchy.Weconsiderpeopleandinfrastructuretobeindifferentnon-overlappingnetworks,some-whatparalleltoeachother.Together,peopleand/orinfrastructureconstituteasingleagent.Collectionsofpeople,agentsandinfrastructureconstituteasingleprocess.Lastly,collectionsofpeople,infrastructure,agentsandprocessesconstituteasingleorganization.Weconceptu-alizeasupplychaintoessentiallybecomposedofthesefivelevels,whereeachlevelisitsownnetwork.Eachentityineachrespectivenetworkiseitheranindivisibleunit,orisacomposi-tionofentitiesandconnectionsfrom‘lower’levels.Forexample,whenwespeakofApple’ssupplychain,wewillhavefivedifferentnetworkstodefine‘Apple’sSupplyChain’.Thecollectionofpeopleacrossfirmsandtheirassociationsandpersonalorprofessionalcommunicationsandotherassociationsconstitutesthepeoplenetworklevel.Theinfrastruc-turemaybecomposedoffacilitiesthatserveasthelocationformanufacturingofApple’sproducts,aswellascomputersystemstoenableApple’sproductdevelopment.Thelinksbetweenthesemayrepresenttransportationroutesofsupplies,orphysicalcomputernetworkwiresorwirelessconnections.Theagentnetworkmayconstituteacollectionofinfrastructure(thatis,computers)orpeoplethatactasrepresentativeagentsforAppleandthevariousfirmsinthenetwork.Theprocessnetworkmayconstituteacollectionofprocessesandtheirconnections,specifictoasingleproductofApple,whereasingleprocessentailsacollectionofpeopleandinfrastructure,withresourcesflowingthroughthisnetworkofprocesses.Andlastly,theorganizationalnetworkmayconstitutethefirmsthemselves,whereasinglefirmhasStevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

230212Handbookoftheoriesforpurchasing,supplychainandmanagementresearchasitsconstituentpartssub-networksofthepeople,infrastructure,agentsandprocesseswithineachoftheirrespectivenetworklevels.Eachnetworkinthishierarchycomestogethertoformthesupplychain.Havingthisconceptualizationallowsustogroundgametheory,sothatweknowpreciselywho,orwhat,iscompetingoverwhat,andhow,aswellaswhytheycompetewithinthesupplychain.Insummary,eachlevel’sentityandconnectionsbetweenentitiesaredefinedthus:1.People.Theindivisibleunitsin/onthesupplychain.Asupplychaincannotexistwithoutpeople.Peopleinteractwithinfrastructure,processesandorganizations.Eveninthemostextremecasesofallcomputerizedandmechanizedsupplychains,theystillexisttoserveendconsumers,whoarepeople.2.Infrastructure.Anotherindivisibleunit,necessaryforsupplychainstoexist.Infrastructureconstitutesthenon-humanassetsofthesupplychain,asisdefinedinaccounting:prop-erty,plant,landandequipment.Withinthedefinitionofinfrastructure,werecognizethattherearephysicalandnon-physicalinfrastructurecomponents(forexample,plantversusinformation).3.Agent.Definedastheauthorizedrepresentationbyapersonoraninfrastructurecompo-nentwiththeabilitytomakedecisionsonbehalfofanorganizationwithotheragentsofotherorganizations.4.Process.Definedasacollectionofpeople,infrastructure,relationshipsamongpeopleandamonginfrastructure,respectively,andbetweenpeopleandinfrastructure.Thepurposeoftheprocessistoconvertinputsintooutputs.5.Organization.Attheorganizationallevelofanalysis,collectionsofpeople,processesandinfrastructurearecombinedforthepurposeoffulfillingamission.Organizationshaveconnectionsbywayoftransactionsorrelationships.GAMETHEORYANDPURCHASING,SOURCINGANDSUPPLYCHAINMANAGEMENT:WHATHASBEENDONE,ANDHOWCANWEUSEIT?WhathasbeendoneattheintersectionofGameTheoryandPurchasing?Aswehaveillustratedthusfar,gametheorylendsitselftonaturalapplicationsthathappentoinvolveactorscompetingoverscarceresourceswiththegoalofmaximizingtheirownutilities,whileaccountingforthepotentialstrategiesofotheractors,andexternalitiesintheenviron-mentwithinwhichtheycompete.Whiletheobviousapplicationofgametheoryisimplicitinthename(games,suchasthe‘leHer’gamenotedabove)thereareclearlyotherapplications.Previously,aswenotedindescribingthehistoricaldevelopmentofthefield,gametheorywasseentoeasilyapplytoeconomicapplicationsinvolvingcompetitionamongstvariousfirms,inamarketcompetingoverconsumersbywayofthedesign,pricinganddeliveryoftheirrespectiveproducts.However,theapplicationsofgametheoryextendbeyondthegeneralareaofeconomicsandoftentrickledowntothemorespecializedareasofpurchasing,sourcingandsupplychainmanagement.Asitrelatestothecontextofpurchasing,variousauthorshaveusedgametheoryintryingtoexplainthebehaviourofactorswhentheyareleveragingbiddingandauction-basedStevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

231Applyinggametheorytopurchasingandsupplymanagement213systemssoastoexercisetheirpurchasingresponsibilities.Forexample,Rob(1985)leveragedaStackleberg7modeltostudycompetitivebiddinginthepresenceofasymmetricalinforma-tion.Similarly,gametheoryhasbeenappliedtostudyreverseauctions(Engelbrecht-Wiggansetal.,2007;Fuggeretal.,2019),biddingwithmulti-stagequalificationcontexts(Chenetal.,2018),aswellastheimpactofthelackofinformationofexogenousfactorssuchasbidderqualityonanactor’srevenue(HaruvyandKatok,2013).Game-theoreticelementshavealsobeenleveragedtobetterunderstandthedecisionsmadeinthebrandingofproducts.Thisbranchoftheliteraturehasfocusedattentionontheapplicationofgametheorytostudythepositioningofbrands(Saymanetal.,2002)aswellasthedynamicsofbrandcompetition(AmaldossandJain,2015;Ansarietal.,1994).Gametheoryapplicationsarenotonlyrestrictedtothestudyofcompetitionofbrandsandthedynamicsofauctionsystems,buthavealsoreachedtheliteraturestreamsofpricing(AvivandPazgal,2008;CachonandFeldman,2015;RaoandShakun,1972),negotiation(Miller,1972;Rapoportetal.,1995;Samuelson,1980),andofsequential(Augustetal.,2015),service(Lietal.,2016)andinternet(HsiaoandChen,2014)channeldistribution,aswellasthebehaviourofconsumershopping(AmaldosandJain,2005;IyerandKuksov,2012;KuksovandKangwang,2014;Pazgaletal.,2013).Anotherbranchofliteraturethathasintroducedgame-theoreticconceptsisthatofsupplychainmanagement,broadlydefined.Variousapplicationswithinthisbodyofknowledgehaveleveragedgametheorytobetterunderstanddecisionmakingincapacitymanagement(CachonandLariviere,1999a),inventorymanagement(Özenetal.2008),buyer‒supplierrelationships(Narasimhanetal.,2009),riskanddisruptionmanagement(Leeetal.,2004),aswellasvariousproblemswithinproductionandoperationsmanagementinthesupplychaincontext(FangandWang,2010).Intheareaofcapacitymanagement,equilibriumsanddominantstrategies8havebeenderivedandusedtocharacterizecapacityallocationdecisions(CachonandLariviere,1999b).Similarmethodshavebeenusedtostudytheconditionsthatmustholdforanequilibriumtoexistinthecasesofquick-responseinventorycompetition(CaroandMartínez-de-Albéniz,2010),supplychaindesigninthepresenceofpositiveandnegativeexternalities(NetessineandZhang,2005),aswellasinprofitallocationsunderthestrategyofinventorycentralization(Kemahlioğlu-ZiyaandBartholdi,2011).Mostoftherelevantapplicationsofgametheorywithintheintersectionofsupplychainmanagementandpurchasinghavebeendemonstratedintheareasofbuyer‒suppliermanage-mentaswellascontracting.Thesameconceptsofgamedesignandthestudyofequilibriumsandthevarioustypesofdominantstrategieshavebeenleveragedinthestudyoflong-termcontractswhensuppliersareatriskofdefault(SwinneyandNetessine,2009),outsourcingdecisionswithcontractmanufacturers(Grayetal.,2009),contractingdecisionsbetweenfirmswithopposingprofitseekingandsurvivalseekingobjectives(Weietal.,2013),theconstruc-tionofprojectmanagementcontractsinthescopeofdelayedpayments(Kwonetal.,2010),aswellasthestudyoffosteringbuyer‒supplierrelationshipsinthesalienceoforganizationaltrade-offs(ChatainandZemsky,2007).Likewise,theseconceptshavebeenappliedtoissueswithinsupplychainsecurity(Choetal.,2015),disruptionandriskmanagement(BakshiandKleindorfer,2009;Guptaetal.,2016;Toyasakietal.,2017),productquality(Chaoetal.,2009;GuanandChen,2017;Sheu,2016),andcostallocationacrossmembersinthesupplychain(Elomrietal.,2012).Thecommonthreadthatweavesthisdiversebodyofliteraturewithinthefieldsofpur-chasing,sourcingandsupplychainmanagementisthetheoryofgames.AswepreviouslyStevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

232214Handbookoftheoriesforpurchasing,supplychainandmanagementresearchillustrated,solongasthesituationathandinvolvesactorscompetingoverscarceresourceswithinanenvironment,eachwiththeirownutilitymaximizinggoalsundertheinformationthatisavailabletoeachofthem,respectively,gametheoryoffersaninterestingapproachtopredictandexplainthebehavioursofthevariousactorsinthesediverseecosystems.Wecanclearlyseethattheseapplicationshavebeenappliedtovarioustypesofactors,suchasbuyers,suppliersandconsumers,aswellasacrossvariouslevelsofthesupplychain,rangingfromindividualpeople(thatis,consumers)toentireorganizations(thatis,buyers/suppliers).Theextantliteraturecontendsthatgametheoryisindeednotonlyausefulmethodologyforexplainingandpredictingthebehavioursoftheseactors,butalsoausefulgroundingtheoryfortheorizingthebehavioursinthecontextofcompetitioninenvironmentswithscarceresourceswithcongruentandincongruentgoalsofrespectiveactors.HowcanweuseGameTheory?Often,itisbettertoshowthepathratherthantoprescribethesolution.Inthischapterthatistheapproachwehavechosentotake.InTable14.3wehighlightafewpapersthatdemonstratetheuse-casesofgametheoryinareasrelatedtopurchasingandsupplymanagement.This,wehope,willserveasaheuristicofsortsfortheaspiringgametheoristworkinginthespaceofpurchasingandsupplymanagement.MACHINESASCOMPETITIVEACTORSTraditionalandneoclassicaleconomicthoughthas,uptothispoint,consideredthenotionofanactortobedefinedasaperson,company,university,government,oranyothergeneralorganizationthatengageswithinsomeformofeconomictransaction.However,duetorecentadvancesintechnology,onecouldposetheargumentthatthedefinitionof‘actor’shouldnolongerbeconstrainedtothissmalllaundrylistofentities,andshouldberevisedtoincludenewerentities:machines.Whileitistruethatmachineshavetechnicallyengagedineconomictransactionsoverthepriorcentury,suchasthroughautomatedtellermachinesandautomatedorderplacement,thesetransactionshavetraditionallybeenrule-based,wheretheruleshavebeenwelldefinedbyanotheractor.Putsimply,whenmachinesmake‘decisions’,thosedecisionsaretechnicallypreordainedbyothereconomicactorsandpurelydelegatedtothemachinetomake,asthoughtheactorweremakingthem.However,wearguethatwiththerecentadvancementandreplacementofthesetraditionalrule-basedmachines,eachonereflectiveofthespecificdecisionsmadebyatraditionalnon-machineeconomicactor,withnewerlearning,andsoontobe‘self-aware’machines,thatthesemachinesarethemselvestheirownactors.Whiletheymayindeedbelearningandactinginthebestinterestandonthebehalfofothereconomicactors,onecouldarguethatsincethesemachinesoperateonrulesnolongerstrictlyderivedfromotheractors,butratherfromthemselvesbywayoftheirobservationsandtheanalysisoftheseobservationsbywayofmachinelearning,thesemachineshavetheirowncollectionofutility,resourcesandstrategiestoundertaketoplaywithinthegame.Wealsoargue,bywayofexperienceandtransitivityfromotheractors,thatthesemachineswillalsoactwithboundedrationality,sincetheyareonlyprivilegedtocertaininformationthatisfedtothem;andwithopportunism,sincetheymakedecisionswithautility,thatis,objectiveStevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

233Applyinggametheorytopurchasingandsupplymanagement215InsightsSeveraldynamicsareexploredaroundindividualbargainingpower,costminimization,andsoon.Ultimately,basedonseveralequilibriaderivedviaanalyticalexamination,performanceofvariousstrategiescanbeexaminedandcompared.Theauthorsusethecaseofpetroleumstockpilingwithpriceuncertainly,andfindthatwiththecooperativeapproach,wherepartiesarecoordinatingandjointlypurchasing,betteroutcomesaregained.Theauthorsfindthatcategorymanagement,conductedinthisway,oftenresultsinlessthanoptimalpricingandassortmentdecisions,becausecategorymanagementisdecentralized(thatis,categorymanagersarecompetingwithoneanother).GametheoryapproachTheauthorsetsuptwodistinctapproaches:onecooperativeandonecompetitive.ThecompetitivescenarioreachesaNashequilibrium,andprovidesfornormativeprescriptionsforamoreconservativestrategy.Theauthorsetsuptwobroadscenarios:anon-cooperative,andacooperativeapproach.Inthenon-cooperativeapproachaNashequilibriumisproposedwherestockpilingiscontingentonotherpartieswhoarealsoengaginginsuchprocurementbehaviour.Thecooperativeapproachincludescoordination.Theauthorspresentaduopolymodelwhereretailerschoosepricingandbreadthwithinacategory.Theconsumersareallowedtochoosetobuy(ornot),tomaximizetheirownutilities.ResearchquestionBroadly,theresearchexamineswhethercooperativeorcompetitivedynamicsarebetterinbuyer‒suppliernegotiations.Theresearchaddressestheoptimalmethodofstockpilingsuchthatcompetitionisattendedtoandthatpriceisconsideredasuncertain.Thisresearchstudiestheproblemofplanningapurchasingassortmentwhereconsumersbuyfrommultiplecategories.Thegoalistodeterminetheoptimalassortment.AreasofgametheoryappliedtopurchasingandsupplymanagementTable14.3PurchasingandsupplymanagementfocusareaNegotiation(Bard,1987)Competitivepurchasingunderdemanduncertainty(Nti,1987)Categorymanagementandcoordination(CachonandKök,2007)StevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

234216Handbookoftheoriesforpurchasing,supplychainandmanagementresearchInsightsTheauthorsareabletounderstandhowandunderwhatconditionstheprocurementofatechnologybundledprojectarelikelytobesuccessful,andwhatthelimitingfactorswillbe.Thisallowsforaspecificstrategytomaximizethepurchaser’slikelihoodofsuccess.Optimalstrategyforsupplierselectioncanbeascertainedifsituationsarestudiedrigorouslyandcomprehensively.Inthiscasetheagencycostsbetweencertificationandappraisalareexamined.Thestrategicdimensionthatthefirmintendstocompeteonbecomespre-eminent,andgametheorycandictatehowtobestchooseasupplierunderthesecompetingobjectives.GametheoryapproachTheauthorssetupadynamicgamewithnplayers,andusebackwardinductiontoanalysehowdifferentbiddingscenarioswillleadtoincreasedlikelihoodofsuccess.Theauthorsalsoleveragethisset-uptounderstandextensionssuchastechnologyadoptionfailure,bargainingpowerandtechnologyadvancements.Twoseparateinstancesaresetup:(1)theappraisalregimewheresuppliersarepenalizedwhenqualityissuesarise;and(2)thecertificationregimewherethesupplierattainsexternalcertificationandthebuyerpaystheunitprice(giventhecertificationofquality).ResearchquestionThegoalistoanalysebundledprocurement,aphenomenonwherebytheoutcomeofthepurchasingscenarioistoachieveadualmandate:accomplishtheproject,andacquiretheunderlyingtechnology.Thisisparticularlygametheory-driven,becausethescarceresourcehereisquiteproprietary.Whatisbetterinsupplierselection:appraisalofqualityorcertificationofquality?PurchasingandsupplymanagementfocusareaProcurementoftechnology(ChuandWang,2015)Supplierselectionandqualityevaluation(Hwangetal.,2006)StevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

235Applyinggametheorytopurchasingandsupplymanagement217function,definedbyotheractors.Whenthetimeofmachine‘self-awareness’arrives,thisutility,weargue,couldverywellchangefrombeingderivedbyotheractorstothatofitsown,basedonitsownexperiencesandlearnings.Evenwithoutself-awareness,itisplausibletoassumethatmachinescurrentlyhavetheabilitytolearntheirownutilitybasedontheirownobservations.Hence,wepositthatmachinesareactors,andasiscurrentlythecaseinpractice,theydoengageineconomictransactionswithotheractors,suchashumans,companies,moregeneralorganizations,andevenothermachines.CONCLUDINGREMARKSIfthereadertakesbutonethingawayfromthischapteritshouldbethis:gametheoryistheformalstudyofcompetitioninthepresenceofscarcity.That,ofcourse,reducesyearsofelegantandrigorousworkdowntoonephrase,butitsolvesthecoreobjectivewesetouttoachieve.Stateddifferently,thegoalsofthischapteraretwofold:(1)topresentgametheoryasagroundingtheory,completewithacomprehensiveexaminationofitsdefinitions,itsdomain,itsrelationshipsanditspredictions;and(2)toprovidescholarsintheareaofpurchasingandsupplymanagementwitharoughideaofhowtostartusinggametheorytosolvechallengingresearchproblemsandquestions.Wefirstprovidedauniqueconceptualizationofthehierar-chicallevelsofsupplychainanalysis,sothatthescholarknowsatwhatlevelandwithwhomthecompetitionisoccurring.Then,toadvancegametheoryasaformalgroundingtheory,weleveragedWacker’s(2008)framework.Next,wetransitionedintohowgametheoryhasbeenusedinpurchasingandsupplymanagement,eitherdirectlyortangentially.Wethenprovidedafewspecificandexemplaryworksinthefieldtoprovideaheuristicofsorts,toallowtheresearchertostarttheirjourneyinthiselegantandrigorousrealmofknowledge.Justremem-ber:scarcitybreedscompetition,andcompetitionengendersunderstandingitthroughgametheory.NOTES1.Aduopolyisanoligopolywithtwoparticipants,anditisoftenusedtomodelcompetitionbecauseofnaturaleaseinexposition.2.‘Strictlydetermined’referstoatwo-person,zero-sumgame.3.Apurestrategyimpliescertaintywithrespecttohowtheplayerwillplaythegame,whereasamixedstrategyusesaprobabilitytodescribethelikelihoodthattheplayerwilltakeacourseofaction.4.A‘solutionconcept’referstotheruleorrulesforhowagamewillbeplayed.5.AlsoofnoteisthattheNashequilibriumisonlyrelevantinthecontextofcompetitivegames,asopposedtocooperativegames.Asbrieflyalludedtoabove,competitivegamesarethosewhereitisactoragainstactor,ratherthangroupsofactorscompetingagainstoneanother.Forexample,inthecaseofcartels,wheregroupsofcountriesarejoiningtogethertocompete,thiswouldbeconsideredcooperativegametheory.Inthecooperativecase,theanalogoussolutionconceptisreferredtoastheShapleyvalue(Shapley,1951).Thelogic,however,isquitesimilar.6.Suchthatconsumershavelittletonoissueswitchingbetweenthem.7.Aso-calledStackleberggameinvolvesaleaderandafollower,typicallyutilizingtheconceptofleadershipandfirstmoveradvantage.8.So-calleddominantstrategiesarethosethatresultinthehighestpayoffforactors,regardlessoftheotheractors’actions.StevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

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238220Handbookoftheoriesforpurchasing,supplychainandmanagementresearchNetessine,S.andZhang,F.(2005),‘Positivevs.negativeexternalitiesininventorymanagement:Implicationsforsupplychaindesign’,ManufacturingandServiceOperationsManagement,7(1),58–73.Nti,KofiO.(1987),‘Competitiveprocurementunderdemanduncertainty’,ManagementScience,33(11),1489–1500.Özen,U.,Fransoo,J.,Norde,H.andSlikker,M.(2008),‘Cooperationbetweenmultiplenewsvendorswithwarehouses’,ManufacturingandServiceOperationsManagement,10(2),311–324.Pazgal,A.,Soberman,D.andThomadsen,R.(2013),‘Profit-increasingconsumerexit’,MarketingScience,32(6),998–1008.Peleg,B.andSudholter,P.(2007),IntroductiontotheTheoryofCooperativeGames(TheoryandDecisionLibraryC(34)),2ndedition.HeidelbergandNewYork:Springer.Rao,A.G.,andShakun,M.F.(1972),‘Aquasi-gametheoryapproachtopricing’,ManagementScience,18(5Part2),110–228.Rapoport,A.,Erev,I.,andZwick,R.(1995),‘Anexperimentalstudyofbuyer–sellernegotiationwithone-sidedincompleteinformationandtimediscounting’,ManagementScience,41(3),377–394.Rob,R.(1985),‘Anoteoncompetitivebiddingwithasymmetricinformation’,ManagementScience,31(11),1431–1439.Samuelson,W.(1980),‘First-offerbargains’,ManagementScience,26(2),155–164.Sayman,Serdar,Hoch,StephenJ.andRaju,JagmohanS.(2002),‘Positioningofstorebrands’,MarketingScience,21(4),378–397.Shapley,LloydS.(1951,21August),‘Notesonthen-PersonGame–II:Thevalueofann-persongame’(PDF),SantaMonica,CA:RANDCorporation.Sheu,J.B.(2016),‘Buyerbehaviorinquality-dominatedmulti-sourcingrecyclable-materialprocurementofgreensupplychains’,ProductionandOperationsManagement,25(3),477–497.Swinney,R.andNetessine,S.(2009),‘Long-termcontractsunderthethreatofsupplierdefault’,ManufacturingandServiceOperationsManagement,11(1),109–127.Toyasaki,F.,Arikan,E.,Silbermayr,L.andFalagaraSigala,I.(2017),‘Disasterreliefinventoryman-agement:Horizontalcooperationbetweenhumanitarianorganizations’,ProductionandOperationsManagement,26(6),1221–1237.Wacker,J.G.(2008),‘Aconceptualunderstandingofrequirementsfortheory‐buildingresearch:Guidelinesforscientifictheorybuilding’,JournalofSupplyChainManagement,44(3),5–15.Walker,P.(1995),‘Anoutlineofthehistoryofgametheory’,DiscussionPaper9504,UniversityofCanterbury,DepartmentofEconomics.Wei,M.M.,Yao,T.,Jiang,B.andYoung,S.T.(2013),‘Profitseekingvs.survivalseeking:Ananalyticalstudyofsupplier’sbehaviorandbuyer’ssubsidystrategy’,ProductionandOperationsManagement,22(2),269–282.Weintraub,E.R.(ed.)(1992),TowardaHistoryofGameTheory(Vol.24),Durham,NC:DukeUniversityPress.Williamson,O.E.(1985).TheEconomicInstitutionsofCapitalism:Firms,Markets,RelationalContracting.NewYork:FreePress.StevenCarnovaleandMylesD.Garvey-9781839104503DownloadedfromPubFactoryat05/28/202209:10:33AMviaColumbiaUniversityLibrary

23915.ParadoxtheorySajadFayeziINTRODUCTIONInabroadsense,paradoxtheoryisaparadigmoforganizationandmanagementwithitsrootsinphilosophy,psychology,andliterature.Philosophers(Plato),psychologists(Jung)andpoets(Shakespeare)havelongmadeuseofparadoxestoconveywide-rangingmeanings,includinginseparability,coexistenceandcoevolutionofcontradictions(forexample,lifeanddeath,beingandbecoming,unityandplurality)tobroadenourviewoftheintricaciesofhumanexpe-rienceandexistence(Schadetal.,2016).Paradoxicalthinkingallowsustoshiftourmindsetfrom‘either/or’to‘both/and’(Smithetal.,2016),whichisparticularlyrelevanttoamodernenvironmentcharacterizedbyuncertaintyandambiguity.Paradoxicalthinkingoftenrevealsvulnerabilitiesinourtraditionalapproachestoorganizationandmanagementandshowsthatgrowthandsustainabilityrequirespaceforunconventional,counterintuitiveapproaches.Weexplaintheparadoxtheoryanditsapplications(outlinedinTable15.1),andinvitepurchasingandsupplychainmanagement(PSCM)scholarstoexploreitsutilityforadvancingtheoryandpractice.KEYVARIABLESANDDEFINITIONSTensions:MechanismsOrganizationandmanagementscholarshavebeenengagingwithparadoxdebatessincethe1980s,exploringitsroleinorganizationtheory(PooleandvandeVen,1989),developingthe-oreticalframeworks(Lewis,2000),andapplyingparadoxtoinvestigatetensionsembroiledinmanagementdecisions(Eisenhardt,2000;SmithandTushman,2005;TushmanandO’Reilly,1996).Thishascontributedtotheadvancementofparadoxtheorythrough,forexample,dis-sectingthenotionofparadoxicaltensionsandexploringtheirantecedentsandmanifestations,whilesheddinglightoninterrelationshipsbetweencontradictoryelements,includingtheirsimultaneityandpersistence(FordandBackoff,1988;Lewis,2000).Scholarlyconversationshaveallowedustounderstandorganizationalelementsofparadoxicaltensionsinavarietyofforms,suchasmindsets,emotions,demands,interests,identitiesandpractices(Lewis,2000).Tensionsassociatedwithcontradictory,yetinterrelatedelementsofparadoxcanbeaninherentfeatureoforganizationalsystemsintheformofaction(orontologicalrealitiesoftensions)(SchadandBansal,2018).Thesetensionsmaybesociallyconstructedbyactorcognition.Organizations,andactorswithinthem,oftenputthemselvesunderexorbitantpressureasaresultofpolarizedsociallyconstructed,diametricallyopposedinteractionlogicsofparadoxes(forexample,socialversusfinancialgoals).Thisisdescribedasaprocessforsimplifyingcontradictionsbyadoptingaframeofreferencethatencouragesabstractionandbipolarizationofcomplexrealities(Kelly,1955),whichfailstocapturethenotionofinter-221SajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

240222Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable15.1DefinitionsElementExplanationReferencesLevelofanalysisIndividual,team,functional,businessunit,organizational,SeeAppendixinterorganizational,multi-levelUnitofanalysisProject,performance,relationship,sensemaking,corporateSeeAppendixsustainability,process,scandal,teams,supplynetwork,function,discourse,strategyVariablesanddefinitionsTensionsCompetingobjectivesorvaluesthatappeartobeinconflictandQuinn(2015)oppositionbutinfactsupporteachotherTypesoftensionsParadox:‘ContradictoryyetinterrelatedelementsthatexistSmithandLewis(2011,simultaneouslyandpersistovertime.’Theseresemblethesymbolofp.387)yin‒yang,wheretheparadoxicalchoices‘reflectpolaritiesthatareinterrelatedaspectsofagreaterwhole.’Dilemma:‘Competingchoices,eachwithadvantagesanddisadvantages’Dialectic:‘Contradictoryelements(thesisandantithesis)resolvedthroughintegration(synthesis),which,overtime,willconfrontnewopposition’CategoriesoftensionsLearning(knowledge):SurfacesduringorganizationalchangesandSmithandLewis(2011,innovationsinvolvingtensionsbetweenoldandnewp.383)Belonging(identity):InvolvesconflictssurroundingindividualandgroupinteractionsembodyingselfversusotherOrganizing(processes):ResultswhenorganizationsadoptcompetingdesignandproductionprocessesreflectingdemandsforbothcontrolandflexibilityPerforming(goals):ArisesfromdifferingandconflictingneedsofinternalandexternalstakeholdersViciouscycleStemsfromconsistencyschemes(individual),defensivemechanismsSmithandLewis(2011)(individual),inertiaforces(organizational)VirtuouscycleStemsfromcognitiveandbehaviouralcomplexity(individual),SmithandLewis(2011)emotionalcomposure(individual),dynamiccapabilities(organizational)relatedness.However,paradoxtheoryrestsonthepremisethatorganizationsmayfollowparadoxicaldemandstosafeguardbothshort-andlong-termgoalsandenhanceperformance(SmithandLewis,2011).Itisthereforeimportanttounderstandhowtheparalyzingdefensive-nessofactorsagainstcompetingdemandscanbetackledand,correspondingly,howthepowerofparadoxicalthinkingcanbeharnessed.Suchquestionshavecontributedtotheadvancementoftheoryandpracticeofparadoxicalmanagement,andthisisacontinuingjourney(DeKeyseretal.,2019;Schadetal.,2016).Tensions:TypesThreetypesoforganizationaltensionsareidentifiedanddiscussedintheparadoxliterature:paradox,dilemmaanddialectic.Paradoxreferstotensionsassociatedwithcontradictoryyetinterrelateddemandsthatexistsimultaneouslyandpersistovertime(Lewis,2000;SmithandSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

241Paradoxtheory223Lewis,2011).Inrelationtodilemma(ortrade-off),tensionsarecentredoncompetingchoices,eachwithadvantagesanddisadvantagesthatmustbeweighedup(SmithandLewis,2011).Withdialectic(orcompromise),tensionsrelatetocontradictorydemandswhosesimilaritiescanbeintegratedtodevelopa(short-lived)synergy(Lewisetal.,2014).Thistypologyoftensionsreflectsvarieddecisionmakingapproachestocompetingdemands,andassuchservestwoprimarypurposes:(1)itfostersunderstandingofthefeaturesofparadoxbyjuxtaposingsimilartypesoftensions;and(2)itencouragesreflectiononhowwecharacterizedualitiesbasedontheirstateofcontradiction,interrelationship,simultaneityandpersistence.Forexample,studiesofexploration–exploitationtensionsdescribetheirsequentialrecharacteriza-tionfromdilemma(Burgelman,2002)anddialectic(Farjoun,2010)toparadox(AndriopoulosandLewis,2009).Tensions:CategoriesBuildingonLewis(2000)andLüscherandLewis(2008),SmithandLewis(2011)developacomprehensivecategorizationofparadoxesthatrepresentscoreactivitiesofanyorgani-zation:learning,belonging,organizingandperforming.Learningparadoxessurfaceduringorganizationalchangesandinnovationsinvolvingtensionsbetweenoldandnew.Belonging(identity)paradoxesinvolveconflictssurroundingindividualandgroupinteractionsembod-yingselfversusother.Organizingparadoxescanresultwhenorganizationsadoptcompetingdesignandproductionprocessesreflectingdemandsforbothcontrolandflexibility.Finally,performingparadoxesarisefromdifferingandconflictingneedsofinternalandexternalstake-holders(Jarzabkowskietal.,2013).Asnotedearlier,notonlyaretensionsinherentinorgani-zationalsystems,butalsotheycanbecognitivelyandsociallyconstructed(SmithandLewis,2011).Itisthesecharacteristicsthatshedlightonforcesthatrenderlatenttensionssalient.Tensions:AssumptionsParadoxtheoryholdsimportantassumptionsinitsconceptionandarticulationoforganiza-tionaltensionsassociatedwithcontradictoryelements.Accordingtoparadoxtheory,organ-izationsareviewedasrepletewithinherenttensionsembeddedacrosscomplexsystemsandsubsystems(forexample,industries,firms,teamsandindividuals)thatconstantlyinteract(LewisandSmith,2014).Tensionsareseenasemergingduetodifferinggoals,expectationsandfunctionsofthesesubsystems(LewisandSmith,2014).Importantly,lackofunderstand-ingoftheinteractionsbetweensubsystemsandtheiroutcomes,aswellasboundedrationalityofdecisionmakers,cansignificantlyaggravateorganizationaltensions(MertonandBarber,1976).Paradoxtheoryalsoassumesthatparadoxesarecognitivelyand/orsociallyconstructedpolarities,resultingfromactorresponsestotensions.Theseresponsesareproposedtobecentredondefensivenessaimingtoreduceactordiscomfortandanxiety(FordandBackoff,1988;Lewis,2000).Actorsareassumedtohaveatendencytoignoreormaskinterdependenceofcontradictorychoicesthroughpolarization,whichfosterseither/orthinkingwherebyactorssimplychooseoneoftwoopposingelements(SharmaandBansal,2017).Finally,paradoxtheoryemphasizesthepersistenceoftensionasaphenomenonthatcanneverberesolved(SmithandLewis,2011),butcanbeleveragedthroughparadoxicalthinkingthatacceptsthispersistence,movesbeyondcontradictionsandidentifiessynergies(SharmaandBansal,2017).SajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

242224Handbookoftheoriesforpurchasing,supplychainandmanagementresearchENVIRONMENTALFOCIANDACTORCOGNITIONBuildingontheassumptionsofparadoxtheory,researchersdistinguishbetweenlatentandsalienttensions(SmithandLewis,2011).Thisdistinctionacknowledgesthattensions,whileembeddedinorganizationalsystemsandpersistentduetotheircomplexityandadaptability,areexperiencedphenomena(SchadandBansal,2018).Assuch,theirparadoxicalnaturecanberecognized,intensifiedandaggravatedsubjecttoenvironmentalfoci(thatis,plurality,change,scarcity)and/oractorcognitionandsensemaking(Miron-Spektoretal.,2018;SmithandLewis,2011).Thesefactorsaccentuatethejuxtapositionofcontradictoryelements,spur-ringambiguityandstressthatescalatesusceptibilitytopolarization(either/orthinking).Pluralitydenotesthemultiplicityofviews,claimsanddemandsassociatedwithanorganization’sinternalandexternalstakeholders(MeixellandLuoma,2015).Uncertaintiesandinconsistenciesaremorelikelytosurfaceaspluralityincreases.Ontheotherhand,thepermeationofchangethroughorganizationalsystemsandsubsystemscreatesaninstitutionalexcusetoexercisetemporalandspatialtensionsinducedbyuncertaintyabouttheunknownfutureorconfusionaroundroles/identities(LüscherandLewis,2008).Finally,saliencyoftensionsmightarisewhenscarcityofresources(timeormoney)causesactorstotendtowardsrationalizationandcost‒benefitanalysisofcompetingchoices(Miron-Spektoretal.,2018).Actorcognitionreferstosensemakinginambiguoussituationsaccordingtocognitiveframes(Hahnetal.,2014),thatis,‘mentaltemplate[s]thatindividualsimposeonaninformationenvironmenttogiveitformandmeaning’(Walsh,1995,p.281).Thisprocessoftenfollowspastexperiences,knowledgestructure,andwhatisknowntotheactors(orwithintheircomfortzone)asamechanismtomitigateambiguityanddevelopcertainboundaries(Ashcraftetal.,2009).Assuch,actorcognitionintensifiestheexperienceofcontradictorydemandsanddisre-gardsinterrelatednessdueto,forexample,stereotypicalthinking(Hahnetal.,2014).MANAGEMENTRESPONSESStrategiestomanagetensionsshouldbebasedonanexplorationoforganizationalresponsestoexperiencedtensions.Thisrequiresnavigationofboth‘vicious’and‘virtuous’cyclesinordertohighlightparadoxicalthinking(Lewis,2000;SmithandLewis,2011).Viciouscyclesdescribethetypicalresponsesshownbyorganizations/actorswhenfacedwithsalienttensions.Theseresponsesarecentredonconsistencyschemes,defensivemechanismsandinertiaforces(SmithandLewis,2011).Consistencyschemesrefertothepreferenceofactorstoexerciseconsistencyintheircognitionandactionwhenrespondingtotensions.Defensivemecha-nismssuchasrepression,regressionandambivalencereduceemotionalanxietyrelatedtoinconsistenciesandcontradiction(Lewis,2000).Organizationalinertiaoftenreinforcesactorcommitmenttopastbehaviourswhendealingwithtensions(Gilbert,2005).Thesefactorsmayofferatemporarysenseofreliefbyenablingtheactortochooseandsticktoasinglechoice,buteventuallyexacerbatetheunderlyingtensionsbymaskingtheirinterrelatedness.Virtuouscycles,ontheotherhand,promoteacceptanceofopposingchoices,whichenablesparadoxicalresolutionstrategiesasexplainedbySmithandLewis(2011).Incontrasttodefen-siveness,acceptanceallowsforcomforttomotivateactorresponsetotensions.Cognitiveandbehaviouralcomplexity,emotionalcomposureanddynamiccapabilitiesareindispensableinnurturingacceptanceandtheabilitytoworkthroughparadoxicaltensions(SmithandLewis,SajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

243Paradoxtheory2252011).Cognitivecomplexityenablesdevelopmentofcognitiveframesthatrecognizeduali-ties,whilebehaviouralcomplexitylegitimizescompetingbehaviours.Emotionalcomposureeasesfearandanxiety,givingactorsroomtorecognizetheinterrelatednessofcontradictoryelements(SundaramurthyandLewis,2003).Finally,dynamiccapabilitiescontributetoacceptancestrategiesbyunderlining‘collectivetools’(SmithandLewis,2011,p.392)throughwhichorganizationscandealwithtensionsarisingfromchangeanduncertainty.Bycultivat-ingacceptanceasawayofthinkingandworkingthroughtensions,managerscanexerciseres-olutionstrategiesthatacknowledgethecoexistenceofparadoxicalelements.Theseresolutionstrategiesshouldbegroundedontheideaofiterativesplittingandintegrationofcontradictorychoices.SmithandLewis(2011,p.392)elaboratethisintheirdynamicequilibriummodelasfollows:‘paradoxicalresolutiondenotespurposefuliterationsbetweenalternativesinordertoensuresimultaneousattentiontothemovertime.Doingsoinvolvesconsistentinconsistencyasmanagersfrequentlyanddynamicallyshiftdecisions.Actorsthereforemakechoicesintheshorttermwhileremainingacutelyawareofacceptingcontradictioninthelongterm.’OutcomesInherentinparadoxtheoryarethenegativeoutcomesofignoringormaskingtheinterdepend-enciesofopposingforcesencapsulatedinviciouscycles.Theseforcesmaybemanifestedas,forexample,ambivalence(Eisenhardt,2000),myopia(SmithandLewis,2011),missingalternativeviews(BarronandHarackiewicz,2001),unethicalbehaviour(Schweitzeretal.,2004)andchaos(ThiétartandForgues,1995).Conversely,paradoxicalthinkingisarguedtoboostcreativity,augmentflexibilityandresilience,andfosterpositivity.Suchmechanismsnotonlypromoteshort-termachievementbutalsoofferapathwaytolong-termsuccess.Thisishowparadoxicalthinkinggeneratessustainability(SmithandLewis,2011).KeyvariablesofparadoxtheoryaresummarizedinFigure15.1.Figure15.1OverviewofparadoxtheoryvariablesDOMAINWHERETHETHEORYAPPLIESAttheheartofparadoxtheoryweobservecontradictionandinterdependenceofelements/choiceswithattributesofsimultaneityandpersistence.Paradoxtheorycanthereforebeappliedwheneverthesubjectofinterestexhibitsconflictofdemandsandoppositionalforcesbetweenelementsthatmakesenseinisolationbutarecontradictorywhencoupled(Lewis,SajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

244226Handbookoftheoriesforpurchasing,supplychainandmanagementresearch2000).Further,theopposingelementsmusthave‘inextricablelinks’(Schadetal.,2016,p.11).Thelevelofinterdependencemayvaryfromseparabletoontologicallyinseparable,yettheelementsshouldpersistovertime;thatis,theelementsmustdefineandinformeachotherinadynamicandcyclicalfashion(Schadetal.,2016).LewisandSmith(2014)identifycomplexityandgoalsasimportantboundaryconditionsoftheparadoxtheorythatsubstantiateitsapplicationtoorganizationsthatarecomplex(intermsofenvironment,maturityandsize)andpursuemultiplegoals.Paradoxtheoryhasalsobeenconsideredasameta-theory,whichextendsitsapplicationacrossavarietyofcontextsrelatingtoorganizationaltensionsandtheirmanagement(LewisandSmith,2014;PierceandAguinis,2013).Schadetal.(2016)maintainthatparadoxtheoryissuitableformeta-theorizing(Ritzer,2001)acrossmultiplespecificorganizationtheories,whichcaninturnbeappliedtostudyadiverserangeofphenomena.Theversatilityandubiquityofparadoxtheoryisalsomanifestedinitsapplicationacrossmultiplelevelsofanal-ysis,suchastensionssurfacingatindividual,team,organizationandsystemlevels.Studiedparadoxicaltensionsincludechange–stability(LüscherandLewis,2008),flexibility–control(Osonoetal.,2008),exploration–exploitation(AndriopoulosandLewis,2009;Papachronietal.,2015;SmithandTushman,2005)andcollaboration–competition(MurnighanandConlon,1991;StadtlerandVanWassenhove,2016).RELATIONSHIPSBETWEENTHEVARIABLESANDTHEORETICALPREDICTIONSParadoxtheoryexplainsrelationshipsbetweenthecorevariablesofsalientparadoxicaltensions,managementstrategies(responses),andoutcomesviareinforcingcycles(viciousandvirtuous),eachofwhichfollowscertainiterativedynamicsthataffecttheoutcomeofparadoxicalthinking.ReinforcingCyclesViciouscyclesdepicttheiterativedynamicsofdefensiveresponsestoparadoxicaltensionsbyactorsandorganizations.Theseresponsesleadtoadownwardspiralbecauseoftheemphasisononechoice(fortemporaryreliefthroughavoidance),whichinstigatespressuresfromitsopposingchoiceandcurtailsanysustainabilityoutcomes.Therefore,viciouscyclesofferanopportunitytoevaluatetheshort-termandlong-termoutputsofdefensiveresponsestopara-doxicaltensions.Factorssuchascognitiveandbehaviouralforcesforconsistency(followingactors’existingknowledgestructureandlivedexperience),anxietyandfearoftheunknown,andinstitutionalinertia,comprisediagnosticsofdefensivenessandinformendeavourstoturntowardsembracing(ratherthancircumventing)paradoxes.Virtuouscyclesidentifyimportantlinksbetweenparadoxes,responsesandoutcomesbyper-petuatinginnovation(AndriopoulosandLewis,2009;Jay,2013)andlearning(Miron-Spektoretal.,2011)whenactorsandorganizationswelcometensions.Thispositivereactionrequirescognitiveandbehaviouralcomplexity,composureanddynamiccapabilityoforganizationstoencourageacceptanceofparadoxesandworkthroughtensions.Inthisway,organizationscanfosterpeakperformanceandpromoteenduring,expansivesustainabilityoutcomes.Forexample,SharmaandBansal(2017)maintainthatembracingfinancial–socialparadoxhasSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

245Paradoxtheory227thepotentialtofurnishorganizationswith,forexample,newformsintermsofstructuresandpractices(Traceyetal.,2011)andimprovedsurvival(BattilanaandDorado,2010).HOWHASTHETHEORYBEENUSED?WediscussselectedapplicationsofparadoxtheoryintheorganizationandmanagementliteratureoutsideandinsidePSCM(seeAppendixTable15A.1).DeKeyseretal.(2019)demonstratethatresearchershaveutilizedparadoxtheoryasameanstotheorize,understandandadvance,orverbalize,somethingpuzzling.ThisalignswithLewisandSmith’s(2014)postulationsonwideningthescopeofparadoxtheoryandSchadetal.’s(2016)reviewofparadoxresearchinmanagementscience.Paradoxtheorystudiesareproliferatingintermsofbothdiversity(forexample,mechanisms,typesandcategories)andlevelofapplications(forexample,macroandmicro),whichresonateswithitsmeta-theoreticalcapacity.OutsidePSCMActorresponsesandcognitiveframesParadoxtheoryoffersapromisingdiscoursecentredonactor/organizationcognitiveframesandtheirresponsestotensionswithinandbetweenorganizations,includingincross-sectorcollaborationprojects.Forexample,paradoxicalcognitiveframesareconceptualizedasfosteringambivalentinterpretationsofmanagerialsensemakingofcorporatesustainabilitytensions,asopposedtounivalentinterpretationsdrivenbythebusinesscaseframe(Hahnetal.,2014).However,thisinterpretationisadynamicandtemporalprocesssubjecttodif-ferentframingadoptedbyactorsatdifferentorganizationallevels.Drawingonmulti-leveltensionsofabottom-of-the-pyramid(BoP)project,SharmaandJaiswal(2018)arguethatthedifferingcognitiveframesadoptedbyorganizationalandprojectleadersaremediatedbybottom-uptemporalworkandevent-driventemporalshift.Therefore,cognitivefluidity(flexibility)isvitalforthesuccessofcollaborativeprojects‒forexample,betweenbusinessandnon-governmentalorganizations(NGOs)‒asitnotonlyallowsfortheengagementofparadoxes,butalsoenablespartiestofindwaystoworkthroughtensionsratherthanbeingresignedtoaknowncourseofaction(SharmaandBansal,2017).Thiscognitivefluiditypro-videsinterestinginsightsintothedebatesofinstrumentalandecologicallydominantlogicsinsustainabilityresearch(Montabonetal.,2016).Employees’cognitiveframesandresponsestotensionsareimportantpredictorsofindi-vidualperformanceandorganizationalsustenanceinbothinternalandinterfacingcontexts.Forexample,ahighparadoxmindsetencouragesemployeestoacceptcontradictorychoiceswithoutfearandanxiety,whichadvancestheirin-rolejobperformance(Miron-Spektoretal.,2018).ThisisfurtherillustratedbyStadtlerandVanWassenhove(2016)intheircasestudyofcoopetitioninacomplex,cross-sectorpartnershipoflogisticsemergencyteamssupportingdisasterresponseoperations.Inthisstudy,employeesnavigatedcoopetitiontensionsbyjuxtaposingcollaborativeandcompetitivelogics,andusingaparadoxicalmindsettodevelopnestedidentityandcontextualsegmentation.Employeesexercisedbothintegratingandsepa-ratingresponsestocopewiththecoopetitiontensions.SajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

246228Handbookoftheoriesforpurchasing,supplychainandmanagementresearchIssuesofmanagingparadoxesStudieshavetakenvaryingapproachestoexploretheissueofmanagingparadoxicalten-sions,extendingparadoxtheoryanditsapplicationsforunderstandingvariousphenomena.Forexample,aninvestigationofcontinuousimprovement(kaizen)projectsrevealshowdefensivenessandacceptancerelatetocompetingandinterrelatingepistemicobjectsbetweenfrontlineemployeesandmanagerialstaffthroughmediationofmaterialsartifact(Aoki,2020).Epistemicobjectsalsoservetocharacterizetheorganizationalcontextforactorresponsestoparadoxes.Moreover,differentiationandintegrationstrategiescanescalateorganizationalsuccessinthemanagementofexploitation–explorationtensionsinproductdesigninnovation.AndriopoulosandLewis(2009)demonstratethisbycategorizingnestedtensionsofinnova-tion‒strategicintent(profit–breakthroughs),customerorientation(tight–loosecoupling),andpersonaldrivers(discipline–passion)‒thatexplicatetheinterplayamonginnovationparadoxes,anddemonstratehowtheirmanagementcanfuelvirtuouscyclesofambidexterity.SustainabilitytensionsSustainabilityentailsattendingtoandbalancingthetriadofpeople,planetandprofit.Assuch,sustainabilityisrepletewithtensions,whichmakesapplicationofparadoxtheorysalienttoitsexpandingdiscourse(Mazutisetal.,2020;Slawinskietal.,2017).Relevanttosustainabilityandparadoxarethepart–wholeandshort–long(temporal)tensionsrelatingtosocialsystemsandsubsystems(Jayetal.,2017).Inthisregard,Hahnetal.(2015)offeracompellingcon-ceptualizationthatpostulatesthesourceofsustainabilitytoresidebetweenmulti-level(thatis,individual,organizationalandsystemic)interactionsand/orwithinspatialandtemporalcontexts.Compartmentalizationandtemporalsplittingareputforthasresponsestrategiestoworkthroughtheparadoxicaltensionsofsustainability.Forexample,anorganizationmayemploytemporalsplittingforproductdesigntensionsbypursuingefficiencyandfunctionalityparametersinthebasicdevelopmentphase,thenconsideringsocial/environmentalfootprintintheproductionramp-up(Jayetal.,2017).ParadoxicalleadershipStudiesthatfocusonparadoxicalleadershipareconcernedwiththeroleofparadoxicalthinkinginhigh-level,strategiccorporatedecisionsthatofteninvolvevarioustensionssuchasintuition–rationality,exploration–exploitationandstability–flexibility.Thisisinherentintheideathatparadoxicalleadershipstimulates‘practicesseekingcreative,both/andsolutionsthatcanenablefast-paced,adaptabledecisionmaking’(Lewisetal.,2014,p.58).Thisisillus-tratedinareviewofsevencasestudiesofinnovationprojectsthatexaminesmanagementoftheintuition–rationalitytension.Theauthorsdescribeaprocessofacceptingthecontradictoryelementsofrationalandintuitiveapproaches,makingdecisionsthroughtheintegrationofintuitiveandrationalpractices,andembeddingtheresultingoutcomesintotheorganizationalcontext(Calabrettaetal.,2017).Paradoxicalleadershipalsoinformspracticesusedbyleaderstoshapelower-levelmanagers’interpretivecontextoftensions(KnightandParoutis,2017),aswellasthecompany’sabilitytofosterstrategicagility(Lewisetal.,2014).Forexample,threerelatedcontexts–instrumental,relationalandtemporal–aretheorizedtomakelatentexploration–exploitationtensionsinthemediasectorsalientthroughleaderpracticesofdiver-sifying,devaluingandmultitasking(KnightandParoutis,2017).SajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

247Paradoxtheory229QuestioningtheassumptionsAnemergingstreamofliteraturehasfocusedonthedarksideofparadoxicaltheoryandmindsetwiththeintentiontomotivatewhatiscalleda‘critical’paradoxtheory.Inaconcep-tualpiece,BertiandSimpson(2021)questionthelackofattentiontoasymmetricalpowerrelationsinparadoxtheorybyexpoundingthenotionoforganizationalpragmaticparadoxes:‘contradictorydemandsreceivedwithinthecontextofanintensemanagerialrelationship,suchaswhenasubordinateisorderedto“takeinitiative”’.Akeyargumentisthatparadoxtheoryassumesactoragencyforbehavingparadoxically,andassuchignoresthedynamicsofdisempowerment.Organizationalpragmaticparadoxesresultfromaninterplaybetweenunavoidablepressuretoattendtotensions,andvariousdimensionsofpower,andcanleadtoparalysisandotherpathologicalconsequences(BertiandSimpson,2021).Explainingthefalsemasteryofparadox,Gaimetal.(2019)juxtaposemanagingimpressionsagainsttacklingemis-sionsintheVolkswagenDieselgatedebacle,totheorizediscursive(asopposedtosubstantive)embracingofparadox,whichcausesdysfunctionalbehaviours.Thesecontributionsmakeacaseforincludingproblematizationapproachesintheparadoxdiscourseinordertopreserveitsrelevanceacrossawiderangeofapplications(CunhaandPutnam,2019).Paradoxtheoryanditsinterplaywithotherorganizationtheorieshasalsobeenasubjectofinterest.Forexample,KellerandSadler-Smith(2019)reviewparadoxanddual-processtheo-ries,arguingthatcognitionasabasictenetofparadoxtheoryrelatestomanagers’useof‘intu-ition’and‘analysis’forprocessinginformation.Intuitionandanalysisarethemselveshighlysuggestiveofamicro-levelparadoxgiventhattheyarecontradictoryyetinterrelatedelements.KellerandSadler-Smith(2019)proposeanintegrativeframeworkwhichexplainshowthetheoriesofintuitionandanalysisinformeachother,unpackingtherelationshipbetweenthetwoseeminglyparadoxicalsystemsofthinkingandreasoning.Pinto(2019)presentsanapplicationofparadoxandstakeholdertheoryinthecontextoforganizationalperformancemanagement,arguingthatsuchaperspectivepreventsshort-sighted(SlawinskiandBansal,2015),metric-orientedapproachesthatarepronetodetrimentalconsequences.InsidePSCMPSCMscholarshaveshownanincreasinginterestinparadoxtheorygiventhecomplexdeci-sionchoices,multi-stakeholderenvironmentsandglobaldynamicssurroundinginternalandexternalsupplychains(Sandberg,2017).Forexample,sustainabilityisbyitsverynaturebuiltaroundbalancingpriorities(WuandPagell,2011).Tensionsnaturallyarisewhendealingwithmultipletriggerpoints(SeuringandMüller,2008)associatedwiththedifferingandsometimesconflictingdemands(DonaldsonandPreston,1995)ofpurchasingandsupplychainstake-holders.Insuchsituations,stakeholdertheory(Mitchelletal.,1997)canassistwithanalysingthestakeholdersandtheirsalience,whetherstakeholderdemandsareself-servingorrecipro-cal.Thecontestednatureofsustainabilityandthepowerofparadoxtheory(asameta-theory)toreinvigoratethesustainablesupplychaindiscoursehavebeendebatedbyMatthewsetal.(2016)withtheaimofmotivatingaparadigmshiftinresearchandpractice.Aparadoxicalframeworkisusedtouncovertensionsacrossdifferentlevelsofsustainabilityanalysis(forexample,firm,network)andbetweenvarioustypesoftheoriesdevelopedinthepertinentliterature(Matthewsetal.,2016).Fayezietal.(2018)characterizetheinterpretivecontextofprocurementsustainabilitytensionsbytappingintotheattributesofdifferentstakeholdersandconsideringhowtheymaySajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

248230Handbookoftheoriesforpurchasing,supplychainandmanagementresearchgeneratetensionsassociatedwithtriplebottomlinesustainabilityinprocurement.Consideringmanagers’sensemakingofsustainability,itisarguedthatcontextualizationofsustainabilitystandards(thatis,makingthemworkableforemergingmarketsuppliers)shiftsadversarialcognitiveframesgroundedoninstrumentalismtowardsaparadoxicalapproachbasedonintegration(Xiaoetal.,2019).Contributionsaddressingsustainabilitytensionsalsoincludediscussionsofleanimprovementprojects(Maalouf,2016)andpractice–performancetensionsforgreensupplychainsthatrendersupplychainposition(upstreamanddownstream)para-doxessalient(Schmidtetal.,2017).Researchersdrawonparadoxtheorytoinvestigatecapabilitiesthatcircumventdefen-sivenesswhenrespondingtocontradictoryandcompetingchoices.Withregardtocol-laboration–competitiontensions,buyercoopetitioncapabilitiesarearguedtodriveparadoxicalresolutions,whiletheirevaluativecapabilitiesfostertrust,triggeringpositiveresponsesfromsuppliers(WilhelmandSydow,2018).Paradoxtheoryhasalsoshownutilityinastreamoftheliteraturethatdealswithantecedentsandoutcomesofambidexterity.Thisentailssuchthingsasexploringcapabilitiesthataugmentambidexterity(Chandrasekaranetal.,2012),andperformanceimplicationsofambidextrousstrategy.Forexample,Kristaletal.(2010)explainthatcombinativecompetitivecapabilitiessuchasquality,delivery,flexibilityandcostareaffectedbyexplorationandexploitationpracticesinthesupplychainandcoincidewithbusinessperformance.WHATARETHEFUTURERESEARCHOPPORTUNITIES?PSCMresearchcanbenefitfromadiversityofparadigmsandapproachesbeingappliedtothestudyofdifferentphenomena(BoyerandSwink,2008).Paradoxtheorycanbeconsideredasatheory(andmeta-theory)toturnsuchdiversityintoacreativeendeavourforpushingboundariesandchallengingthetheoreticalandcommunityassumptionsthatdominateourdiscipline.Paradoxtheorycomplementscontingency-basednarrativeswithparadoxicalapproachesthatspurdynamismandchangeindealingwithtensions.Thisparadigmshiftmarkswhatwemightcalla‘paradoxtransition’inadisciplinethathastraditionallytendedtofollowinstrumentalism.SupplyChainTensionsandDesignDecisionsTheideasofparadoxtheoryencourage‘rethinkingthesupplychain’intermsofstructure,boundaries,andissuesofinstitution,agencyandpower.Paradoxicalleadershiphasimpli-cationsforthephysicalandsupportstructuresofsupplychains(Carteretal.,2015)tobothtightenandwidentheirvisiblehorizon.Inthiscontext,supplychaindesignsmustseekambiv-alencetoworkthroughtensions.PSCMresearchshouldinvestigatetensionsthatarisefromshiftsinsupplychainproducts/services,processesandsystems,astheserequireemployeesandleaderstoengagewithnewideasandactions.Paradoxtheorycancontributetoadvancingsupplychaintheoryrelatingtoparadoxesoflearning,andhelpindevelopingstrategiesformitigatingresistancetochangebyencouragingacceptanceandintegrationofthenewalongwiththeold.Supplychainsencompassavarietyofrolesandidentitiesatmultiplelevelsandlocationswithinandoutsideoftheorganization,includingsubsidiariesandpartners.ThisisacriticalsourceofbelongingSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

249Paradoxtheory231tensionsinPSCM,asindividualsassumemultipleroles,identitiesandmemberships,andevenworkaspartofcross-functionalteams.PSCMresearchshouldattendtosuchrolemultiplicitytensions,particularlywherebelongingtensionsaremixedupwithperformingtensionsasactorspursueconflictinggoalsacrossmultipleroles.Forexample,Fayezietal.(2018)showacomplexinterpretivecontextforprocurementprofessionalswherebyindividualsmightassumefunctionalkeyperformanceindicators(KPIs)basedoncost,whilealsofeelingpres-suretofulfildemandsfromsocialstakeholders.Insuchcases,paradoxtheory’sdisintegrationandintegrationapproachescanbeappliedtoallowemployeesandmanagerstocircumventanxietybyacceptingparadoxes.Ontheotherhand,PSCMisrepletewithorganizingtensionsthatresearchhasrecognized,butshouldpursuefurther.Thisisparticularlycriticaltothesupplychaindesigndiscourse,whereargumentsareshiftingtopromote,forexample,collaboration,empowerment,flexibil-ityanddiversity.WhilethishashelpedtomakePSCManinclusivediscoursethatpromotesoutside-inthinkingintheory,inpracticeitisnotalwayseasytoachievethesequalitiesinsupplychains.Further,thepursuitofthesequalitiesinsupplychainsmightnotnecessarilyneedtobeattheexpenseofcompetition,direction,controlandhomogeneity.ParadoxicalsupplychaindesignisapromisingareaofresearchforPSCMscholarsandneedsfurtheratten-tion(BalsandTate,2018).Inrelationtoperformingparadoxes,PSCMresearchersarebestplacedtoadvanceparadoxtheoryandthesupplychaindiscoursebystudyingtheimplicationsofaparadoxicalresponsetothecontradictoryandcompetingdemandsofsocial,environmen-talandeconomicstakeholdersinvarioustiersofthesupplychain.Thisisparticularlyrelevantforcreatingresponsiblesupplychains.Forexample,socialissuessuchasmodernslavery,povertyalleviationandgenderequalityaccentuateperformanceparadoxesthat,ifnotsystem-aticallyattendedto,resultinunsustainabledecisionsandactions(Goldetal.,2015;Trautrimsetal.,2020)thatfavourshort-termismnomatterwhichside(social–financial)isadopted.SupplyChainTensionsandPowerRegimesAnimportantsourceofdebatebetweenPSCMandparadoxscholarsisthenotionofusingpowerdistributionanddynamicstomakesenseofandrespondtotensions.Giventhatsupplychainsoperateacrossinstitutions,culturesandeconomies,theyofferopportunitiestoexploretherealitiesofparadoxicalthinkinginenvironmentswhere,forexample,systemicpowermightprevail.HargraveandVandeVen(2017,p.329)definesystemicpoweras‘institu-tionalizedpowerthatoperatesautomaticallythroughrulesandroutineswhichareseeminglyindependentoftheinterestsofparticularactorsyetadvantagesomeactorsoverothers’.Itisthereforeimportantforfutureresearchtoexplorehowsuchpowerregimesinterplaywithpar-adoxicalthinkingwhencreatingsystem-widechanges(SchadandBansal,2018).Ifsystemicpowersitsbehindonesideofacontradiction,failuretoapplyaparadoxicalmindsetcancreatevariousunintendedconsequences,suchaswhatBusseetal.(2016)describeasafalsesenseoflegitimacyinglobalsupplychainsinthecontextofsupplychainsustainabilityrisk.Otheropportunitiesforfutureresearchincludeexplorationofresource-basedpowerdifferentials,asarticulatedbyresourcedependencytheory(PfefferandSalancik,1978),andevaluationofthedimensionsoforganizationalpowersuchascoercion,manipulation,dominationandsub-jectification(FlemingandSpicer,2014)inconjunctionwith(particularlylower-level)supplychainmanagers’agencyforexercisingparadoxicalresponsestrategies.SajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

250232Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSupplyChainTensionsandNetworkStructuresInthecontextofmulti-tierandnetworkedsupplychains,triadicrelationships(forexample,buyer–supplier–supplier),andstrategiesforcopingwithandrespondingtoparadoxicaltensionsinsuchenvironments,offerafruitfulareaforfutureresearch(ChoiandWu,2009).Forexample,PSCMresearchershaveidentifiedvariousgovernancemechanismstodiffusesustainabilityinmulti-tieroperations(Menaetal.,2013;TachizawaandWong,2014).Thesestudiesaregroundedoncontingent-basedstrategiesforcreatingsystem-widesustainability.Paradoxtheorycanaugmentsuchperspectivesbyintroducingparadoxicalgovernance(Blomeetal.,2013;SundaramurthyandLewis,2003)throughtemporalandspatialseparatingandintegratingapproaches.SupplyChainTensionsandActorCognitionsFinally,weinvitePSCMscholarstointegrateandleverageresearchfrombehaviouralopera-tionsmanagementwithpsychological,sociologicalandorganizationalparadox,tostudythemicro-foundationsoftheparadoxicalmindset/cognitioninthesupplychain(Gondetal.,2017;KellerandSadler-Smith,2019).Forexample,neuroscienceconceptsmightserveourdisci-plinebyuncoveringthepsychologicalconstructsthatdefineactorcognitionandsensemakingasitrelatestotheconstructionofviciousorvirtuouscycleswhendealingwithparadoxicalsupplychaintensions(Waldmanetal.,2019).Attendingtonegativeandunintendedconse-quencesofparadoxicalapproachesinPSCMisequallyimportantinordertogainabalancedperspectiveonengagingwithparadoxtheoryforsupplychaintheorydevelopment.REFERENCESAndriopoulos,C.,andLewis,M.W.(2009).Exploitation–ExplorationTensionsandOrganizationalAmbidexterity:ManagingParadoxesofInnovation.OrganizationScience,20(4),696–717.doi:10.1287/orsc.1080.0406.Aoki,K.(2020).TheRolesofMaterialArtifactsinManagingtheLearning–PerformanceParadox:TheKaizenCase.AcademyofManagementJournal,63(4),1266–1299.doi:10.5465/amj.2017.0967.Ashcraft,K.L.,Kuhn,T.R.,andCooren,F.(2009).ConstitutionalAmendments:‘Materializing’OrganizationalCommunication.AcademyofManagementAnnals,3(1),1–64.doi:10.5465/19416520903047186.Bals,L.,andTate,W.L.(2018).SustainableSupplyChainDesigninSocialBusinesses:AdvancingtheTheoryofSupplyChain.JournalofBusinessLogistics,39(1),57–79.doi:10.1111/jbl.12172.Barron,K.E.,andHarackiewicz,J.M.(2001).AchievementGoalsandOptimalMotivation:TestingMultipleGoalModels.JournalofPersonalityandSocialPsychology,80(5),706.Battilana,J.,andDorado,S.(2010).BuildingSustainableHybridOrganizations:TheCaseofCommercialMicrofinanceOrganizations.AcademyofManagementJournal,53(6),1419–1440.doi:10.5465/amj.2010.57318391.Berti,M.,andSimpson,A.(2021).TheDarkSideofOrganizationalParadoxes:TheDynamicsofDisempowerment.AcademyofManagementReview,46(2),252–274.Blome,C.,Schoenherr,T.,andKaesser,M.(2013).AmbidextrousGovernanceinSupplyChains:TheImpactonInnovationandCostPerformance.JournalofSupplyChainManagement,49(4),59–80.doi:10.1111/jscm.12033.Boyer,K.K.,andSwink,M.L.(2008).EmpiricalElephants‒WhyMultipleMethodsareEssentialtoQualityResearchinOperationsandSupplyChainManagement.JournalofOperationsManagement,26(3),338–344.doi:10.1016/j.jom.2008.03.002.SajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

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255Paradoxtheory237ParadoxapproachTotheorizeTotheorizeParadoxtype/categoryLearningPerformingPerformingIndividualapproachesUnitofanalysisContinuousimprovement(Kaizen)projectsIn-rolejob(productspecialists)LevelofanalysisTeamsIndividualsResearchapproachandcontextQualitative(twotransformationprojects)Manufacturingplants(China)QuantitativeandqualitativeConsumerproducts(US,UK,Israel,China)Findings‘Identifiesfourdistinctrolesofmaterialartifacts(triggering,supporting,disconnecting,andconnecting)andtheirimpactonthemanagementofparadoxes.Itshowshowcompetingandinterrelatingepistemicobjectsexplaindefensiveness(exclusivefocusonperformance)andacceptanceoffrontlineemployeesinrelationtolearning‒performanceparadox’‘Identifiesemployees’experienceoftensionscontributedpositivelytotheirin-rolejobperformanceandinnovationwhentheirmindsetsencouragethemtovalue,accept,andfeelcomfortablewithcontradictions.Experiencingtensionsisdetrimentalforindividualswithalowparadoxmindset’‘Arguesscarceresourcesintensifyanysurfacetensions,andthusaffectperformanceoutcomesindirectly’AsummaryofselectedarticlesAimsandresearchquestions‘Todevelopatheoryontherolesofmaterialartifactsinthemanagementofparadoxfocusingonthelearning‒performanceparadoxwhichfrontlineemployeesfacewhentheyengageinincrementalinnovation’Howdomaterialartifactscontributetotransformingorganizationsinwaysthateffectivelymanagethelearning‒performanceparadox?‘Toexplorewhysomeindividualsthrivewithandleveragetensions(whileothersmightstruggle)’Whatconditionsintensifytheexperienceoftensions?Whatistheimpactoftensionsonone’sworkplaceefforts,suchasjobperformance?Howdoindividuals’approachesaffecttheirabilitytocopewith,orevenbenefitfrom,thesetensions?TitleTheRolesofMaterialArtifactsinManagingtheLearning‒PerformanceParadox:TheKaizenCaseMicrofoundationsofOrganizationalParadox:TheProblemIsHowWeThinkAbouttheProblemAPPENDIX:Table15A.1Author(year)/journalOutsidePSCMAoki(2020)/AMJMiron-Spektoretal.(2018)/AMJSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

256238Handbookoftheoriesforpurchasing,supplychainandmanagementresearchParadoxapproachTotheorizeTounderstandParadoxtype/categoryPragmaticparadoxesSensemakingUnitofanalysisManagerialrelationship(manager‒subordinate)Managerialsensemaking(anddecisionmaking)LevelofanalysisIndividualsIndividualsResearchapproachandcontextConceptualConceptualFindings‘Drawsattentiontoorganizationalpragmaticparadoxeswhicharecontradictorydemandsreceivedwithinthecontextofanintensemanagerialrelationship,suchaswhenasubordinateisorderedto“takeinitiative”’‘Developsamodelwhichhighlightshoworganizationalpragmaticparadoxesderivefrompowerrelationsrestrictingactors’capacitiesforenactinglegitimateresponses(agency)totensions.Themodellinksdifferentorganizationalpowerdimensionstovariousmanifestationsofpragmaticparadoxes’‘Proposesabusinesscaseframeandaparadoxicalframe(withdifferencesincontentandstructure)toinfluencethethreestagesofthesensemakingprocessofambiguousissues.Itarguesthatwiththebusinesscaseframemanagerstakeaunivalentinterpretationofsustainabilityissueshenceassumeapragmaticstancewhereaswiththeparadoxicalframe,thisinterpretationisratherambivalentandfollowsaprudentstancethatencouragescomprehensiveresponse’Aimsandresearchquestions‘Tocontributetotheparadoxtheorybyconceptualizinganeglectedissuerelatingtotheagencyofactorsinembracingparadoxeswhichitselfhighlightsinattentivenesstothisdarksideofparadoxduetoinsufficientconsiderationofasymmetricalrelationsofpower’‘Togenerateabetterunderstandingoftheunderlyingcognitivedeterminantsofdifferentresponsestosustainabilityissues(economic,environmental,andsocial)thatmanagersconsider’Howdomanagersmakesenseofambiguouscuesconcerningsustainability?TitleTheDarkSideofOrganizationalParadoxes:TheDynamicsofDisempowermentCognitiveFramesinCorporateSustainability:ManagerialSensemakingwithParadoxicalandBusinessCaseFramesAuthor(year)/journalBertiandSimpson(2021)/AMRHahnetal.(2014)/AMRSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

257Paradoxtheory239ParadoxapproachTounderstandTounderstandParadoxtype/categoryLearning(long-termandshort-term)LearningUnitofanalysisBoPprojectsCorporatesustainabilityLevelofanalysisMulti(individual;organizational)MultiResearchapproachandcontextQualitativePharmaceutical(India)ConceptualFindings‘Elaboratestherelationshipbetweencognitiveframes(forexampleparadoxicalandbusinesscase)atdifferentlevels,thatis,organizationalandproject.Also,arguesthatdecisionmakinghorizonmediatesthisrelationshipthroughtwomechanisms:bottom-uptemporalwork;andevent-driventemporalshift’‘Developsanintegrativeframeworkthatgoesbeyondthetraditionaltriadofeconomic,environmental,andsocialdimensionsandarguesthattensionsincorporatesustainabilityoccurbetweendifferentlevels(individual,organizational,systemic),inchangeprocesses,andwithinatemporalandspatialcontext’Aimsandresearchquestions‘Toidentifytheprocesswithwhichcognitiveframesofdifferentactorswithinorganizationinteractandinfluenceasustainabilityinitiative’ssurvival’DoorganizationalandprojectleadersdifferintheirunderstandingoftensionsinaBoPproject,andifso,how?‘Todevelopanintegrativeframeworkfortheidentificationandcharacterizationoftensionsincorporatesustainability’TitleUnsustainabilityofSustainability:CognitiveFramesandTensionsinBottomofthePyramidProjectsTensionsinCorporateSustainability:TowardsanIntegrativeFrameworkAuthor(year)/journalSharmaandJaiswal(2018)/JBEHahnetal.(2015)/JBESajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

258240Handbookoftheoriesforpurchasing,supplychainandmanagementresearchParadoxapproachTounderstandTotheorizeParadoxtype/categoryLearningPerforming(illusion‒reality)StretchgoalUnitofanalysisNewproductdevelopmentprocessVWemissionscandalLevelofanalysisOrganizationalOrganizationalResearchapproachandcontextQualitativeQualitative(secondarydata)Findings‘Developsaframeworkthatexplicatesexploitation‒explorationtensionsandtheirmanagement.Also,identifiesnestedtensions(strategicintent[profit‒breakthroughs],customerorientation[tight‒loosecoupling],andpersonaldrivers[discipline‒passion]),posedasparadoxesofinnovation,whichillustratesthevalueofblendingdifferentiationandintegrationapproaches,andtheorizesthepotentialforinterwovenparadoxes,andtheirmanagementtofuelvirtuouscyclesofambidexterity’‘UsingtheVolkswagenemissionsscandal,showshowparadoxicalpromises,embraceddiscursivelybutnotsubstantively,createdfalsetranscendenceratherthanparadoxicalmastery.Assuchitcontributestoparadoxtheorybydiscussinghowtheillusionofparadoxembracecantriggerdysfunctionalbehaviors’Aimsandresearchquestions‘Toinvestigateexploitation–explorationtensionsandtheirmanagementinpractice’Howareorganizationstomanageparadoxesofinnovation?‘Todiscusshowthe“embrace”ofparadoxcantriggerdysfunctionalbehaviors,fillingthegapbetweenpromisingandpracticing’‘Explorestheperils(darkside)ofparadoxesthatareastretchtoofar,beingengagedthroughmanagingimpressionsratherthanmanagingarealityconcomitantwithclaimsbeingmadeaboutpractice’TitleExploitation‒ExplorationTensionsandOrganizationalAmbidexterity:ManagingParadoxesofInnovationManagingImpressionsratherthanEmissions:VolkswagenandtheFalseMasteryofParadoxAuthor(year)/journalAndriopoulosandLewis(2009)/OrgScienceGaimetal.(2019)/OrgStudiesSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

259Paradoxtheory241ParadoxapproachToverbalizeParadoxtype/categoryPerformingUnitofanalysisProjectsLevelofanalysisMulti(cross-sectorpartnership)ResearchapproachandcontextQualitativeIndiaFindings‘Identifiesthatintheprojectsthatworkedwell(twooutoffiveprojects),thetwopartiesheldfluidcategories,thatistheysawdifferencesbetweenbusinessandNGOascontextualandaimedtofindcreativeworkaroundstoemergentproblems.Intheprojectsthatdidnotworkwell,businessesandNGOsimposedcategoricalimperatives,thatistheysawsharpdifferencesthattheyintensifiedbyimposingstandardizedandfamiliarsolutionsontheirpartner’‘Arguesthatorganizationalcognitionandactionsaredeeplyrelatedinengagingparadoxes.Thoseorganizationsthatassumedcognitivefluiditysoughttosolveproblemsandaccommodateeachother’sneeds;thosethatassumedcognitiveimperativesresortedtocognitivetemplatesthatwereinflexibletoeachother’sneeds’AimsandresearchquestionsHowdobusinessesandNGOsengagethecommercial–socialparadoxinacollaborativeproject?TitlePartnersforGood:HowBusinessandNGOsEngagetheCommercial–SocialParadoxAuthor(year)/journalSharmaandBansal(2017)/OrgStudiesSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

260242Handbookoftheoriesforpurchasing,supplychainandmanagementresearchParadoxapproachTounderstandParadoxtype/categoryPerformingUnitofanalysisLogisticsemergencyteamsLevelofanalysisIndividualsResearchapproachandcontextQualitativeFindings‘Showshowemployeesbuildontheorganizationalandtheboundaryspanningtaskcontextsanddevelopparadoxicalframes.Juxtaposingthecompetitiveandcollaborativelogics,theseframesshapetheemployees’understandingofwhotheyare(anestedidentity)andwhattheyshoulddo(contextualsegmentation).Thisjuxtapositionallowstheemployeestonavigateemergingtensionsbyadoptingbothlogics(integratingbehavior)andbycontextuallyprioritizingonelogicwithoutignoringtheother(demarcatingbehavior)’AimsandresearchquestionsHowdoemployeescopewithtensionsarisingfromcoopetition?TitleCoopetitionasaParadox:IntegrativeApproachesinaMulti-Company,Cross-SectorPartnershipAuthor(year)/journalStadtlerandVanWassenhove(2016)/OrgStudiesSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

261Paradoxtheory243ParadoxapproachTounderstandParadoxtype/categoryCollaboration‒competitionUnitofanalysisSupplynetworkLevelofanalysisInterorganizationalResearchapproachandcontextQualitative(casestudy)AutomotiveFindings‘Bothsplittingandacceptanceapproachestomanagingtheparadoxofcoopetitioncanbesuccessfulintermsofavoidingnegativetensiondynamicswhencoopetitioncapabilitiesatthelevelofthebuyingorganizationarepresent’‘Whenthebuyingfirmhasstrongevaluativecapabilities,itisbetterabletoprovidehelpfulcostimprovementsuggestionswhich,inturn,increasesthepotentialforjointvaluecreationthroughthecreationofsupplier(competence)trust’‘Whenthebuyingfirmhasstrongevaluativecapabilities,anddemonstratesitsintentionforafairdivisionofvalueappropriationbetweenbothparties,higherlevelsofsupplier(goodwill)trustmakesopenbookpoliciesmorelikely’Aimsandresearchquestions‘Toinvestigatethecompetitivetensionsthatevolvewhenbuyingfirmsaretryingtoengagebothcollaborationandcompetitionsimultaneouslyintheirrelationswithcoresuppliers’Howdobuyingfirmsmanagetheparadoxofcoopetitionintheirsuppliernetworks?Whichcoopetitioncapabilitiesdoesthebuyingfirmneedinordertotriggerpositiveresponsesfromsuppliersandavoidnegativetensiondynamics?TitleManagingCoopetitioninSupplierNetworks‒AParadoxPerspectiveAuthor(year)/journalInsidePSCMWilhelmandSydow(2018)/JSCMSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

262244Handbookoftheoriesforpurchasing,supplychainandmanagementresearchParadoxapproachTounderstandParadoxtype/categorySensemakingofsustainabilityUnitofanalysisManagers’sensemakingofandresponsestosustainabilityLevelofanalysisFunctionalResearchapproachandcontextQualitative(singlecasestudy)ConsumerelectronicsFindings‘Whenmanagerscontinuetoapplyaninstrumentalperspective,theunderlyingadversarialsensemakingwillleadtoasuppressionresponsethatresolvesparadoxicaltensionsattheexpenseofsuppliersustainability,whichincreasestheriskofparadoxicaltensionescalation’‘Contextualizingsustainabilitystandardscanalleviatecost—sustainabilitytensionsandcreatethenecessaryspaceformanagerstochangetheiradversarialsensemakingtoaparadoxicalapproachbyreducing,butnottranscending,paradoxicaltensions’‘Ifmanagersadoptparadoxicalsensemaking,butsystemicpowerisasymmetricallydistributed,sustainabilitywillbeassimilatedintothedominantbusinessaims,andsynergizingwillnotleadtotruesustainability’AimsandresearchquestionsHowdopurchasingandsustainabilitymanagerswithinthebuyingfirmmakesenseofandrespondtoparadoxicaltensionsinsustainablesupplychainmanagement(SSCM)?TitleInsidetheBuyingFirm:ExploringResponsestoParadoxicalTensionsinSustainableSupplyChainManagementAuthor(year)/journalXiaoetal.(2019)/JSCMSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

263Paradoxtheory245ParadoxapproachToverbalizeTounderstandParadoxtype/categorySensemakingofsustainabilityTheoreticaltensionsUnitofanalysisProcurementfunctionSSCMdiscourse/paradigmsLevelofanalysisMultiTheoryResearchapproachandcontextQualitative(casestudy)ProblematizationapproachFindings‘Identifiessupplychainandcompanyprocurementsustainabilitytensionsandexplaintheirmulti-levelnature.Also,dissectsthemulti-stakeholderandmulti-institutionalenvironmentswherePSTsoperate.Itexplainssuchenvironmentsintermsofvarioustemporalandspatiallegitimacycontextsthat,throughtheirassessmentofinstitutionaldistance,cancharacterizethemanifestationofPSTs’‘Giventhatsustainabilityisanessentiallycontestedconcept,atheoryofSSCMwillbenefitfromtheadoptionofparadoxasitsmeta-theoreticallens’‘AparadoxicaltheoryofSSCMwillusethetensionsbetweenlevelsofanalysistostimulatetheorydevelopment’‘AparadoxicaltheoryofSSCMwillneedtostrikeabalancebetweenthecontradictorypurposesofexplanationandnormativity’AimsandresearchquestionsWhatprocurementsustainabilitytensions(PSTs)doprocurementprofessionalsfaceintheirstakeholderenvironment?HowdolegitimacycontextsofthestakeholdersexplainthesePSTsandcharacterizetheirmanifestation?‘ToexplorewhatthenextparadigmshiftinSSCMmightlooklike’HowcanalternativetheoriesofSSCMbedeveloped?WhatassumptionsneedtobechallengedinorderforalternativetheoriesofSSCMtoemerge?WhatassumptionsareneededtodevelopalternativetheoriesofSSCM?TitleProcurementSustainabilityTensions:AnIntegrativePerspectiveBuildingBridges:TowardAlternativeTheoryofSustainableSupplyChainManagementAuthor(year)/journalFayezietal.(2018)/IJPDLMMatthewsetal.(2016)/JSCMSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

264246Handbookoftheoriesforpurchasing,supplychainandmanagementresearchParadoxapproachToverbalizeTounderstandParadoxtype/categoryCombinativecompetitivecapabilitiesOrganizing,performingandbelongingUnitofanalysisSupplychainstrategyLeanimplementationprojectsLevelofanalysisOrganizationalIndividualResearchapproachandcontextSurveyManufacturing(US)QualitativeDenmarkFindings‘Findsthatanambidextroussupplychainstrategycoincideswithcombinativecompetitivecapabilitiesandbusinessperformance.Thiscontradictsconventionalwisdomthatarguesfortradeoffsbetweenexplorationandexploitation’‘Identifiesthreetypesoforganizationalparadoxesinlean:organizing,performing,andbelonging.Also,pointstoarangeofmanagerialresponsesusedfordealingwiththethreeparadoxesandfacilitatingleantransformation’Aimsandresearchquestions‘Toinvestigatetheinfluenceofanambidextroussupplychainstrategyonmanufacturers’combinativecompetitivecapabilities–theabilitytoexcelsimultaneouslyoncompetitivecapabilitiesofquality,delivery,flexibility,andcost–and,inturn,onbusinessperformance’Inpractice,canweclassifyagroupofmanufacturersthatfollowanambidextrousstrategyinthecontextofsupplychainmanagement?GiventhatambidextrousSCstrategyisaviableapproach,doesanambidextrousSCstrategycoincidewithcombinativecompetitivecapabilitiesandbusinessperformance?‘Todeepentheunderstandingofleanimplementationintricacies,andcontributetosustainingleanincompanies’Whatorganizationalparadoxesaresalientduringthebuildingofleanstructuresofimprovementandhowhavetheybeenmanaged?TitleTheEffectofanAmbidextrousSupplyChainStrategyonCombinativeCompetitiveCapabilitiesandBusinessPerformanceManagingParadoxicalTensionsduringtheImplementationofLeanCapabilitiesforImprovementAuthor(year)/journalKristaletal.(2010)/JOMMaalouf(2016)/IJOPMSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

265Paradoxtheory247;;ParadoxapproachToverbalizeToverbalizeParadoxtype/categoryExplorationandexploitationSCPparadoxUnitofanalysisExplorationandexploitationR&DprojectsGSCMpractice-performanceoffirms;OrgScience=OrganizationScience.LevelofanalysisBusinessunitsBusinessunitResearchapproachandcontextSurveySurvey;JBE=JournalofBusinessEthics;IJPDLM=InternationalJournalofPhysicalDistributionandLogisticsManagementFindings‘Arguesthatacompetencyinambidexterityinvolvesthreecapabilitiesatdifferentorganizationallevels:decisionrisk(strategiclevel),structuraldifferentiation(projectlevel),andcontextualalignment(mesolevel)’‘Resultsindicatethatdecisionriskandcontextualalignmentaffectambidexteritycompetencyforhightechorganizations.StructuraldifferentiationdoesnotaffectambidexteritycompetencybuthasmixedeffectsonR&D[researchanddevelopment]projectperformance’‘ShowsthatfirmslocatedfurtherdownstreaminthesupplychaininvestmoreinGSCMpracticeswhiletheyparadoxicallygaindecreasingperformancebenefits.Inturn,upstreamfirmswithgenerallylowerGSCMpracticelevelsgainincreasinglyhigherperformance.ThisphenomenoniscalledtheSCPparadox’;AMR=AcademyofManagementReview;IJOPM=InternationalJournalofOperationsandProductionManagementAimsandresearchquestions‘Toadvanceunderstandingoftheantecedentsthatleadtoambidexterityconsideringitsmultilevelnature’Whataretheantecedentstocompetencyinambidexterityforhigh-techorganizations?‘Toexplorethecontextualroleofafirm’ssupplychainposition(SCP)ontheadoptionofgreensupplychainmanagement(GSCM)practicesandtheirperformanceimplications’HowdoessupplychainpositioninfluencethelevelofGSCMpracticesandthe‘GSCMpractice–performancelink’?TitleAntecedentstoAmbidexterityCompetencyinHighTechnologyOrganizationsTheSupplyChainPositionParadox:GreenPracticesandFirmPerformanceAuthor(year)/journalChandrase-karanetal.(2012)/JOMSchmidtetal.(2017)/JSCMNote:AMJ=AcademyofManagementJournalOrgStudies=OrganizationStudies;JSCM=JournalofSupplyChainManagementJOM=JournalofOperationsManagementSajadFayezi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:36AMviaColumbiaUniversityLibrary

26616.ContingencytheoryandtheinformationprocessingviewVirpiTurkulainenINTRODUCTIONContingencytheoryisoneofthefocaltheoreticallensesusedtostudyorganizationsandhasalsobeenthetheoreticalfoundationforasubstantialbodyofempiricalresearchinavarietyoftopicareasinoperationsandsupplychainmanagement(OSCM).Theoriginsofcontingencytheorygobacktothe1960sand1970s;thetheorywasdevelopedtosolvesomeoftheprob-lemsofthebureaucratictheoryaswellasthe‘bestpracticeview’ofmanagement(Donaldson,2001;SousaandVoss,2008;VandeVenetal.,2013).Contingencytheorydominatedaca-demicconversationsonorganizationsandorganizationdesignoverthosedecadesandstillcontinuestobeboththefocusoforganizationalresearch(forexample,LuoandDonaldson,2013;SinhaandVandeVen,2005;TurkulainenandKetokivi,2013;VandeVenetal.,2013)aswellasthetheoreticalbasisofempiricalresearchinvariousdisciplinaryareas,includingOSCM(forexample,Flynnetal.,2010;KetokiviandSchroeder,2004;Shenhar,2001;Tenhiälä,2011).1Contingencytheoryalsoservesastheunderlyingfoundationforseveralmanagementtheoriesandpractices,suchastheinformationprocessingview(Galbraith,1973;TushmanandNadler,1978)andtheconfigurationperspective(Meyeretal.,1993).Thefundamentalargumentofcontingencytheoryhasoftenbeentranslatedintothefamousstatementthat‘thereisnoonebestwaytoorganize’(Galbraith,1973).Traditionalcontingencytheoryandtheorizing,however,focusesspecificallyondevelopingdetailedandin-depthunderstandingoforganizationdesign(BurnsandStalker,1961;LawrenceandLorsch,1967b;Thompson,1967;VandeVenetal.,1976;Woodward,1965),subsequentlybeingcalledthe‘structuralcontingencytheory’(Donaldson,2001).Thisresearchhasbeendevelopedintoamoregenericcontingencytheoryargument;thebasicargumentofthemajor-ityofresearchbuildingoncontingencytheoryisthattherelationshipbetweentwovariablesisimpacteduponbyathirdvariable(Donaldson,2001).Thiscanbeinterpretedinthecontextoforganizationdesignsothattherelationshipbetweenorganizationaldesignandthecontextualfactorsimpactsupontheeffectivenessofanorganization,essentiallycomparingtheeffective-nessoforganizationdesignindifferentcontextualconditions.Whilethefocusofthefoun-dationalworkoncontingencytheoryisonorganizationsandorganizationdesign,essentiallyanypropositionwithamoderatingvariableisacontingencytheoryargument(VandeVenetal.,2013).Inlinewiththis,the‘strategiccontingencytheory’examinesrelationshipswherestrategyservesasthecontextualfactor(DeanandSnell,1996;KetokiviandSchroeder,2004).InthecontextofOSCM,similarconversationsaboutthevalueofbestpracticesareevident.WhilemanyOSCMpractices,suchasleanandtotalqualitymanagement(TQM),havetradi-tionallybeenassumedtobeuniversallyapplicableandbeneficial,thereisalsocriticismthattheseconclusionshavebeenmadebasedonanecdotalevidenceandcasestudiesofaveryspecifictypeoforganizations(forexample,‘worldclassmanufacturingorganizations’operat-248VirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

267Contingencytheoryandtheinformationprocessingview249inggloballyinhigh-techindustries)(SousaandVoss,2008).Asaresponsetotheseconversa-tions,researchonOSCMpracticeshasshiftedtodevelopingunderstandingofthecontextualconditionsunderwhichthosepracticesareapplicableandvaluable(SousaandVoss,2008).OneoftheearliestworksinOSCMbuildingonthefoundationsofcontingencytheoryistheworkofSkinner(1969);hisnotionoffitbetweenthemanufacturingstrategyandtheproduc-tionsystemessentiallyformsthefoundationsofthestrategiccontingencytheoryofOSCM(KetokiviandSchroeder,2004).Thiswasthenfurtherdeveloped,forexample,byHayesandWheelwright(1984).Interestingly,whiletheearlyworksofcontingencytheoryresearchinOSCMbuildmainlyonthestrategiccontingencyargument,themajorityofcontingencystudiesinOSCMasoftodayhavebuiltonthenotionthattheinternalorexternalenvironmentaffectstheeffectivenessofvariousoperationspractices(Geraldietal.,2011;SousaandVoss,2008).ThisisalsoevidentinthereviewofcontingencytheoryresearchinOSCMpresentedlaterinthischapter.KEYASSUMPTIONSANDCONSTRUCTSUnderlyingAssumptionsaboutHumanNatureContingencytheorybuildsontheassumptionoforganizationsas‘openrationalsystems’(asopposedtoclosedand/ornaturalsystems),accordingtotheclassificationframeworkpre-sentedbyScott(1998).First,therationalsystemsviewperceivesorganizationsasinstrumentsdesignedtoattainspecificgoals.Thus,thegoalsarepredeterminedandtheorganizationisdesignedandmanagedtoachievethosegoals.Theopensystemsperspective,ontheotherhand,perceivesorganizationsascapableofmaintainingthemselvesbecauseofthroughputofresourcesfromtheenvironment.Afundamentalunderlyingassumptionabouthumanbehaviourthatcontingencytheorybuildsonisthathumanbehaviouris‘boundedlyrational’(MarchandSimon,1958).Thismeansthatthedecisionmakersarerational,butconstrainedbytheirlimitationstogather,interpretandunderstandinformation,aswellastomakecalculationsabouttheoptimumsolu-tion(CyertandMarch,1992).Hence,whilethedecisionmakersaimatfindingtheoptimumsolutiontotheirdecisionmakingproblem,theyarenotnecessarilyabletoidentifythebest,optimumsolution;rather,forexample,theysimplifythedecisionmakingproblem,settargets,andidentifyasolutionthatsatisfythosetargets(MarchandSimon,1958).Theconceptofboundedrationalityintegratesthefundamentalelementsofrationalsystems:goalspecificityandformalization(Scott,1998).Byfocusingoncognitivelimitationstorationality,contin-gencytheorydoesnotaddress,forexample,opportunismindecisionmaking.LevelsandUnitsofAnalysisThelevelofanalysisinresearchonthefoundationsofcontingencytheoryvaries.Oftenthelevelofanalysisincontingencytheoryisanorganization,suchasthefirm(LawrenceandLorsch,1967a)oraworkunit,whichreferstothesmallestformalgroupingofindividualsinanorganization,suchasadepartmentoranorganizationalunit(Gresov,1990;VandeVenandDelbecq,1974).IntheOSCMcontext,contingencytheoryhasbeenapplied,forexample,atthelevelofaproject(Geraldietal.,2011;YanandDooley,2013),afunctionalVirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

268250Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable16.1FocalconceptsandassumptionsDefinitionExamplereferencesFocalconceptsContingencyvariablesAnyfactororvariableoftheorganizationalcontextChenhall(2003);Donaldson(2001);orsituationalcharacteristic,whichaffectstheSousaandVoss(2008);Thompsonorganization.Contingencyvariablescanbebutarenot(1967)necessarilyunderthecontroloftheorganization.Organizationdesign(oranotherOrganizationalstructureandinternalarrangementofGreenwoodandMiller(2010);managementdecisionvariable)work,forexample,organizationaldifferentiationandLawrenceandLorsch(1967a,1967b);integration(oranymanagementdecisionvariable).SousaandVoss(2008)EffectivenessHowwelltheorganizationisabletoachievewhatitisDonaldson(2001);Turkulainenandtryingtoachieve.Ketokivi(2013)FitCongruencebetweentheorganizationalcontextDonaldsonandJoffe(2014);Drazinanddesign(selection),interactionofapairofandVandeVen(1985);Venkatramanorganizationalcontextanddesignvariablesaffects(1989)performance(interaction),andinternalconsistencyofmultiplecontingenciesandstructuralvariables(systems).FocalassumptionsBoundedrationalityDecisionmakersarerationalbutconstrainedbyCyertandMarch(1992);Marchandtheirlimitationstogather,interpretandunderstandSimon(1958)informationaswellastomakecalculationsaboutoptimaldecisions.unit,suchasthepurchasingfunction(Balsetal.,2018;Patruccoetal.,2019;Trautmannetal.,2009),amanufacturingplant(KetokiviandSchroeder,2004;TurkulainenandKetokivi,2012),afirm(Dasetal.,2000;Flynnetal.,2010;SwinkandSchoenherr,2015),aswellasinterorganizationallevelsinthesupplychainsetting(BensaouandVenkatraman,1995;SongandDiBenedetto,2008).Theunitofanalysisintheclassicalcontingencytheoryisanorganizationaldyad,suchasthedyadsbetweendifferentfunctionalunitsofproduction,fundamentalresearch,appliedresearchandsales(LawrenceandLorsch,1967a,1967b).Similarly,inOSCMresearchfocusingonorganizationaldesignaspects,suchasintegration,theunitofanalysisisoftentimesadyad;eitherintra-organizational(Turkulainenetal.,2013)orinterorganizational(forexample,buyer‒suppliersrelationships,BSRs)(KaipiaandTurkulainen,2017;SongandDiBenedetto,2008).However,researchbuildingonthefoundationsoffocalcontingencytheoryargument,andlookingatavarietyofmoderationeffects,isappliedindiverseunitsofanalysisandoper-ationspractices(forareview,seeSousaandVoss,2008).FocalConceptsThefocalconceptsofclassiccontingencytheoryare:(1)contingencyvariables;(2)organiza-tiondesignoranyothermanagementdecisionvariable;(3)effectiveness;and(4)fit.ThesearepresentedinTable16.1,withexplanationsandreferences,andfurtherdiscussedinthefollowingsubsections.TherelationshipsofthefocalconceptsareillustratedinFigure16.1.VirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

269Contingencytheoryandtheinformationprocessingview251Source:AdaptedfromTushmanandNadler(1978).Figure16.1RelationshipsofthefocalconceptsContingencyVariablesContingencyvariables,asperceivedbycontingencytheory,refertovariablesoftheorgan-izationalcontext,whichaffecttheorganizationandcanbe(butarenotnecessarily)directlyunderthecontroloftheorganization(Thompson,1967).Researchhasidentifiedandexam-inedavarietyofcontingenciesandtheirimpact.Someofthecontingenciesareexternaltotheorganizationandsomeareinternal;theexternalcontingenciesaffectingtheinternalones(Donaldson,2001).Contingenciesidentifiedandexaminedintheclassiccontingencytheoryresearchinclude,forexample,organizationalsize(Blau,1970;Child,1973;Pughetal.,1969;VandeVenetal.,1976),organizationalage(Pughetal.,1969),strategy(Chandler,1962;MilesandSnow,1978),innovation(AikenandHage,1968;BurnsandStalker,1961),technol-ogy(Pughetal.,1969;Woodward,1965),environmentaluncertainty(LawrenceandLorsch,1967a),taskuncertainty(Gresov,1990;VandeVenandDelbecq,1974;VandeVenetal.,1976),taskinterdependence(Thompson,1967;VandeVenetal.,1976)anddependenceonotherorganizations(Pughetal.,1969).Severalauthorspresentcomprehensivereviewsofcontingenciesusedinresearch(Chenhall,2003;Donaldson,2001).Furthermore,thenumerouscontingenciesincludedintheplethoraofstudieshavebeenclassifiedinvariousways:forexample,Donaldson(2001)classifiesthemunderthethreecategoriesoftaskuncertainty(forexample,environmentalandtechnologicalchange),taskinterdependence(forexample,strategy,technology)andsize;whileSousaandVoss(2008)presentaliteraturereviewoncontingencytheoryinOSCManddivideresearchintofourbroadcategoriesdependingonthestudiedcontingencies:nationalcontextandculture(forexample,earlyworksonoperationspracticesinJapanversustheWesterncountries),firmsize,strategiccontext(especiallymanufacturingstrategy),andotherorganizationalcontextualvariables(forexample,industry,age).ResearchinthePSMsettinghasassessedcontingenciesof,forexample,purchaseimpor-tance(Trautmannetal.,2009),product/categorycomplexity(Schleperetal.,2020;Trautmannetal.,2009),technologicalnewness(HongandHartley,2011),strengthofBSR(FynesandVoss,2002),levelofpurchasingmaturity(Balsetal.,2018;Schleperetal.,2020),purchasenovelty(Schleperetal.,2020;Trautmannetal.,2009),absorptivecapacity(Kauppietal.,2013),newventure’spowerandcommitmenttothesupplier(SongandDiBenedetto,2008),VirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

270252Handbookoftheoriesforpurchasing,supplychainandmanagementresearchsupplyenvironmentcharacteristicssuchasregulationsandinstitutionalenvironment(Patruccoetal.,2019;Richteretal.,2019;Trautmannetal.,2009),industrycontext(Brandon-JonesandKnoppen,2018),environmentalcomplexity(Balsetal.,2018;Richteretal.,2019),dynamismandvolatility(Balsetal.,2018;Trautmannetal.,2009),aswellaspurchaseandcorporatestrategy(Atesetal.,2018;Balsetal.,2018),andinterdependenceofthepurchasingunits(Trautmannetal.,2009).InthebroaderOSCMresearch,studieshaveincluded,forexample,contingenciessuchasproductionprocesstype(Shouetal.,2018;Tenhiälä,2011),processspan(SwinkandSchoenherr,2015),technologicaluncertaintyornewness(HongandHartley,2011;Shenhar,2001;TurkulainenandSwink,2017),fitnovelty(Adler,1995),projectcomplexity(Geraldietal.,2011;Shenhar,2001),fitanalysability(Adler,1995),productlifecyclestage(Mahapatraetal.,2012),firmsize(Jayarametal.,2010),organizationalstructure(Zhangetal.,2012),cross-functionalintegration(Pérez-Luñoetal.,2019)andindustrytype(Jayarametal.,2010).Contingenciesrelatedtothesurroundingenvironmentincludeenvironmentaluncertainty(PagellandKrause,2004),demanduncertainty(O’Leary-KellyandFlores,2002),dynamismoftheenvironment(HelkioandTenhiala,2013;Wongetal.,2011;Zhangetal.,2012),envi-ronmentalunpredictability(Wongetal.,2011),competitiveintensity(Mahapatraetal.,2012),internationalcompetition(Dasetal.,2000)andnationalcontext(Brushetal.,1999).StrategiccontingenciesusedinbroaderOSCMresearchincludebusinessstrategy(O’Leary-KellyandFlores,2002),strategicproprieties(KetokiviandSchroeder,2004),strategyalignment(Swinketal.,2005),emphasisonflexibility(KathuriaandPartovi,1999),strategicroleoftheplant(Maritanetal.,2004)andstrategicpriorityoftheoutsourceditem(KaipiaandTurkulainen,2017).OrganizationDesign(orAnotherManagerialDecisionVariable)Organizationdesignreferstotheorganizationalarchitectureandinternalarrangementofwork(GreenwoodandMiller,2010).ThefoundationalworkoncontingencytheorybyLawrenceandLorsch(1967a)conceptualizesorganizationdesignintermsofdifferentiationandintegra-tion:differentiationreferstosegmentationoftheorganizationintosubsystems,eachofwhichthentendstodevelopattributesinrelationtothedemandsposedbyitsfocalenvironment;integration,ontheotherhand,istheprocessofachievingunityandcommongoalsamongthosesubsystems.Examplesofotherorganizationdesignvariablesincludedegreeofspeciali-zation(BurnsandStalker,1961;Child,1973;Gresov,1990;Pughetal.,1968),verticalspanofcontrol(Pughetal.,1968),centralizationofdecisionmaking(BurnsandStalker,1961;Child,1973;Pughetal.,1968),degreeofauthority(Gresov,1990;Pughetal.,1968),formalization(BurnsandStalker,1961;Child,1973;Pughetal.,1968),standardizationofwork(Child,1973;Gresov,1990;Pughetal.,1968),levelofexpertise(VandeVenandDelbecq,1974),levelofroutinizationoftaskactivities(VandeVenandDelbecq,1974),andpersonal,imper-sonalandgroupcoordinationmodes(VandeVenetal.,1976).IntheOSCMcontext,contingencytheoryresearchhasaddressedorganizationdesign,forexample,intermsofthepurchasingandsupplyorganization(PSO)andprocurementorganizationdesigns(Balsetal.,2018;BalsandTurkulainen,2017),differentaspectsofcross-functionalandinternalsupplychainintegration(Adler,1995;O’Leary-KellyandFlores,2002;SwinkandSchoenherr,2015;Turkulainenetal.,2017),configurationsofglobalplantnetworkintermsofplantlocationswithintheglobalplantnetwork(Brushetal.,1999),andVirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

271Contingencytheoryandtheinformationprocessingview253plantautonomyindecisionmakingwithinthefirm’sglobalplantnetwork(Maritanetal.,2004).Inthebroadersupplychainsetting,organizationdesignhasbeenstudied,forexample,intermsofsupplychainintegration(Flynnetal.,2010)andsupplierinvolvementinradicalinnovation(SongandDiBenedetto,2008).However,thecontingencyargumenthasbeenextendedtoothermanagementdecisionvariablesthanjustorganizationdesign.Infact,SousaandVoss(2008)callthisthe‘responsevariable’,emphasizingthattheconceptisessentiallyanyorganizationalormanagerialaction,whichintheOSCMareaarethevarietyofoperationsmanagementpractices,suchasthequalitymanagementpractices(FynesandVoss,2002;Jayarametal.,2010;Zhangetal.,2012),enterpriseresourceplanning(ERP)systems(TenhiäläandHelkio,2015),planningmethods(Tenhiälä,2011),e-procurementpractices(Kauppietal.,2013),aswellashumanresourcemanagement(HRM)practicesinthemanufacturingsetting(AhmadandSchroeder,2003).EffectivenessPerformanceincontingencytheoryreferstoeffectiveness,andessentiallymeanshowwelltheorganizationisabletoachievewhateveritistryingtoachieve;whilesomeorganizationsfocusonefficiency,somefocusongrowthorinnovation(Donaldson,2001).Thishighlightstheperspectiveofrationalorganizationsaspresentedabove.Itisimportanttonotethateffec-tivenessisnotthesameasperformance,eventhoughmanyscholars(forexample,Donaldson,2001)usethesetermsinterchangeably.Thekeypointofeffectivenessisthelinkbetweenorganizationalgoalsandorganizationalperformance;performanceassuchcanbemeasured,forexample,byfinancialmeasuresoroperationalmeasuresindependentlyofwhethertheyarethemaingoalsoftheorganizationornot.Hence,effectivenessfundamentallydependsonthecontext,andthiscontextdependenceisespeciallycriticalwhentheorganizationisembeddedinabroadersystem,suchasasupplychain(TurkulainenandKetokivi,2013).Classicalmeasuresoforganizationaleffectivenessinthemanufacturingcontextare,forexample,manufacturingcostefficiency,conformancequality,flexibilityanddelivery(HayesandWheelwright,1984).However,TurkulainenandKetokivi(2013)suggestthatthedependentvariableofeffective-nessshouldbeempiricallyderivedasitdependsonthecontext.Thismeansthatweshouldnotmakeassumptionsabouttheorganizationalgoalsbut,rather,empiricallyassessthemtoensurethattheperformancemeasuresweuseareinfactthefocalgoalsoftheorganization.FitFitisattheheartofcontingencytheoryargumentandtheorizing.Thefundamentalassumptionandhypothesisincontingencytheoryisthatorganizationswhichhaveafitbetweenorganiza-tiondesignandcontingenciesaremoreeffective(Donaldson,2001).Atthegenerallevelthiscanbetranslatedtotheassumptionthatorganizationswhichhavefitbetweenthemanagementdecisionvariableunderinvestigationandcontextualvariablesaremoreeffective(Donaldson,2001).Thereisnocommonunderstandingandagreementaboutthetheoreticalmeaningoffit;rather,ithasbeenconceptualizedandoperationalizedindifferentways.Oneconceptualizationmakesadistinctionbetweenthreetypesoffit:‘fitasselection’(thatis,congruencebetweentheorganizationalcontextanddesign),‘fitasinteraction’(thatis,interactionofapairoforganizationalcontextanddesignvariablesaffectsperformance),and‘fitassystems’(thatis,VirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

272254Handbookoftheoriesforpurchasing,supplychainandmanagementresearchinternalconsistencybetweenmultipleorganizationalcontextualanddesignvariablesaffectsperformance)(DrazinandVandeVen,1985).Anotherconceptualizationidentifiessixdiffer-enttypesoffit:‘fitasmoderation’,‘fitasmediation’,‘fitasmatching’,‘fitasgestalts’,‘fitasprofiledeviation’and‘fitascovariation’(Venkatraman,1989).Clarifyingtheformoffitisessentialintheoreticaldiscussionsandinensuringthattheempiricaloperationalizationoffitistheninlinewithit(Venkatraman,1989).Someofthecritiquetowardscontingencytheoryalsolinkstotheconceptualizationsoffit(Meyeretal.,1993).RELATIONSHIPSBETWEENTHEVARIABLESThegenericargumentofthestructuralcontingencytheoryisthatthefitbetweentheorgan-izationdesignandthecontextualfactorsimpactsupontheeffectivenessofanorganization(Donaldson,2001).Thiscanbedividedintothreesimplecorearguments:(1)thereisarela-tionshipbetweenthecontingencyvariableandtheorganizationdesign;(2)thecontingencyvariabledeterminestheorganizationdesign;and(3)thereisafitbetweenthecontingencyvariableandtheorganizationdesignvariablethatleadstohighereffectiveness(Donaldson,2001).Takentogether,contingencytheoryviewsorganizationdesignasaconstrainedoptimi-zationproblem:attheorganizationallevel,thisinvolvesmaximizingtheeffectivenessbymin-imizingthemisfitbetweentheenvironmentaldemandsandinternalorganizationdesign(VandeVenetal.,2013).Thisinturnrequiresmaximizingthebenefitsofdifferentiation,whileminimizingthecostsofintegration(LawrenceandLorsch,1967a).Aswecanseehere,thecontingencytheorynotionthatorganizationsshouldadapttheirstructurestotherequirementsposedbytheenvironmentfollowstherationalityargumentaspresentedabove.Moreover,thenotionthatorganizationsandunitswithinorganizationsfacedifferentcontextualconditionsandenvironments,andsubsequentlydifferentchallenges,isfundamentallytheopensystemsperspectiveaspresentedabove.Consideringthecontingencyvariableofenvironmentalstability,theclassicstudiesonorganizationdesignmakeadistinctionbetweentwocontrastingorganizationaldesignsofmechanistic(highdegreeofspecialization,centralizationofdecisionmaking,andformaliza-tion)andorganic(lowspecialization,decentralizationofdecisionmaking,andlowlevelofformalization),suggestingthattheyaresuitablefordifferentenvironments.Themechanisticstructureiseffectiveinstableconditions;andtheorganicstructureinchangingconditions,asitisabletorespondquicklytonewproblemsandunforeseenrequirements(BurnsandStalker,1961).Organizationalsizethenhasbeensuggestedtobeassociatedwithhighercon-centrationofauthority(Pughetal.,1969),andthatineffectivelargerorganizations,thelevelsofdecentralizationofdecisionmaking,formalizationandspecializationarehigher(thatis,bureaucraticstructure)(Donaldson,2001).Moreover,organizationalagehasbeensuggestedtobenegativelyrelatedtoconcentrationofauthority(Pughetal.,1969).Importanttonotehereisthattypicallyempiricalresearchconsiderstherelationshipsbetweenthecontingencyandtheorganizationdesignasbivariaterelationships(reductionistapproach),lookingatonesetofvariablesatatime.Furthermore,thesecondargumentaboveislinkedwiththeassumptionthatachangeinacontingencyenforcesachangeinthedesign.Tofurtherclarifytherelationshipbetweentheenvironmentandtheorganizationdesign,Donaldson(2001)presentstheSARFIT(structuraladaptationtoregainfit)model.Itstatesthatanorganizationisinitiallyinastateoffit;fitpositivelyaffectsperformance.AchangeinVirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

273Contingencytheoryandtheinformationprocessingview255thecontingencyvariablethenimpliesamisfitbetweentheorganizationdesignandthecontin-gency,leadingtolowereffectiveness.Wheneffectivenessbecomessolowthatitislessthansatisficing,thentheorganizationadaptsitsdesigntoregainfitandagainachievehighereffec-tiveness.However,theorganizationisnotconsideredmerelyresponsivetotheenvironment;rather,theorganizationalsohasstrategicchoice(Child,1972),andtherelationshipbetweentheenvironmentandtheorganizationisessentiallyreciprocal.Whilethisistheunderlyingargument,mostempiricalresearch,however,takesastaticperspectiveandmerelyassumesthattheorganizationadaptstoreachfit.Recentresearchfurtherelaboratesthenotionoffitandproposesa‘compensatorymisfittheory’,suggestingthatover-fittingtheorganizationdesign(thatis,thelevelofaspecificorganizationdesignvariableistoohightofitthecontingencies)cancompensateforanunder-fittingdesign(thatis,thelevelofanotherorganizationdesignvariableistoolowandhenceamisfit)(LuoandDonaldson,2013),andalsobringsupforfurtherdiscussionfittomultiplecontingencies(DonaldsonandJoffe,2014).InformationProcessingPerspectiveTheinformationprocessingperspectivefurtherdevelopsthecontingencytheoryargument,proposingtheconceptualizingoforganizationsasinformationprocessingsystems(Galbraith,1973;TushmanandNadler,1978).Itwasdevelopedpartlytorespondtothelackofclarifyintermsoftheconceptoffitofcontingencytheory(TushmanandNadler,1978).Informationprocessingreferstogathering,interpretingandsynthesizinginformationand,hence,isdif-ferentfrommeredataasitmeansachangeinknowledge(TushmanandNadler,1978).Asorganizationsareopensystems,theyareassumedtofaceuncertaintyfromtheirenvironmentandsubsequentlyneedtodevelopinformationprocessingcapacitytomanagethoseinforma-tionprocessingrequirementsinordertobeeffective.Furthermore,duetoboundedrationality,dividingtheorganizationintoahierarchicalstructureimpliesthatdifferentorganizationallevelspossessdifferentstocksofknowledge,increasingthechallengeofinformationprocess-ing(ConnerandPrahalad,1996;Galbraith,1973).Inaddition,alsoincreasingtaskcomplex-ity,forexampleintermsofstrategicscope,issuggestedtorequiremorecomplexinformationflows(TurkulainenandKetokivi,2013).Organizationsfacilitateinformationprocessingcapacitybytheirstructureandvarietyofintegrationmechanisms,whichvarybothintheircapacitytofacilitateinformationprocessingaswellasintheircosts.Theinformationprocess-ingperspectivehasbeenusedextensivelyinresearchinOSCM(forareview,seeBusseetal.,2017).Whiletheoriginalideaoftheinformationprocessingperspectivewasdevelopedwithinthecontextofanorganization,ithasalsobeenlaterextendedtotheinterorganizationalleveltodevelopunderstandingofbuyer‒supplierrelationshipsandsupplychains(BensaouandVenkatraman,1995;Busseetal.,2017).TheinformationprocessingperspectiveisillustratedinFigure16.2.ConfigurationalPerspectiveTheconfigurationalperspectivebuildsoncontingencytheory,especiallyaimingtoaddressthecriticismoncontingencytheoryintermsoftheorganizations’needtofitthecontingen-cies,reductionismandmultivariatism(Donaldson,2001;Meyeretal.,1993).Rather,ittakesamoreholisticperspective,suggestingthatorganizationscannotbeunderstoodbyanalysingdistinctorganizationalcharacteristicsinisolation.Configurationsrefertoa‘constellationVirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

274256Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSource:AdaptedfromTushmanandNadler(1978).Figure16.2Informationprocessingperspectiveofconceptuallydistinctcharacteristicsthatcommonlyoccurtogether’(Meyeretal.,1993,p.1175).Accordingtotheconfigurationperspective,organizationscanbeclassifiedintoafewconfigurationsintermsofacombinationofseveralvariables(forexample,strategyandstructure;Miller,1986).Thevariablesneedtofiteachotherinorderfortheorganizationtobeeffective,assumingthatthereareafewpotentialfits.Thislinkstoconceptualizingfitassystem(DrazinandVandeVen,1985)orfitasgestalts(Venkatraman,1989).Configurationscanbebasedontypologies(AhmadandSchroeder,2003;BurnsandStalker,1961;MilesandSnow,1978)orempiricallybasedtaxonomies(Adler,1995;BensaouandVenkatraman,1995;Flynnetal.,2010),thoughthelatterapproachhassometimesbeencriticizedduetolackoftheory(Miller,1996).Someoftheconfigurationresearchdoesnotevenfocusonfindingfitwithanycontingencies,presentingacontrastingviewtocontingencytheory(Donaldson,2001).FewstudieshavebuiltontheconfigurationperspectivewithintheOSCM.Researchhas,forexample,empiricallyidentifiedconfigurationsofdesign-manufacturingcoordination(Adler,1995),configurationsofBSRs(BensaouandVenkatraman,1995),configurationsofinternal,customerandsupplierintegration,andtheiroperationalandbusinessperformance(Flynnetal.,2010),aswellasconfigurationsofinternalsupplychainintegrationmechanismsandhowtheyareassociatedwithdifferentintegrationneeds(Turkulainenetal.,2017).Inthepurchasingandsupplymanagement(PSM)setting,researchhasidentifiedconfigurationsoforganizationdesignsinthecontextofpublicprocurement(Patruccoetal.,2019).OSCMRESEARCHBUILDINGONCONTINGENCYTHEORYANDTHEINFORMATIONPROCESSINGVIEWContingencytheoryisvaluableforOSCMresearchbecauseitprovidesanopportunitytoexplainOSCMphenomenaandadvancetheunderstandingof,forexample,theuseofvariousoperationsmanagementpracticesandtheirimplicationsindifferentoperationalcontexts.Interestingly,whiletheearlyworksbuildingoncontingencytheoryinOSCMfocusonthestrategiccontingencyargument(HayesandWheelwright,1984;Skinner,1969),themainbulkVirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

275Contingencytheoryandtheinformationprocessingview257ofcontingencystudiesinOSCMhavebuiltonthenotionthattheenvironmentinwhichtheorganizationoperatesaffectstheeffectivenessofvariousoperationspractices(SousaandVoss,2008).ResearchinOSCMhasalsoabundantlybuiltontheinformationprocessingview(IPV)(forareview,seeBusseetal.,2017);theIPVisusefulforOSCMformultiplereasons,includ-ingtheboundaryspanningnatureofsupplychainmanagement(SCM)aswellasincreasinguncertaintyduetotheshorteningofproductlifecyclesandincreasingcustomerexpectationsandcompetition(Swinketal.,2007).Researchhasalsocontinuedtoseeadvancesinthecon-tingencytheoryargumentsbyelaborationsintheOSCMcontext(TurkulainenandKetokivi,2013),orelaborationofIPVintheOSCMcontext(Busseetal.,2017;FlynnandFlynn,1999).Asingeneralinresearchbuildingoncontingencytheory,theoreticalandpracticalcon-tributionsofOSCMcontingencyresearchcanbeachievedby:(1)identifyingimportantcontingencyvariablesthatdistinguishbetweencontexts;(2)groupingdifferentcontextsbasedonthesecontingencyvariables;and(3)determiningthemosteffectiveinternalorganizationdesignsorresponsesineachmajorgroup(SousaandVoss,2008).Whenbuildingonthefoun-dationsofgenericcontingencytheoryarguments,itisimportanttonotethatcontextualizingthegenericcontingenciesiscrucial;developmentofthehypothesisrequireselaborationofthetheoreticalargumentsinaspecificcontext.Hence,forexample,hypothesizingthatenviron-mentaluncertaintyactsasacontingencyinanypractice‒performancelinkisnotuniversallyestablished.Inthefollowing,IpresentanoverviewofsomeoftheresearchintheOSCMcontextthatbuildsoncontingencytheory.Ononehand,researchisdividedintostudiesfocusingspecif-icallyonthePSMcontext,andstudiesinthemoregenericOSCMsetting.Andontheotherhand,researchisdividedintostudiesfocusingonorganizationdesigns(mainlyfollowingthelineofthestructuralcontingencytheory;Donaldson,2001)andstudiesonthegenericcontin-gencyrelationships(SousaandVoss,2008;VandeVenetal.,2013).ResearchonOrganizationDesigninthePSMContextSeveralstudieshavefocusedonorganizationdesignwithinthePSMcontext,buildingonthefoundationsofthestructuralcontingencytheory.TheseincludedevelopingacomprehensivecontingencyframeworkofPSOstructuresandidentifyingexternalandinternalcontingenciesaffectingthechoiceofPSOstructure(Balsetal.,2018),anddevelopingaconceptualframe-workfororganizationdesigninthespecificcontextofpublicprocurementandthedependenceoforganizationdesignonseveralinternalandexternalcontextualfactors(Patruccoetal.,2019).Intheglobalsourcingarea,studieshaveaddressedintegrationintheglobalsourcingorgan-ization,proposingthatwaystomanageintegrationinglobalsourcingorganizationsdependonthreecontingenciesofcategorycharacteristics,supplyenvironmentcharacteristicsandinterdependenceofthepurchasingunits(Trautmannetal.,2009),andhowcompaniesactuallymakeglobalsourcingdecisions,andtheeffectofcontextualconditionsofsourcingmaturity,productcomplexityandpurchasenoveltyontheuseofthesearchetypesofdecisionmaking(Schleperetal.,2020).Withinthesustainablesupplychainmanagementsetting,researchhasaddressedhowdifferenttypesofsustainability-relateduncertaintiescanbemanagedbyapplyingafittingconfigurationofprocessingmechanismsinthecontextofsustainablesupplymanagement(Foerstletal.,2018).VirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

276258Handbookoftheoriesforpurchasing,supplychainandmanagementresearchResearchonGenericContingencyRelationshipsinthePSMContextAmoregenericcontingencyargumenthasalsoservedasthefoundationinPSMresearch.ThesestudiesincludethecontingencyeffectofthestrengthoftheBSRontherelationshipbetweenqualitypracticesandperformance(FynesandVoss,2002),howbuyersmanagetheinterfaceamongtheinterdependentfirst-tiersuppliersandthecontingencyeffectoftechno-logicalnewness(HongandHartley,2011),andthecontingenteffectofabsorptivecapacityontherelationshipbetweene-purchasingtoolsandcategoryperformance(Kauppietal.,2013).ResearchhasalsoaddressedtheinfluenceoftheBSRontheperformanceoftheservicesupplierandthecontextualeffectofthecontractualsupportandservicesitesize(Karatzasetal.,2016),aswellastherelationshipsbetweenthepurchasingrecognition,purchasinginvolvement,anddynamiccapabilityanditsimpactoncostandinnovationperformanceandthecontingenteffectoftheindustrycontext(Brandon-JonesandKnoppen,2018).Inthenewproductdevelopment(NPD)setting,researchhasassessedthecontingentvalueofspecificintegrativedevicesonprojectperformanceundervariousconditionsofuncertainty(YanandDooley,2013),andsupplierinvolvementinradicalNPD,aswellasthecontingencyeffectsofnewventurepowerandcommitmenttothesupplier(SongandDiBenedetto,2008).Intheinternationalpurchasingcontext,Richteretal.(2019)testtheperformanceimplicationsofavarietyoforganizationdesigndimensionsunderdifferentconditionsofcomplexityanduncertaintyofaspecificnationalinstitutionalcontext.Andfinally,buildingonthestrategiccontingencytheory,researchhasaddressedhowthestrategicpriorityofcostversusqualityisassociatedwithorganizationalintegrationoftheBSRinanoutsourcingcontext(KaipiaandTurkulainen,2017),aswellastowhatextentthe(mis)fitbetweencostofinnovationpurchas-ingstrategyandpurchasingstructure(centralization,formalizationandcross-functionality)impactsuponpurchasingperformance(Atesetal.,2018).ResearchonOrganizationDesignintheBroaderOSCMContextResearchhasalsobuiltonthestructuralcontingencytheorytoaddressvariousaspectsoforganizationdesignwithinthebroaderOSCMcontext.Researchhasdevelopedunderstandingofthemediatingroleofsupplychainprocessvariabilityontherelationshipbetweenorgani-zationstructureandperformance,aswellastheeffectofpredictabilityofdemand(Germainetal.,2008).Severalstudieshavebuiltoncontingencytheorytodevelopcontextualizedunderstandingoforganizationalintegration;forexample,toidentifyconfigurationsofdesign‒manufacturingcoordinationandtheeffectoffitnoveltyandanalysability(Adler,1995),toidentifydifferentconfigurationsofsupplychainintegration(Flynnetal.,2010),tounderstandhowintegrationofoperations‒salesinglobalprojectoperationsinprojectsalesversusprojectexecutionphasesismanaged,aswellashowthecontingenciesofprojectuniqueness,ambi-guity,complexityandgeographicaldispersionareassociatedwithhowintegrationismanaged(Turkulainenetal.,2013),andtoidentifydifferentpatternsofinternalsupplychainintegrationandtheassociatedreasonsforwhyintegrationisneeded(Turkulainenetal.,2017).Furthermore,contingencytheory-basedorganizationdesignresearchinthebroaderOSCMcontexthasexaminedtheeffectoffitandmisfitintheuseofHRMpracticesinanoperationssetting(AhmadandSchroeder,2003),thelinksbetweenthedynamismandcompetitivenessofthebusinessenvironmentandvarioussupplychainstrategies,aswellastheirrelationshipswiththevarioussupplymanagementpractices(Prajogoetal.,2018),andlately,turningfocusVirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

277Contingencytheoryandtheinformationprocessingview259tosustainability,hasidentifiedhowdifferentformsofsustainability-relateduncertaintycanbemanagedwithdifferenttypesofsustainability-drivensupplychainmodificationmechanisms(Busseetal.,2017).Intheinternationaloperationscontext,researchhasaddressedhowplantlocationdeci-sionsareaffectedbythechoiceofwhethertheplantisintegratedorindependentinthefocalnetwork,anddomesticorforeignascomparedtotheheadquarters(Brushetal.,1999),andwhetherthestrategicroleoftheplanthasimplicationsonorganizationdesignintermsofplantautonomyonplanning,controlandproductiondecisions(Maritanetal.,2004).Finally,intheprojectoperationscontext,DaviesandFrederiksen(2013)elaboratethevolume‒varietymatrix(HayesandWheelwright,1979)andthelinkagebetweentheproductandtheorganizationdesign,suggestingthatattheprojectlevel,high-variety,uniqueprojectproductsaretobematchedwithone-offprojectorganizationstodevelopandcompletetheproduct.Thishasbeenfurtherelaboratedatthelevelofproductandorganizationsubsystemcomponentsinthecontextofmajorprojects(ArttoandTurkulainen,2018).ResearchonGenericContingencyRelationshipsintheBroaderOSCMContextResearchbuildingonthegenericcontingencyargumentinthebroaderOSCMcontextisvastandvaried.WhileKetokiviandSchroeder(2004)studyboththestrategicandthestructuralcontingencyargumentsonthevalueofvarietyofmanufacturingpractices,onlyafewbuildonthestrategiccontingencyargument.Theseincludethecontingenteffectoftheemphasisonflexibilitypriorityonthelinkbetweenworkforcemanagementpracticesandperformance(KathuriaandPartovi,1999),thecontingenteffectofthemanufacturingstrategyalignmentonthelinkbetweenvariousmanufacturingpracticesandcapabilities(Swinketal.,2005),andthecontingenteffectsofthefinancialleverage,internationalizationanddiversificationstrategiesonthelinkbetweenchiefsupplychainofficer(CSCO)appointmenttothetopmanagementteamandfirmperformance(Rohetal.,2016).Themainbulkofthesestudiesassesstheeffectoftheexternalandinternalenvironment.Thevalueofflexibilitystrategyinthemanufacturingcontextissuggestedtobecontingentonenvironmentaluncertainty(PagellandKrause,2004).ResearchonthefundamentalOSCMpracticeshasaddressed,forexample,contextualfactorsaffectingtheuseofqualitymanage-mentpractices,suggestingthattheirvaluedependsondynamismoftheoperatingenvironmentandorganizationstructure(Zhangetal.,2012)andthatthevalueofthequalitysystemdesigniscontingentonfirmsize,TQMdurationandindustrytype(Jayarametal.,2010),orinterna-tionalcompetition(Dasetal.,2000).Researchhasalsoaddressedthecontingentuseofplan-ningmethods,suggestingthattheeffectivenessofsophisticatedplanningmethodsdependsonprocesstype(Tenhiälä,2011),thecontextualvalueofERPsystemsindynamicandstableenvironments(TenhiäläandHelkio,2015),aswellasthecontextualizedvalueofinformationsharinginthesalesandoperationsplanning(S&OP)process(Kaipiaetal.,2017).Topic-wise,themajorityofOSCMstudiesbuildingoncontingencytheoryhavefocusedoncontextualizingthevalueofinternalandexternalintegration.Thevalueofinternal,cross-functionalintegrationhasbeensuggestedtobecontingenton,forexample,processspan(Swinketal.,2007;SwinkandSchoenherr,2015),operationsperformancedimension(TurkulainenandKetokivi,2012),strategicscope(TurkulainenandKetokivi,2013),levelofdifferentiation(TurkulainenandKetokivi,2013),aswellasthelevelofsupplierandcustomerintegration(Flynnetal.,2010).Furthermore,theperformancevalueofmarketing‒VirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

278260Handbookoftheoriesforpurchasing,supplychainandmanagementresearchmanufacturingintegrationhasbeensuggestedtobecontingentonbusinessstrategyanddemanduncertainty(O’Leary-KellyandFlores,2002).Supplychainintegration,ontheotherhand,hasbeensuggestedtoprovidecontextualvaluedependingonunpredictabilityandchange(Wongetal.,2011),andtypeofproductionsystems(Shouetal.,2018).Researchhasanalysedtheproactivemanagementofthecriticalsuppliersandtheinfluenceofcompetitiveintensityandproductlifecyclestage(Mahapatraetal.,2012).Andlinkedtothese,astudyhascontextualizedthevalueofinvolvinginternalsupplychainpersonnelinafirm’sproductinnovationactivities,suggestingthatitdependsontheorganization’stechnologycontextandthelevelofoperationalsupplierintegration,aswellastheinteractionofthesetwocontingencyfactors(TurkulainenandSwink,2017).InthebroaderSCMsetting,researchbuildingoncontingencytheoryhasalsodevelopedacontingentresource-basedviewtounderstandtherelationshipbetweenspecificresources(informationsharingandconnectivity),capabilitiesandperformance,aswellasthecontingenteffectofsupplychaincomplexity(Brandon-Jonesetal.,2014).Andfinally,theclassicalcontingencytheorystatementof‘onesizedoesnotfitallpro-jects’wasbroughttotheprojectoperationscontextwhenShenhar(2001)studiedprojectsandtheirdifferencesundertwocontingencies‒technologicaluncertaintyandcomplexityintermsofsystemscope‒suggestingthanwhenplanningforprojectsandtheirmanagement,projectcharacteristicsneedtobeconsidered,callingforaproject-specificapproachtoprojectmanagement.ThecontingencyvariableofprojectcomplexityhasbeenfurtherelaboratedbyGeraldietal.(2011).AvenuesforFutureResearchAsthereviewaboveshows,contingencytheoryhasservedasthefoundationinavastvarietyofstudiesinOSCMoverthepastdecades,aswellasinanumberofstudiesinthemorespecificareaofPSM.Interestingly,however,basedontheirreviewof23yearsofsourcingliterature,Giuniperoetal.(2019)concludethatcontingencytheoryisrarelyusedinstudiesonsourcing:only3percentofarticleswereidentifiedasusingitastheunderlyingtheory,thoughthenumberofthesestudieshasbeenincreasinginthetwenty-firstcentury.ThisprovidesampleopportunitiesforfutureresearchinPSM.Overall,ascanbeseeninthereviewofexistingcontingencystudiespresentedabove,contingencytheoryprovidesanopportunitytoengageintheory-basedempiricalresearchtodevelopelaboratedandmoredetailedunderstandingofavarietyofmanagerialpracticesinPSMorothertopicareas.Forexample,futureresearchcouldengageinadetaileddiscussionofthefocalconceptsofcontingencytheoryinaspecificareaofPSM.Thiswouldmeanelaborat-ingandcontextualizing,first,thebroaderorganizationalcontingenciesandfurtherdevelopingthosetoaspecificmanagerialdecisionmakingareainPSM.Second,researchcouldengageinanin-depthconversationofconceptualizingandempiricallyassessingeffectivenessinthatspecificPSMsetting.ResearchcouldthenfurtherstudytheeffectivenessofavarietyofthespecificmanagerialareasinPSM,utilizingtheseelaboratedcontingenciesandestablishedeffectivenessmeasures.Moreover,consideringdifferentformsoffitalsoprovidesoppor-tunitiesforfutureresearch.Overall,engaginginempiricalresearchbuilding,forexampleondatacollectedbycasestudies,providesampleopportunitiestodevelopmorein-depth,contextualizedunderstandingofthemanagerialchallengesinPSM.ThiswouldalsofacilitatedevelopingunderstandingofthecontextualrichnessoftheorganizationsunderinvestigationVirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

279Contingencytheoryandtheinformationprocessingview261andsubsequentlyfacilitatebetterunderstandingoftheeffectsthatorganizationalcontextmayhaveonthepractice‒performancerelationships.NOTE1.IntheOSCMcontext,researchonmanagementpracticeswiththecontingencytheorylensissome-timesreferredtoas‘OMpracticecontingencyresearch’(OMPCR)(Geraldietal.,2011;SousaandVoss,2008).REFERENCESAdler,P.S.(1995).InterdepartmentalInterdependenceandCoordination:TheCaseoftheDesign/ManufacturingInterface.OrganizationScience,6(2),147–167.Ahmad,S.,andSchroeder,R.G.(2003).TheImpactofHumanResourceManagementPracticesonOperationalPerformance:RecognizingCountryandIndustryDifferences.JournalofOperationsManagement,21(1),19–43.Aiken,M.,andHage,J.(1968).OrganizationalInterdependenceandIntra-organizationalStructure.AmericanSociologicalReview,33(6),912–930.Artto,K.,andTurkulainen,V.(2018).ItTakesTwotoTango:Product–OrganizationInterdependenceinManagingMajorProjects.InternationalJournalofOperationsandProductionManagement,38(6),1312–1339.Ates,M.A.,vanRaaij,E.M.,andWynstra,F.(2018).TheImpactofPurchasingStrategy–Structure(Mis)fitonPurchasingCostandInnovationPerformance.JournalofPurchasingandSupplyManagement,24.Bals,L.,Laine,J.,andMugurusi,G.(2018).EvolvingPurchasingandSupplyOrganizations:AContingencyModelforStructuralAlternatives.JournalofPurchasingandSupplyManagement,24,41–58.Bals,L.,andTurkulainen,V.(2017).AchievingEfficiencyandEffectivenessinPurchasingandSupplyManagement:OrganizationDesignandOutsourcing.JournalofPurchasingandSupplyManagement,23(4),256–267.Bensaou,M.,andVenkatraman,N.(1995).ConfigurationsofInterorganizationalRelationships:AComparisonbetweenU.S.andJapaneseAutomakers.ManagementScience,41(9),1471–1492.Blau,P.M.(1970).AFormalTheoryofDifferentiationinOrganizations.AmericanSociologicalReview,35(2),201–218.Brandon–Jones,A.,andKnoppen,D.(2018).TheRoleofStrategicPurchasinginDynamicCapabilityDevelopmentandDeployment–AContingencyPerspective.InternationalJournalofOperationsandProductionManagement,38(2),446–473.Brandon–Jones,E.,Squire,B.,Autry,C.W.,andPetersen,K.J.(2014).AContingentResource‐BasedPerspectiveofSupplyChainResilienceandRobustness.JournalofSupplyChainManagement,50(3),55–73.Brush,T.,Maritan,C.,andKarnani,A.(1999).ThePlantLocationDecisioninMultinationalManufacturingFirms:AnEmpiricalAnalysisofInternationalBusinessandManufacturingStrategyPerspectives.ProductionandOperationsManagement,8(2),109–132.Burns,T.,andStalker,G.M.(1961).TheManagementofInnovation(3rdedn).London:TavistockPublications.Busse,C.,Meinlschmidt,J.,andFoerstl,K.(2017).ManagingInformationProcessingNeedsinGlobalSupplyChains:APrerequisitetoSustainableSupplyChainManagement.JournalofSupplyChainManagement,53(1),87–113.Chandler,A.D.(1962).StrategyandStructure:ChaptersintheHistoryofAmericanEnterprise.Cambridge,MA:MITPress.VirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

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281Contingencytheoryandtheinformationprocessingview263Hong,Y.,andHartley,J.L.(2011).ManagingtheSupplier–SupplierInterfaceinProductDevelopment:TheModeratingRoleofTechnologicalNewness.JournalofSupplyChainManagement,47(3),43–62.Jayaram,J.,Ahire,S.L.,andDreyfus,P.(2010).ContingencyRelationshipsofFirmSize,TQMDuration,Unionization,andIndustryContextonTQMImplementation‒AFocusonTotalEffects.JournalofOperationsManagement,28(4),345–356.Kaipia,R.,Holmström,J.,Smaros,J.,andRajala,R.(2017).Informationsharingforsalesandoperationsplanning:Contextualizedsolutionsandmechanisms.JournalofOperationsManagement,52,15–29.Kaipia,R.,andTurkulainen,V.(2017).ManagingIntegrationinOutsourcingRelationships–TheInfluenceofCostandQualityPriorities.IndustrialMarketingManagement,61(2),114–129.Karatzas,A.,Johnson,M.,andBastl,M.(2016).RelationshipDeterminantsofPerformanceinServiceTriads:AConfigurationalApproach.JournalofSupplyChainManagement,52(3),28–47.Kathuria,R.,andPartovi,F.Y.(1999).WorkForceManagementPracticesforManufacturingFlexibility.JournalofOperationsManagement,18(1),21–39.Kauppi,K.,Brandon-Jones,A.,Ronchi,S.,andvanRaaij,E.M.(2013).ToolsWithoutSkills–ExploringtheModeratingEffectofAbsorptiveCapacityontheRelationshipbetweenE–PurchasingToolsandCategoryPerformance.InternationalJournalofOperationsandProductionManagement,33(7),828–857.Ketokivi,M.A.,andSchroeder,R.G.(2004).Strategic,StructuralContingencyandInstitutionalExplanationsintheAdoptionofInnovativeManufacturingPractices.JournalofOperationsManagement,22(1),63–89.Lawrence,P.R.,andLorsch,J.W.(1967a).DifferentiationandIntegrationinComplexOrganizations.AdministrativeScienceQuarterly,12(1),1–47.Lawrence,P.R.,andLorsch,J.W.(1967b).OrganizationandEnvironment–ManagingDifferentiationandIntegration.Boston,MA:HarvardBusinessSchoolPress.Luo,B.N.,andDonaldson,L.(2013).MisfitsinOrganizationDesign.JournalofOrganizationDesign,2(1),2–10.Mahapatra,S.K.,Das,A.,andNarasimhan,R.(2012).AContingentTheoryofSupplierManagementInitiatives:EffectsofCompetitiveIntensityandProductLifeCycle.JournalofOperationsManagement,30(5),406–422.doi:10.1016/j.jom.2012.03.004.March,J.G.,andSimon,H.A.(1958).Organizations.Cambridge,MA:Blackwell.Maritan,C.A.,Brush,T.H.,andKarnani,A.G.(2004).PlantRolesandDecisionAutonomyinMultinationalPlantNetworks.JournalofOperationsManagement,22(5),489–503.Meyer,A.D.,Tsui,A.S.,andHinings,C.R.(1993).ConfigurationalApproachestoOrganizationalAnalysis.AcademyofManagementJournal,36(6),1175–1195.Miles,R.E.,andSnow,C.C.(1978).OrganizationalStrategy,Structure,andProcess.Stanford,CA:StanfordUniversityPress.Miller,D.(1986).ConfigurationsofStrategyandStructure:TowardsaSynthesis.StrategicManagementJournal,7(3),233–249.Miller,D.(1996).ConfigurationsRevisited.StrategicManagementJournal,17(7),505–512.O’Leary–Kelly,S.W.,andFlores,B.E.(2002).TheIntegrationofManufacturingandMarketing/SalesDecisions:ImpactonOrganizationalPerformance.JournalofOperationsManagement,20(3),221–240.Pagell,M.,andKrause,D.R.(2004).Re-exploringtheRelationshipbetweenFlexibilityandtheExternalEnvironment.JournalofOperationsManagement,21(6),629–649.Patrucco,A.S.,Walker,H.,Luzzini,D.,andRonchi,S.(2019).WhichShapeFitsBest?DesigningtheOrganizationalFormofLocalGovernmentProcurement.JournalofPurchasingandSupplyManagement,25(3),100504.Pérez–Luño,A.,Bojica,A.,andGolapakrishnan,S.(2019).WhenMoreisLess–TheRoleofCross-FunctionalIntegration,KnowledgeComplexityandProductInnovationinFirmPerformance.InternationalJournalofOperationsandProductionManagement,39(1),94–115.Prajogo,D.,Mena,C.,andNair,A.(2018).TheFitBetweenSupplyChainStrategiesandPractices:AContingencyApproachandComparativeAnalysis.IEEETransactionsonEngineeringManagement,65(1).VirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

282264Handbookoftheoriesforpurchasing,supplychainandmanagementresearchPugh,D.S.,Hickson,D.J.,Hinings,C.R.,andTurner,C.(1968).DimensionsofOrganizationStructure.AdministrativeScienceQuarterly,13(1),65–105.Pugh,D.S.,Hickson,D.J.,Hinings,C.R.,andTurner,C.(1969).TheContextofOrganizationStructures.AdministrativeScienceQuarterly,14(1),91–114.Richter,N.F.,Schlaegel,C.,Midgey,D.F.,andTressin,T.(2019).OrganizationalStructureCharacteristics’InfluencesonInternationalPurchasingPerformanceinDifferentPurchasingLocations.JournalofPurchasingandSupplyManagement,25(4),100523.Roh,J.,Krause,R.,andSwink,M.(2016).TheAppointmentofChiefSupplyChainOfficerstoTopManagementTeams:AContingencyModelofFirm-LevelAntecedentsandConsequences.JournalofOperationsManagement,44,48–51.Schleper,M.C.,Blome,C.,andStanczyk,A.(2020).ArchetypesofSourcingDecision-Making:TheInfluenceofContextualFactorsonConsensus,ArgumentationandCabal.InternationalJournalofOperationsandProductionManagement,40(2),117–143.Scott,W.R.(1998).Organizations:Rational,Natural,andOpenSystems(5thedn).UpperSaddleRiver,NJ:PrenticeHall.Shenhar,A.J.(2001).OneSizeDoesNotFitAllProjects:ExploringClassicalContingencyDomains.ManagementScience,47(3),394–414.Shou,Y.,Li,Y.,Park,Y.,andKang,M.(2018).SupplyChainIntegrationandOperationalPerformance:TheContingencyEffectsofProductionSystems.JournalofPurchasingandSupplyManagement,24(4),352–360.Sinha,K.K.,andVandeVen,A.H.(2005).DesigningWorkWithinandBetweenOrganizations.OrganizationScience,16(4),389–408.Skinner,W.(1969).Manufacturing–MissingLinkinCorporateStrategy.HarvardBusinessReview,47(3),136–145.Song,M.,andDiBenedetto,C.A.(2008).Supplier’sInvolvementandSuccessofRadicalNewProductDevelopmentinNewVentures.JournalofOperationsManagement,26(1),1–22.Sousa,R.,andVoss,C.A.(2008).ContingencyResearchinOperationsManagementPractices.JournalofOperationsManagement,26(6),697–713.Swink,M.,Narasimhan,R.,andKim,S.W.(2005).ManufacturingPracticesandStrategyIntegration:EffectsonCostEfficiency,Flexibility,andMarket-BasedPerformance.DecisionSciences,36(3),427–457.Swink,M.,Narasimhan,R.,andWang,C.(2007).ManagingBeyondtheFactoryWalls:EffectsofFourTypesofStrategicIntegrationonManufacturingPlantPerformance.JournalofOperationsManagement,25(1),148–164.Swink,M.,andSchoenherr,T.(2015).TheEffectsofCross–FunctionalIntegrationonProfitability,ProcessEfficiency,andAssetProductivity.JournalofBusinessLogistics,36(1),69–87.Tenhiälä,A.(2011).ContingencyTheoryofCapacityPlanning:TheLinkbetweenProcessTypesandPlanningMethods.JournalofOperationsManagement,29(1–2),65–77.doi:10.1016/j.jom.2010.05.003.Tenhiälä,A.,andHelkio,P.(2015).PerformanceEffectsofUsinganERPSystemforManufacturingPlanningandControlunderDynamicMarketRequirements.JournalofOperationsManagement,36(5),147–164.Thompson,J.D.(1967).OrganizationsinAction–SocialScienceBasesofAdministrativeTheory(Transactionedn).NewBrunswick,NJ:TransactionPublishers.Trautmann,G.,Turkulainen,V.,Hartmann,E.,andBals,L.(2009).IntegrationintheGlobalSourcingOrganization–AnInformationProcessingPerspective.JournalofSupplyChainManagement,45(2),57–74.Turkulainen,V.,andKetokivi,M.(2008).Cross-FunctionalIntegration–WhataretheRealBenefits?PaperpresentedattheAcademyofManagementAnnualConference,Anaheim,CA.Turkulainen,V.,andKetokivi,M.(2012).Cross–functionalIntegrationandPerformance–WhataretheRealBenefits?InternationalJournalofOperationsandProductionManagement,32(4),447–467.Turkulainen,V.,andKetokivi,M.(2013).TheContingentValueofOrganizationalIntegration.JournalofOrganizationDesign,2(2),31–43.VirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

283Contingencytheoryandtheinformationprocessingview265Turkulainen,V.,Kujala,J.,Artto,K.,andLevitt,R.(2013).OrganizingintheContextofGlobalProject-basedFirm–TheCaseofSales–OperationsInterface.IndustrialMarketingManagement,42(2),223–233.Turkulainen,V.,Roh,J.,Whipple,J.,andSwink,M.(2017).ManagingInternalSupplyChainIntegration:IntegrationRequirementsandMechanisms.JournalofBusinessLogistics,38(4),290–309.Turkulainen,V.,andSwink,M.L.(2017).SupplyChainPersonnelasKnowledgeResourcesforInnovation‒AContingencyView.JournalofSupplyChainManagement,53(3),41–59.doi:10.1111/jscm.12133Tushman,M.L.,andNadler,D.(1978).InformationProcessingasanIntegratingConceptinOrganizationalDesign.AcademyofManagementReview,3(3),613–624.VandeVen,A.H.,andDelbecq,A.L.(1974).ATaskContingentModelofWork-UnitDesign.AdministrativeScienceQuarterly,19(2),183–197.VandeVen,A.H.,Delbecq,A.L.,andKoenig,R.,Jr(1976).DeterminantsofCoordinationModeswithinOrganizations.AmericanSociologicalReview,41(2),322–338.VandeVen,A.H.,Ganco,M.,andHinings,B.(2013).ReturningtotheFrontierofContingencyTheoryofOrganizationalandInstitutionalDesigns.AcademyofManagementAnnals,7(1),393–440.Venkatraman,N.(1989).TheConceptofFitinStrategyResearch:TowardVerbalandStatisticalCorrespondence.AcademyofManagementReview,14(3),423–444.Wong,C.Y.,Boon-itt,S.,andWong,C.W.Y.(2011).TheContingencyEffectsofEnvironmentalUncertaintyontheRelationshipbetweenSupplyChainIntegrationandOperationalPerformance.JournalofOperationsManagement,29(6),604–615.Woodward,J.(1965).IndustrialOrganization:TheoryandPractice(2ndedn).London:OxfordUniversityPress.Yan,T.,andDooley,K.J.(2013).CommunicationIntensity,GoalCongruence,andUncertaintyinBuyer–SupplierNewProductDevelopment.JournalofOperationsManagement,31(7–8),523–542.Zhang,D.,Linderman,K.,andSchroeder,R.(2012).TheModeratingRoleofContextualFactorsonQualityManagementPractices.JournalofOperationsManagement,30(1–2),12–23.FURTHERREADINGSomeSeminalPapersandBooksGalbraith,J.R.(1973).DesigningComplexOrganizations.Reading,MA:Addison–Wesley.Lawrence,P.R.,andLorsch,J.W.(1967a).DifferentiationandIntegrationinComplexOrganizations.AdministrativeScienceQuarterly,12(1),1–47.Lawrence,P.R.,andLorsch,J.W.(1967b).OrganizationandEnvironment–ManagingDifferentiationandIntegration.Boston,MA:HarvardBusinessSchoolPress.Thompson,J.D.(1967).OrganizationsinAction–SocialScienceBasesofAdministrativeTheory(Transactionedn).NewBrunswick,NJ:TransactionPublishers.Tushman,M.L.,andNadler,D.A.(1978).InformationProcessingasanIntegratingConceptinOrganizationalDesign.AcademyofManagementReview,3(3),613–624.Woodward,J.(1965).IndustrialOrganization:TheoryandPractice(2ndedn).London:OxfordUniversityPress.MoreRecentAdvancesofContingencyTheoryBurton,R.M.,DeSanctis,G.,andObel,B.(2006).OrganizationalDesign–AStep-by-StepApproach.NewYork:CambridgeUniversityPress.Donaldson,L.(2001).TheContingencyTheoryofOrganizations.ThousandOaks,CA:SAGEPublications.Joseph,J.,andGaba,V.(2020).OrganizationalStructure,InformationProcessing,andDecision-Making:ARetrospectiveandRoadMapforResearch.AcademyofManagementAnnals,14(1),267–302.VirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

284266Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTurner,K.L.,andMakhija,M.V.(2012).TheRoleofIndividualsintheInformationProcessingPerspective.StrategicManagementJournal,33(6),661–680.VandeVen,A.H.,Ganco,M.,andHinings,B.(2013).ReturningtotheFrontierofContingencyTheoryofOrganizationalandInstitutionalDesigns.AcademyofManagementAnnals,7(1),393–440.VirpiTurkulainen-9781839104503DownloadedfromPubFactoryat05/28/202209:10:45AMviaColumbiaUniversityLibrary

28517.SocialexchangetheoryCarlMarcusWallenburgandRobertHandfieldINTRODUCTIONSocialexchangetheory(SET)viewsexchangeasconsistingofinteractionsthatgenerateobligations,andisvaluableinunderstandingcloseinterfirmcollaboration.SETisbuiltonatheoreticalframeworkthatprovidesinsightintosocialcomponentsthatgovernexchangerelationships,emphasizedbysocialexchangeinvolving‘give-and-take’betweenentities,rec-iprocityandcooperation(Blau,1964).Theauthorofthetheorywasnothappywiththename‘socialexchangetheory’,noting:AsImighthaveanticipated,mytheorythereforegotstuckwiththenameof‘exchangetheory’.Thiswastoobad,notonlybecausethetheoryisnotlimitedtosocialbehaviorthatlookslikeexchangebutalsobecauseitsuggestedthatthetheorywasaspecialkindoftheory,whereasitisageneralbehav-ioralpsychology,admittedlyappliedtoalimitedrangeofsocialsituations.(Homans,1984,p.338)Nonetheless,SETproposesthatindividualsorcollectivesofactorsengageinexchangerela-tionshipswithotheractors,expectingthattheeconomicandsocialrewardswillbegreaterthanthecostsoftheinteraction.Whenthisturnsouttobethecase,theexchangetendstoberepeatedand,overtime,increasestrustandcommitmentandproducesrelationalexchangenormsthatgoverntherelationship(Lambeetal.,2001).Theunderlyingassumptionisthattheactorsinasupplychainwilltrytomaximizetheirnetoutcomewhenchoosingtheirexchangepartnersanddecidinghowtointeractwiththem.SEThasbeenextensivelyappliedbysupplychainmanagement(SCM)scholarstoexplaininterfirmexchangerelationships.Despiteitsusefulnessandinfluenceinourunderstandingofbusiness-to-business(B2B)exchange,severaltheoreticalambiguitieswithinSETremaininthesupplychainfield.ToguidefutureresearchinthespecificdomainofpurchasingandsupplymanagementaswellasthebroaderfieldofSCM,thischapterfirstdescribesSET,thenprovidesanoverviewofpriorapplications,andconcludeswithseveralavenuesforfutureresearchforutilizingandextendingthetheory.TherootsofSETmaybetracedto‘oneoftheoldesttheoriesofsocialbehavior’,namelythatanyinteractionbetweenindividualsisanexchangeofresources(Homans,1958,p.597).TheessenceofSETliesinthatinteractionsaremotivatedbypartiesseekingrewardsandavoidingpunishment(Emerson,1976).Theexchangedresourcescanbenotonlytangible,suchasgoodsormoney,butalsointangible,suchassocialamenitiesorfriendship.Assuch,SET’soriginslieinsociology(especiallyHomans,1958,1961;Gouldner,1960;Blau,1964;Emerson,1976),andsocialpsychology(ThibautandKelley,1959).AnexamplebyRedmond(2015)providesagoodillustrationofhowSETworks:Afriend,whodoesnotownacar,needsaridehomeonSaturdaytoattendhissister’swedding;itisaninety-mileround-trip.Heofferstopayforgasandgiveyoufivedollars.YouhavetentativeplansforSaturday,andtwohoursofdrivingforfivebucksdoesnotseemthatappealing,butthisis267CarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

286268Handbookoftheoriesforpurchasing,supplychainandmanagementresearchafriendinneed.Afteryouhesitate,yourfriendofferstendollarsandlunch,soyoufinallyagree.Inthisexchange,bothpartiesreachanagreementbasedoncomparinghowmuchsomethingwillcostrelativetothelevelofrewardorbenefitthatsomethingwillprovide(aridehomeforthefriend,andtendollarsandlunchforyou).SociologistGeorgeHomans(1950,1958,1961)proposedexaminingsuchinteractionasanexchangethatfollowsprinciplesrevolvingaroundrewardsandcosts.Foryou,thecostsincludewearandtearonyourcarandgivinguptwohoursofyourtime;therewardsare$10,afreelunch,andprovidingsupportforafriendandgaininghisappreciation.Sinceyourfriendisdesperateforaride,youprobablycouldhaveaskedfor$20or$30,butsuchademandcouldraisequestionsaboutwhatkindofafriendyouare.Homansarguedthat,ingeneral,twoormorepartiestrytogetsomethingthatisofgreatervaluetothemthanthecosttheyincur.Inthisexample,youandyourfriendprobablybothfeelgoodabouttheexchange:youbothfeelthatyouaregettingmoreoutoftheexchangethanyouhavetoforfeit.SEThasalonghistoryinthefieldofbusinessresearchandhasbeenadvancedintwofairlydistinctdomains:1.Organizationalbehaviour(OB):withanintrafirmperspectiveonemployersandemploy-ees,basedonthenotionthataworkplaceentailsnotonlyeconomicexchangewherewagesarepaidfortheexecutionoftasks,butalsosocialexchangewhichprovidesadditionalvaluetoemployees;atypicalapplicationofthiswouldbeaworker’sorganizationalciti-zenshipbehaviourthatisinfluencedbythesupervisor‒workerrelationship.2.B2Brelationships:withaninterfirmperspectiveinvolvingbuyersandsellers,basedonthenotionthatrelationship-basedexchange(betweenthetheoreticalpolesofmarketandhierarchy)alsoentailsmorethanapurelymonetarydimension.ParameterssuchasthedegreeofcommitmentandtrustinB2BrelationshipsfeatureprominentlyinsupplychainresearchthatemploysSETasatheoreticalfoundation(MorganandHunt,1994).Thischapter’sfocusisonthelatterformofSETrelationshipsviewedinthecontextofSCMresearch.Startinginthe1980sandcoinedbysupplychainandmarketingscholars,SEThasprovidedthefoundation(whetherexplicitlyorimplicitly)formuchoftheworkproposingcloserbuyer‒sellerrelationships.AlargeshareofthepaperspublishedonSEThashistoricallyappearedintwojournals:IndustrialMarketingManagementandJournalofBusinessandIndustrialMarketing.Morrisetal.(2001)notethatforseveralyearsindustrialmarketingtook‘abackseat’tocon-sumermarketingandcoinedtheterm‘TheSleepingGiant’forthefieldofindustrialmarketing(Morrisetal.,2001;WebsterandWind,1980).TheestablishmentoftheIndustrialMarketingManagementjournalin1971wasinstrumentalinpromotingcloserbuyer‒sellerrelationshipsinindustrialbuyingandselling.Inaddition,thefirstspecialissueonindustrialmarketinginthe1984autumneditionoftheJournalofMarketingrepresentedagoodintroductiontothecurrenttheoreticalfoundationforindustrialmarketingandbuyer‒sellerrelationships(WilsonandCunningham,1984).Inthemid-2000s,theapplicationandfurtherdevelopmentofSETalsoheavilyexpandedintodifferentareasofSCM,suchaslogistics,andpurchasingandsupplymanagement.Againstthisbackground,SETcanbeconsideredoneofthegrandtheoriesdevelopedoutsidetheSCMrealm,buthasevolvedtohaveagrowingandlastingimpactwithinSCM(Spinaetal.,2016).CarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

287Socialexchangetheory269Table17.1OverviewofSETvariablesKeyvariableExplanationReferencesExchangeReferstoaseriesofsequentialbutinterrelatedinteractionsinwhichoneMitchelletal.(2012)partyreceivessomethingviathe(in)activityoftheexchangecounterpart.RewardsEssentiallyanythingthatarecipientvalues.ThisincludestangibleCropanzanoetal.(2017);elements(forexample,goodsormoney),intangibleelementssuchasHomans(1961)information,andhedonicelementssuchasprideandjoy.Thevalueissubjective;itmayalsobenegative.CostsThetangibleandintangibleinputs(forexample,workingtime)investedHomans(1958)bytheexchangecounterpart.Credit/indebtednessThedifferencebetweentheincurredcostsandthereceivedrewards.Schoenherretal.(2015)RulesofreciprocitySpecifiesinwhichform,whichtimeframe,andtowhomareceivedGoulder(1960)rewardisexpectedtobereciprocated.ComparisonlevelThenetoutcomeanactorexpectstoreceiveovertimefromacertaintypeThibautandKelly(1959)ofexchangerelationship.ComparisonlevelforThemaximumnetoutcomethattheactorcouldreceivefromanyThibautandKelly(1959)alternativesalternativeexchangerelationshipthattheactorcouldengageininsteadofthecurrentone.SatisfactionTheresultwhenthenetoutcomeoftheexchangeexceedsthecomparisonThibautandKelly(1959)level.DependenceTheresultwhentheexchange’snetoutcomeexceedsthecomparisonThibautandKelly(1959)levelforalternatives(thatis,thesecond-bestoption).RelationalnormsThemutualunderstandingamongexchangepartnersconcerningwhatHeideandJohn(1992);behaviourisappropriate.Macneil(1980);Noordewieretal.(1990)Despiteitsname,SETisnotasingle,concisetheory.Itisbetterunderstoodasafamilyofconceptualmodelsthatshareoneunderlyingparadigm(Cropanzanoetal.,2017).ThebroadcontextofSETmayhelptoexplainwhyitstheoreticalapplicationsoftendifferfromauthortoauthor.Nevertheless,thereisconsensusthatthebasicpremiseofSETisthatindividualandorganizationalactorsenterintoandmaintainrelationshipsinordertoderiveanetpositivevalue,basedonbotheconomicandsocialelementsoftherelationship.Therelationshipsaretreatedasaseriesofsequentialbutinterrelatedinteractions(Mitchelletal.,2012).Theseinteractions,whichtypicallyinvolvedyadsaswellasmultilateralsettings,leadtoobligationsbetweentheexchangepartiesthroughtheconceptofreciprocity(Blau,1964;Emerson,1976;Homans,1958).Whenonepartythroughits(in)activityprovidesvaluetothesecondparty,thiscreatesanobligationforthesecondpartytoreciprocate.Moreover,SETproposesthatrepeatedbeneficialinteractionsovertimegeneraterelationshipnormsthatenhancearelation-ship’sefficiencyandeffectiveness.KEYVARIABLESANDDEFINITIONSBecauseSETisnotasingletheory,thereisnofixedsetofvariablesthatareincludedinallspecificinstancesofSET.AnoverviewofcommonvariablesassociatedwiththeapplicationofSETisprovidedinTable17.1.Thesevariablesarealsodepictedas‘Element1‒Variables’inFigure17.1.CarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

288270Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFigure17.1OverviewofSETelementsExchangeInSET,exchangerelationshipsaretypicallytreatedasaseriesofsequentialbutinterrelatedexchangeinteractions(Mitchelletal.,2012).Inthisrespect,onecouldexpectexchangetorefertoasituationwhereactorAprovidessomethingofvaluetoactorBindirectreturnforsomethingelseofvalue.However,inSET,theconceptofexchangeismoreambiguousthanthis‘upfront’scenario,forseveralreasons.First,inSET,whatisreturnedisnotalwaysspecifiedupfront(Mastersonetal.,2000)(thatis,inourupfrontexample,youcouldhavetakenyourfriendtohissister’sweddingwithoutdirectlygetting$10andafreelunch,insteadexpectingthatyourfavourwillbereturnedinsomeforminthefuture).Second,dependingontherulesofreciprocity,thereturnmaybedelayed(thatis,whenyoutakeyourfriendtohissister’swedding,youdonotknowwheninthefutureyourfavourmaybereturned).Third,inSET,theboundariesoftheexchangeareoftenunclear(thatis,whenyourfriendsubsequentlytakesyououtforlunchtwice,itcouldbethatbothtimesareinexchangeforyoutakinghimtohissister’swedding;however,itcouldalsobethatthesecondlunchalreadyispartofanewexchangeforwhichyourfriendexpectssomethinginexchange).Fourth,inSET,theexchangeisnotnecessarilybilateral,butcouldbemultilateral(thatis,ifyourfriendsubsequentlyhelpsyourspousewithsomeworkinthegarden,itmaybeunclearwhetherthisisinexchangeforyourfavourorwhetherthisispartofasecond,independentexchangerelationship).Fifth,SETnotonlyviewstheactiveprocessofprovidingsomethingbutalsotheinactiveprocessofwithholdingsomethingasapotentialelementoftheexchange(Crompanzanoetal.,2017).Andfinally,SETnotonlyviewsthingsofpositivevaluebutalsotakesintoaccountwhenoneactorreceivessomethingthatisofnegativevalue(Crompanzanoetal.,2017).CarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

289Socialexchangetheory271RewardsRewardsarethereasonwhyactorsenterintoandmaintainexchangerelationships(Lambeetal.,2001).However,withintheSETframework,rewardshavenoexactpricebutaredefinedintermsofvaluetoeachactor.Whatconstitutesareward,andtherelativesizeofthereward,liesintheeyeofthebeholder.Arewardmaybeanythingeconomicornon-economicthatoneactorreceivesthroughthe(in)activityoftheexchangecounterpart.Thisincludestangibleelementssuchasgoodsormoney,butalsointangibleelementssuchasinformation,provid-ingreferences,oraccesstonewsuppliers.Dependingonthetypeofexchangerelationship,rewardscanalsoincludehedonicelementssuchasprideandjoy.Homans’s(1961)definitionofcomparisonofrewardsallowsforanextensiveassortmentofthingstobeconsideredrewards;essentially,anythingweputvalueon.Oneimplicationofthisisthatwhatisvaluabletoonepersonmaynotbeconsideredvaluabletoanother.Thevalueofthoserewardsalsofluc-tuatesovertime;therewardsmaynotalwaysremainatthesamevalue.Whenyouarehungry,foodhasvalueandcanbeareward,buteatingmoreisnolongerrewardingonceyouarefull.‘Amanemitsaunitofactivity,howeverthatunitisdefined,andthisunitiseitherreinforcedorpunishedbyoneormoreunitsofactivityhereceivesfromanothermanorbysomethinghereceivesfromthenon-humanenvironment’(Homans,1961).AsSETviewsrelationshipsbetweenactorsovertime,itcanalsoaccountforinstanceswheretheactualvalueanactorreceivesdeviatesfromtheactor’sinitialassessmentofthevalue.Forexample,anactormaygainaccesstoinformationthatishardlynoticedinitiallybutlaterturnsouttobeofhighvalue.Thiscouldbeinformationaboutwhatacertainsupplierisplanningtodo.Insuchinstances,therewardisnotwhattheactorinitiallythoughtittobe,butisequaltotheactualrealizedvalue.Whileexchangepartnersexpectpositiverewardsovertime,thisdoesnotmeanthateveryexchangeelementhasapositivevalue.Forexample,thevaluemayshiftasafunctionoftime-consumingcontractnegotiations(Rinehartetal.,2004),bullyingtacticsinnegotiations,orhierarchicalbehaviourinwhichthesupplier’sleewayisrestricted(Steinbachetal.,2018).WhileSETtraditionallyhasviewedthevalueanactorreceivesasone-dimensional(rangingfrompositivetonegative),Crompanzanoetal.(2017)offeredausefulextensionthroughaseconddimension:theactivitydimension,withthepolarvaluesofexhibitandwithhold.Thisemphasizesthatpositiveandnegativevaluecanresultfrombothactivityandinactivityofthecounterpart.CostsWithintheSETframework,thecostvariableisalsonotwelldefined.Homans(1961)origi-nallydefinedcostsassomethingofvaluethatisgivenup;itcanalsobeapunishmentorthewithdrawalofareward.Moneyisthemostobvious‘cost’exchangedforsomeproductorservice,butacostcanalsorefertothetimeandenergydevotedtoarelationshipwithapar-ticularbusinessorsupplier.Then,itreferstothesubjectiveperceptionandcostestimationofthetangibleandintangibleinputs(forexample,workingtime)providedbyanactorintotherelationship.Thus,costsarenotanobjectivelyquantifiabledatumwithinSET.Ambiguitymayexistconcerningbothwhichinputsareactuallymadeandhowtovaluetheseinputs.(Forexample,resultsofexchangemaydifferwhenusingafullcostingversusamarginalcostingapproach).Also,someinputsarenon-economic(forexample,managementattention,stressoremotionaleffort)andare,therefore,subjective.Further,Blau(1964)emphasizedthatinCarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

290272Handbookoftheoriesforpurchasing,supplychainandmanagementresearchselectingtospendtimeinonerelationship,weforfeittheopportunitytospendtimeinanotherrelationship,alludingtotheconceptofopportunitycost.Credit/IndebtednessAsrewardsandcostsunfoldovertime,bothparties’netoutcome(thatis,therewardsminusthecosts)maybecomeskewed,asinthecasewhereoneactorhasbuiltupcapitaltowhichthesecondactorisindebted(Schoenherretal.,2015).Assuch,thevariationofcredit/indebtednessmayshiftthecurrentbalancebetweenrewardsandcostsatanygivenpointintime.Asbothcomponentsareperceptionalandsubjective,thebalancewillinevitablyvarybasedonperceptions.WithintheSETframework,thevaluebalanceistypicallyformedasthepuredifferencebetweentherewardsandthecosts.Moreover,SETalsoallowsforactorsbothtoattachahighervaluetoearlierinputs(whichequatestoaninterestrateonvalueovertime),andtheconverse,whichattachesgreatervaluetomorerecentinputs(duetoarecencybias).RulesofReciprocitySETtypicallyfocusesonrelationshipsinwhichtheinputsoftheactorsareexchangedasyn-chronously.Afteroneactorprovidessomethingtotheotheractor,thisactionisreciprocatedlater.Therulesofreciprocityreferfirsttothetimeframewithinwhichthereciprocalactivityisexpected.Thistimeframemayvaryfromtheshortterm,inwhichtheresponseisexpectedinstantaneously,tothelongterm,wherecapitalcanbebuiltupoveralongerperiodbeforeitneedstoberepaid.Second,therulesofreciprocitydeterminetothepartiestowhomtherewardsarereciprocated.Indyadicrelationships,thisistherespectivecounterpart.However,inmultilateralrelationships,thetargetofreciprocitycouldalsobeotheractorsorevenagroupofactors.Forexample,ifamemberinapurchasingalliancesupportsanothermember,theexpectationcouldbethat,inreturn,thesecondcompanyhelpsanymemberinthealliance,notnecessarilytheoriginalpartywhichprovidedtheinitialsupport.ComparisonLevelBasedonThibautandKelly’s(1959)work,someSETconceptualizationsincludethecom-parisonlevelforthestatusquo.Thisvariablereferstothenetoutcomeanactorexpectstoreceiveovertimefromacertaintypeofexchangerelationship.Itisnecessarilylargerthanzero,becauseSETassumesthatactorsenterandmaintainrelationshipstoreceiverewardsthatexceedthecosts.ComparisonLevelforAlternativesOriginatingfromThibautandKelly(1959),thisvariablereferstothemaximumnetoutcomethattheactorcouldreceivefromanyalternativeexchangerelationshipthattheactorcouldengageininsteadofthecurrentone.Thisincludesalternativebuyer‒sellerrelationshipsthatarenon-negative.WhilethisvariableisnotexplicitlyincludedinmostconceptualizationsofSET,itisfrequentlyimplicitlypresentthroughpowerand/ordependence.Conceptually,CarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

291Socialexchangetheory273dependenceisthedifferencebetweenthecurrentrelationship’snetoutcomeandthenetoutcomeofthebestalternativerelationship.SatisfactionSomeversionsofSETentailtheconceptofsatisfaction.Itisoneofthekeyoutcomesofanexchangerelationship,andreferstowhethertheindividualactorissatisfiedwiththerelation-ship,reducingthelikelihoodofchange.DependenceInSET,dependencereferstowhetheralternativeexchangerelationshipswouldyieldsimilaroutcomesornot.Itismostcommonlyconceptualizedasthedifferenceinoutcomebetweencurrentexchangerelationshipsandthenextbestalternative.Asthecurrentrelationship’soutcomeisalreadyhighlysubjective(becausebothrewardsandcostsaresubjectiveinnature),thereisnoobjectivemeasureorproxyfordependencewithinSET.RelationalNorms,IncludingTrustandCommitmentAscontractsdonotfullygovernmanyexchangerelationships,relationalnormsareavitalelementofSET.Whilenormsareinfluencedbythecontextoftheexchangerelationship(forexample,nationalculturesorindustrystandards),theyarespecifictotheindividualrelationshipandaredevelopedovertime.Theyrefertoamutuallyacceptedunderstandingofthedo’sanddon’tswithintherelationship(thatis,howtherelationshipistobeoperated).Assuch,theycanbebothimplicitandexplicitinnature.Thesenormsmayrelatetotherulesofreciprocity(forexample,withinwhichtimeframe,inwhichform,andtowhoman(in)activityisreciprocated).Buttheyalsoincludenormsoncommunicationandinformationsharing(forexample,whatinformationissharedwithwhom).Normsmayalsocovertherelativedomainforrelationshipautonomy,thedegreetowhichtrustandcommitmentisexpected,andspecifyroutinesappliedundervariouscircumstances.ASSUMPTIONSOFSETSETfocusesonthebehaviourofindividualsorcollectivesofindividuals.Generallyspeaking,applyingSETatlevelsbeyondtheindividuallevel(forexample,dyadsortriadsofcompanies)assumesthatcompanies’ororganizationalsubunits’behaviourisrootedinthebehaviourofindividualscomprisingtheseorganizationalunits.ThemostbasicassumptionofSETisthattheactorsinvolvedintheexchangebehaveration-ally,inthattheyseektomaximizetheirrewardsandminimizetheircostsduringanyformofexchange(Blau,1964;Homans,1958;ThibautandKelley,1959).Therefore,‘individualstakepartinanexchangeonlywhentheyexpecttheirrewardsfromtheactivitytojustifythecostoftakingpartinit’(GefenandRidings,2002,p.50).However,whentheSETliteraturereferstorationalactors,thisdoesnotimplyHomoeconomicus(forexample,anindividualwhobehavesperfectlyrationally),butratheranactorwithboundedrationality(seeSimon,2000,aswellasChapter7inthisbookontransactioncosteconomics,regardingtheconceptCarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

292274Handbookoftheoriesforpurchasing,supplychainandmanagementresearchofboundedrationality)thatconsidersnotonlyeconomicelementsoftheexchange,butalsosocialandpsychologicalelements.Additionally,SETassumesthatactorslearnfromthepastandconsidertheirexperiencesintherelationshipbetweencurrentandfuturedecisionmaking.Further,SETassumestheconfinesofaculturalcontext.Thatmeansthatrulesofreciprocityandnormsofengagementarealsoshapedbyothersoutsidetherelationshipandwillvarydependingontherelationship’sspecificset-up.Inthisregard,thecontextis,forexample,impacteduponbynationalculturesandindustrycultures,butwillalsodifferdependingonthetierwithinthesupplychainandwhethertherelationshipisvertical,horizontalorlateral.Besidesthesecentralassumptions,differentvariationsofSETassumethatactorsdislikebeingindebted,andthereforepreferbuildingcreditovertime.Thefearinmanycasesisthatexcessiveindebtednessmayresultindefaultorthatthe‘credits’mayexpireorbeforgottenbeyondagivenfuturehorizon.DOMAINWHERETHETHEORYAPPLIESSETisfairlyvagueinwhatconstitutesanexchangeoraninteractionamongactors.Therefore,thistheoryappliestoanyformofrelationshipwherehumansinteract,bothbusinessandnon-businessrelationships.Itcanbeappliedtoallhigher-levelrelationshipsamongorganiza-tionalentitiesaslongastheseentitiesareviewedascollectivesofindividuals.WhileSETismostoftenappliedtodyadicrelationships,itisequallyapplicabletomulti-lateralrelationshipsofmorethantwoactors,andalsowhentheactorsareatdifferentlevels;forexample,theinteractionamongtwoworkers(individuallevel)andtheiremployer(organ-izationallevel).SETisgenerallyappliedtotwoinstances:therelationshipperspectiveandtheindividualactorperspective.Thefirstinstanceistop-down,wheretherelationshipisshapedbyrulesofreciprocity,relationalnorms,andotherelementssuchasroutines.Theseelementsimpactuponhowtheactorswithintherelationshipactandthink.Thesecondperspectiveisbottom-upandviewstherelationshipbetweentwoactorsfromtheindividual’sperspective.Therefore,therelationshipisnothingmorethanwhattheactorsdoandhowtheythinkaboutoneanother.InSCMresearch,bothperspectiveshavebeenappliedacrossmanystudies;whereasinOBresearch,thelatterclearlydominates.RELATIONSHIPSBETWEENTHEVARIABLESTherelationshipsbetweenthekeyvariablesinSETarefairlystraightforward.Actorsengageinrelationshipswithotheractorstoreceiveapositivenetoutcomeintheformofeconomicandsocialrewardsversuscostsoftheexchangeswithintherelationship.Theexchangeisbasedonrulesofreciprocity.Theyspecifybilateralobligations,whichtheactorsintherelationshipareexpectedtofulfil.Astheexchangeofrewardsistypicallyasynchronous,onepartyintherelationshipwillbuildcreditagainstwhichtheotherpartyisindebted.Eachpartyestimatesthenetoutcomefromtherelationshipasthebalanceofrewardsandcosts.Whenthisnetoutcomeexceedsthecomparisonlevel,theactorissatisfied;whenitexceedsthecomparisonlevelforCarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

293Socialexchangetheory275alternatives,theactorisdependentontheexchangecounterpartandwillstrivetomaintaintherelationship.Overtime,positiveexchangesresultintrustandcommitment,andrelationalnormsthatgoverntherelationship(Lambeetal.,2001),whichgenerallycontinuetogrowinvalue.THEORETICALPREDICTIONS(FACTUALCLAIMS)OneofthegreateststrengthsofSETisitsapplicabilitytoabroadarrayofsettings,whichunfortunatelyalsopresentsoneofitsgreatestweaknesses.ThepredictionsmadebySETarevagueandimprecise(Compranzanoetal.,2017).WhileSETpositsthat(in)activitywhichprovidespositivevaluetotheexchangepartnerwillbepositivelyreciprocated,and(in)activ-itywhichprovidesnegativevaluewillbenegativelyreciprocated,thetheoryislimitedinitsabilitytomakeanypredictionsregardingwhichspecificbehaviourswillresultinreciprocationonbehalfofthecounterpart.Asanexample,ifacompanyprovidesitssupplierwithusefulinformation,SETdoesnotpredictwhetherthesupplierwillreciprocatebyalsoprovidingusefulinformation,orbyputtingmoreeffortintoimprovingthecomponentsitsupplies,orbyreducingitsorderleadtime,oranyother(in)activity.Inasimilarvein,SETalsodoesnotpredictwhenasupplierwillreciprocate.Reciprocationcouldoccurimmediatelybutmayalsooccurafteraconsiderabletimedelay.Moreover,SETalsodoesnotpredictexactlytowhomthesupplierwillreciprocate.Asup-pliercouldreciprocatetotheindividualtheyreceivedtheinformationfrom,astheyfeelindebtedtothem.Alternatively,theycouldreciprocatetoaspecificdepartmentasthepersonmaybeviewedasthedepartment’srepresentative,ortosomebodyelseinthecompanywhenthepersonisviewedasarepresentativeofthecompany.SETalsodoesnotestablishpropositionsregardingwhatfactorswillbeimpactedupon(thatis,moderationormediation),when,towhom,andthroughwhich(in)activitythesupplierwillreciprocate.Consequently,allSET’stheoreticalpredictionspertaintoahigherlevelofabstraction,andarethusmoregeneric.Thismakesitausefulframeworkinwhichtopositionhypothesizedrelationshipsthatexistamongstbuyersandsellers.ExemplarypredictionsthatarisefromtheapplicationofSETtobuyer‒sellerrelationshipsemergeasfollows.Thecoststhatonepartyiswillingtoexpendonarelationshipincreasewiththerewardsthatcanbeorarereceivedfromtherelationship.Thisisthecasebecauseactorsexpectapositivenetoutcome,andthereforeincurredcostswillnotexceedexpectedrewards.Interactionsthatoccurearlyintherelationshiparemoredecisiveforthedevelopmentofrelationship(especiallytrustandcommitment)thanlaterinteractions.Earlyimpressionsaremadeduringthesefirstfewinteractions.TheinitialinteractionsarecrucialindeterminingwhethertheB2Brelationshipwillexpand,diminish,remainstableordissolve.Ifthenetoutcomeisdeemedacceptable,futureinteractionsarelikelytooccur.Inotherwords,trustisestablishedthroughaseriesof‘smallpromiseskept’thatsetthestageforadeeperrelationship.Laterinteractionswilloccurinthecontextoftherelationship’swholehistory,andagainstrelationalnormsandprecedentsthathavealreadybeenestablished.Forthe(in)activityofoneactor,themoreoftenthis(in)activityisrewarded,andthemorevaluablethereward,thehigherthelikelihoodthattheactorwillperformthesame(in)activityagain(Griffithetal.,2006).Incontrast,whenanactor’s(in)activitydoesnotyieldCarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

294276Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtheexpectedrewardorunexpectedpunishment,theactorwillscrutinizethe(in)activityandtypicallyaggressivelyavoidtheactioninthefuture(Homans,1961).Obligationsaredifficulttoevaluateonatransaction-by-transactionbasis(Mastersonetal.,2000).Thecalculationofrewardsderivedfrominteractionswithothersconsistsofbothshort-andlong-termandexplicitandimplicitelements(LindandTyler,1988).Socialexchangerewardsdonothaveanexactpriceintermsofasinglequantitativemediumofexchange.TocomplicatetheSETanalysis,whenexplicitshort-termrewardsaredeemedinadequate,thiscanbeoffset,toadegree,bylong-termimplicitrewards.HOWHASTHISTHEORYBEENUSED?Toexplorethepossibilityoffutureresearch,wereflectonthecurrenttopicalissuesinSCMandposithowSETcanbebeneficialfortheseresearchareas.Thisincludestheclassicalchallengebetweenpurchasingresearchthatconsidersallactorstoberationalandlike-minded,reflectingalargelyWesternbiasregardingcontracting,andwhatcanbeconsideredbehav-iouralSCM(Schorschetal.,2017).Byextendingourlenstoconsiderthatsupplychainsare,infact,systemsinvolvingcomplexmotives,desires,wishesorinteractionsofandbetweenindividualpeople,weenableamoreholisticviewofSET.ExamplesinPurchasingandSupplyManagementSETprovidesausefullensforviewingglobalbuyer‒sellerrelationships,espousingaviewthatinterpersonallinksbetweenfirmboundaryspannersandtheconcomitantlinksbetweenfirmsaremutuallyaffected(Emerson,1976;Ouchi,1980).AseminalapplicationofSETcanbefoundinAndersonandNarus(1991)whonotethatbuyer‒sellernormsareafunctionofthe‘industrybandwidth’ofworkingrelationships,whichcanbeusedbymanagerstosegment,targetandpositioneachrelationshipaccordingtotheexpectedcustomervalue.AsecondseminalpieceisDwyeretal.(1987),whoestablishthenotionofexchangeasa‘criticaleventinthemarketplace’,whichleadstoantecedentconditionsandprocessesfordevelopingbuyer‒sellersocialexchange.Theydistinguishedbetween‘discretetransactions’(forexample,spotcontracts)and‘relationalexchange’,andestablisheda‘hypothesizedrealmofbuyer‒supplierrelationships’dependentontheseller’sandthebuyer’smotivationalinvest-mentintherelationship.AnotherimportantsetofinsightsfromCousinsetal.(2006)emphasizesthe‘social’natureofrelationalnormdevelopmentinbuyer‒sellerrelationships.Resultsfromtheirstudyof111manufacturingorganizationsintheUnitedKingdomsuggestthatinformalsocializationpro-cessesareimportantinthecreationofrelationalcapital,whichinturncanleadtoimprovedsupplierrelationshipoutcomes.Whatisinterestingisthattheseinformalsocializationconduitsplayamoreimportantroleinderivingbenefitsratherthanformal,socialinteractionsderivingthesebenefits.Manysuch‘informational’benefitsoriginatefromtheJapaneseautomotiveindustry.Forinstance,DyerandNobeoka(2000)provideevidencethatsupplierswereabletolearnmorequicklywhenparticipatinginToyota’sknowledgesharingnetwork.Toyota’snetworkreliedonmethodssuchas:(1)motivatingmemberstoparticipateandopenlysharevaluableknowledge(whilepreventingundesirablespilloverstocompetitors);(2)preventingCarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

295Socialexchangetheory277freeriders;and(3)reducingthecostsassociatedwithfindingandaccessingdifferenttypesofvaluableknowledge.Otherresearchexaminesthelongitudinalbenefitsofsafeguardingrelationshipstopreserveperformanceoutcomes,whereinresultsfromover300buyersandsupplierssuggestthatlowerlevelsofopportunismoccurthroughbilateralinvestmentsandinterpersonaltrust,whichleadstoenhancedperformanceoutcomesandfutureexpectations(JapandAnderson,2003).SimilarresearchexistsinapplyingSETtohelpexplaintherolethatpositivebuyer‒supplierrelationshipsplaysinexplainingbuyers’costandinnovationimprove-ment(Careyetal.,2011),aswellasimprovedcustomersatisfaction(ShiauandLuo,2012).Anotherstreamofresearch(forexample,Thomasetal.,2013)utilizesSETtoshowhownegotiationsstrategiesimpactupondifferentaspectsoftheongoingexchangerelationships,forexample,informationexchange.ExamplesinOperationsManagementInoperationsliterature,relationalnormsareseenasakeygoverningforceinmitigatingopportunismandexaminingopportunismthroughanorganization-levelanalyticallens(Tangpongetal.,2010).Thislineofresearchseemstoimplicitlyassumethathumanagentsoperatinginbuyer‒supplierrelationshipsaresubduedtotheexchangenorms,andthereforetheroleofhumanagentsinoperationalrelationshipsislargelyoverlookedandunderstudied.Forinstance,Tangpongetal.(2010)foundinaseriesofreplicatedexperimentsthatrelationalnormsandagentcooperativenessinteractwitheachotherinmitigatingopportunism,andthattheinteractionistperspectiveyieldedthehighestexplainedvarianceinopportunism.Opportunismcanevenresultinproductiondisruptions,causingsupplychaininefficienciesandsignificantnegativeeconomicimpactsduetodisruptionsinproductionenvironments(Morganetal.,2007).AstudybyPagellandHandfield(2000)foundthattherelationshipbetweenunionsandmanagementcansignificantlyimpactuponthecompany’soperationsstrategy.Plantmanag-ersinaunionenvironmentareoftenunwillingtoexploretheadoptionofinnovationsiftheybelievethatadoptionsuccessiscontingentonahumanresourcepolicythatisatoddswiththeirexistingworkforce'snature.Theseresultssuggestthatrelationalnormsmayproduceimprovedmanagement‒unionpartnershipsthatallowworkpracticesthatincreaseflexibilityandimproveresponsetimes.ExamplesinLogisticsManagementMostSETapplicationsinthelogisticscontextapplyaninterfirmperspectivethatiscloselyrelatedtotheresearchinsupplymanagementandindustrialmarketing.AnearlyexampleofthisisbyMooreandCunningham(1999),whofindthatpronouncedsocialexchangeisassociatedwithhighereffectivenessinlogisticsoutsourcing.Otherexampleswhichviewtheeffectivenessoflogisticsoutsourcingutilizesurveydatafromcompaniesthatoutsourcetoinvestigatehowrelationship-specificimprovementactivitiesrelatedtocostsandperformance(Wallenburg,2009)andjustbehaviour(Hoferetal.,2012)oflogisticsserviceprovidersposi-tivelyimpactuponthereciprocitybytheserviceprovider’scustomer.CarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

296278Handbookoftheoriesforpurchasing,supplychainandmanagementresearchExamplesinMarketingAseminalarticleintheanalysisofbuyer‒sellerrelationshipsstemmingfromSETwasbyMorganandHunt(1994),whoestablishedthecommitment‒trusttheoryofrelationshipmarketing.Theirmodel,usingdatafromover200automotivetyreretailers,isbasedontwokeymediatingvariables–commitmentandtrust–asenablersforcooperationinrelationalexchangeswithcustomersandsuppliers,aswellaswithinternalandotherexternalstakehold-ers.Theyidentifiedsuccessfulpartnershipcooperators:by(1)providingresources,opportunities,andbenefits,thataresuperiortotheofferingsofalternativepartners;(2)maintaininghighstandardsofcorporatevaluesandallyingoneselfwithexchangepart-nershavingsimilarvalues;(3)communicatingvaluableinformation,includingexpectations,marketintelligence,andevaluationsofthepartner’sperformance;and(4)avoidingmalevolentlytakingadvantageoftheirexchangepartners.(MorganandHunt,1994,p.34)AnotherkeyformativearticlewasbyAndersonandNarus(1991),whosuggestedthateachsupplier‘mustsystematicallydecidewhichcustomerfirmsareintheirfirm’sbestintereststohavecollaborativerelationshipswith,andthen,activelyworktokeepthemdelighted’,whileinothercases‘transactionalrelationshipsofferthesuppliertheopportunitytopruneelementsoftheproductofferingthatcustomersdeemsuperfluous’(AndersonandNarus1991,pp.112‒113).Thus,theyrecommended,dependingonthe‘industrybandwidth’ofworkingrelationships,tosegment,targetandpositioneachrelationshipaccordingtotheexpectedcustomervalue.ExamplesinManagementTheapplicationofSETinmanagement,andspecificallytherealmoforganizationalbehav-iour,typicallydiffersconsiderablyfromtheabovefieldsofapplication.First,theprimaryfocusisintrafirm,ontherelationshipsbetweentheemployerandemployees(oftenfocusedonorganizationalcitizenshipbehaviour,OCB)aswellasbetweensuperiorandsubordinateemployees(oftenfocusedonleadermemberexchange,LMX).Second,thefocusisnotoneffectiveandineffectiverelationalnorms,butmostlyonthreesequentialaspects(Cropanzanoetal.,2017):(1)anactivityofoneactortowardsanotheractor;which(2)directlyresultsinreciprocalresponses;and(3)whenrepeatedovertime,thesequenceofactivityandreciprocalresponsewillchangethenatureoftherelationship(forexample,turninglow-qualityrelation-shipsintohigh-qualityrelationships).OnestudythatappliesSETandrelatestoboththeOCBandtheLMXdomainsisbyAnandetal.(2018).Basedonsurveydataof60managersand289employees,theyshowthatworkarrangementsthatareindividualizedtothesingleemployee(thatis,idiosyncraticdeals)positivelyimpactupontheexchangerelationshipbetweenmanagersandemployees.Thisrelationship,inturn,positivelyaffectstheOCBoftheindividualemployees.Inaddition,theyshowthatthelinkbetweenidiosyncraticdealsandLMWisweakerwhenthevaluecongruenceamongemployeesishigh.CarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

297Socialexchangetheory279OUTLOOKONFUTURERESEARCHOPPORTUNITIESThereareseveralareaswhereSETprovidesapromisingbaseforfutureresearch.Forinstance,collaborationinavelocity-drivendigitalerarequiresadifferentsetofnormsformanagingindustrialbuyer‒sellerrelationships,requiringdifferentiatedapproachesformanagingeventtransparency,visibilitymaterialflowsandatime-definedcomponent(Chenetal.,2015;OliveiraandHandfield,2019).Theserelationalobjectivesmaydifferinanecosystemwheredigitallinkagescreategreatertransparencyoverinteractionsbetweeninternalandexternalpartiestoexchangeswiththebuyerandsellerfirms.Suchemergingexchangesystemsmayrequirenewformsofgovernanceoverbuyerandsellerrelationships,whichnowoftenconsistofmultiplestakeholdersthatareoftenlinkedinnetworkedmultilateralsupplychains.PriorindustrialmarketingresearchestablishedthatindividualsarenolongerthesoledecisionmakersinB2Brelationships,butthatmultiplestakeholdersoftenplayarole(Rinehartetal.,2004).Supplymanagementexecutivesthemselvesrecognizethattheycannotoperateinavoid,andhavebeguntoestablishcontractualperformanceobjectivesthatextendtototalcostmodelsspanningmultipleentitiesinsupplychainnetworks.Inthisrespect,itwillalsobefruitfultoinvestigatehowrulesofreciprocityarechangingovertime.Itcan,forexample,beexpectedthattimespansofreciprocitywillshrinkintimesofinstantgratificationandcustomerimpatience(Daughertyetal.,2019)andthatcompanieswillincreasetheirfocusonshort-termtangiblerewardsattheexpenseoflong-termintangiblerewards.Internaldynamicsthatrequirepurchasingtomediatetheinternalrelationshipswithstake-holdersandexternalrelationshipswithsellersprovideanotherimportantsetofresearchthemesforexploration.Thismayrelatetoaspectssuchasinternalfragmentationofcompanies,whererelationalnormsbetweencompaniesdifferdependingonwhichspecificdepartmentsinteract(thatis,purchasingmayinteractcompletelydifferentlywiththesalesdepartmentofthesup-pliercomparedtohowtheoperationsdepartmentinteractswiththesupplier’sresearchanddevelopmentdepartment(BrattströmandFaems,2020).Supplymanagementalignmentcancreatesynergisticeffectsderivedthroughstronginternallinesofcommunicationcombinedwithexternalsupplyrelationshipsbasedondefinedmetricsandprocesses(Handfieldetal.,2015,p.12).Thisalignmentconceptpresentsanintriguingapproachforwhatanexecutiveweinterviewedcalleda‘virtualintegratedcompany’where‘anorganizationiswillingtomanagethestandards,discipline,execution,fixedcapitalinvest-ments,andsoonofthe“make”decision,versusthesourcing,negotiation,contracting,andsuppliersignalsassociatedwiththe“buy”decision’.Astheprimaryboundaryspanninginter-facebetweentheinternalandexternaldomainsoftheenterprise,purchasinghasamandatetoensurealignmentinperformanceoutcomesbetweenthestakeholder’sexpectationsandthesupplier’sresultingperformance,andtheelementsofSETprovideanimportanttheoreticalbasisformappingandunderstandingtherelativeformsofvalueamongmultipleengagedparties.Finally,contractingbehavioursinEasternculturesareoftennotwellexplainedinthecontextofWesternbuyer–sellerrelationships.SETprovidesausefullensforviewingglobalbuyer–sellerrelationships,espousingaviewthatinterpersonallinksbetweenfirmboundaryspannersandtheconcomitantlinksbetweenfirmsaremutuallyaffected.Whenoneoverlaystheculturalartifactsthatexist,forexample,intheChinesecultureandtheroleofguanxi,comparativelylittleresearchspecifieshowsuchrelationshipsunfold.RecentresearchcallsforadeepersetofexplanationsthattranslatesthetypicalWesternpragmaticbusinessrela-CarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

298280Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtionshipsintodifferentculturalcontextsandprovidessubstantiveguidanceforhowtobuildeffectivebusinessrelationships.SETprovidesacompellingtheoreticalfoundation,thatcanservetoexploreanumberofimportantresearchareasthatlieahead.SomeofthemanyareaswhereSETcanbeappliedincludealignedrelationalnormsthatcreategreaterproductinnovationandtechnologydevel-opment(Cousinsetal.,2006),knowledgesharingandnewprocesscapabilitydevelopment(DyerandNobeoka,2000),improvedmulti-tiersupplierintegration(ChoiandYunsook,2002),riskmitigation(Ellisetal.,2011),supplierperformanceimprovementandcapabilityaugmentation(Terpindetal.,2008),supplierfinancialdisruptionavoidance(Wagneretal.,2009)andsustainablesupplychainimprovements(Wielandetal.,2016).BecauseSETencompassessuchabroadarrayofconceptualmodels,itprovidesaveryflexibletheoreticalfoundationformanyresearchinquiriesinSCM.REFERENCESAnand,S.,Hu,J.,Vidyarthi,P.,andLiden,R.C.(2018).Leader‒memberexchangeasalinkingpinintheidiosyncraticdeals‒performancerelationshipinworkgroups.LeadershipQuarterly,29(6),698–708.Anderson,J.,andNarus,J.(1991).Partneringasafocusedmarketstrategy.CaliforniaManagementReview,33(1),95–113.Blau,P.M.(1964).ExchangeandPowerinSocialLife.NewYork:Wiley.Brattström,A.,andFaems,D.(2020).Interorganizationalrelationshipsaspoliticalbattlefields:howfragmentationwithinorganizationsshapesrelationaldynamicsbetweenorganizations.AcademyofManagementJournal,63(5),1591–1620.Carey,S.,Lawson,B.,andKrause,D.R.(2011).Socialcapitalconfiguration,legalbondsandperfor-manceinbuyer–supplierrelationships.JournalofOperationsManagement,29(4),277–288.Chen,D.,Preston,D.andSwink,M.(2015).Howtheuseofbigdataanalyticsaffectsvaluecreationinsupplychainmanagement.JournalofManagementInformationSystems,32(4),4–39.Choi,T.Y.,andYunsook,H.(2002).Unveilingthestructureofsupplynetworks:casestudiesinHonda,Acura,andDaimlerChrysler.JournalofOperationsManagement,20(5),469–493.Cousins,P.,Handfield,R.,Lawson,B.,andPeterson,K.(2006).Creatingsupplychainrelationalcapital:theimpactofformalandinformalsocializationprocesses.JournalofOperationsManagement,24(6),851–864.Cropanzano,R.,Anthony,E.L.,Daniels,S.R.,andHall,A.V.(2017).Socialexchangetheory:acriticalreviewwiththeoreticalremedies.AcademyofManagementAnnals,11(1),479–516.Daugherty,P.J.,Bolumole,Y.,andGrawe,S.J.(2019).Thenewageofcustomerimpatience.InternationalJournalofPhysicalDistributionandLogisticsManagement,49(1),4–32.Dwyer,F.R.,Schurr,P.H.,andOh,S.(1987).Developingbuyer–sellerrelationships.JournalofMarketing,51(2),11–27.Dyer,J.,andNobeoka,K.(2000).Creatingandmanagingahighperformanceknowledgenetwork:theToyotacase.StrategicManagementJournal,21(3),345–367.Ellis,S.C.,Shockley,J.,andHenrey,R.M.(2011).Makingsenseofsupplydisruptionriskresearch:aconceptualframeworkgroundedinenactmenttheory.JournalofSupplyChainManagement,47(2),65–96.Emerson,R.M.(1976).Socialexchangetheory.AnnualReviewofSociology,2(1),335–362.Gefen,D.,andRidings,C.M.(2002).Implementationteamresponsivenessanduserevaluationofcus-tomerrelationshipmanagement:aquasi-experimentaldesignstudyofsocialexchangetheory.JournalofManagementInformationSystems,19(1),47–69.Gouldner,A.W.(1960).Thenormofreciprocity:apreliminarystatement.AmericanSociologicalReview,25(2),161–178.CarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

299Socialexchangetheory281Griffith,D.A.,Harvey,M.G.,andLusch,R.F.(2006).Socialexchangeinsupplychainrelationships:theresultingbenefitsofproceduralanddistributivejustice.JournalofOperationsManagement,24(2),85–98.Handfield,R.,Cousins,P.,Lawson,B.,andPetersen,K.,(2015).Howcansupplymanagementreallyimproveperformance?Aknowledge-basedmodelofalignmentcapabilities.JournalofSupplyChainManagement,51(3),3–17.Heide,J.B.,andJohn,G.(1992).Donormsmatterinmarketingrelationships?JournalofMarketing,56(2),32–44.Hofer,A.R.,Knemeyer,A.M.,andMurphy,P.R.(2012).Therolesofproceduralanddistributivejusticeinlogisticsoutsourcingrelationships.JournalofBusinessLogistics,33(3),196–209.Homans,G.C.(1950).TheHumanGroup.NewYork:HarcourtBrace.Homans,G.C.(1958).Socialbehaviorasexchange.AmericanJournalofSociology,63(6),597–606.Homans,G.C.(1961).SocialBehavior:ItsElementaryForms.NewYork:HarcourtBrace.Homans,G.C.(1984).ComingtoMySenses:TheAutobiographyofaSociologist.NewBrunswick,NJ:TransactionPublishers.Jap,S.,andAnderson,E.(2003).Safeguardinginterorganizationalperformanceandcontinuityunderexpostopportunism.ManagementScience,49(12),1684–1701.Lambe,C.J.,Wittmann,C.M.,andSpekman,R.E.(2001).Socialexchangetheoryandresearchonbusiness-to-businessrelationalexchange.JournalofBusiness-to-BusinessMarketing,8(3),1–36.Lind,E.A.,andTyler,T.R.(1988).TheSocialPsychologyofProceduralJustice.Basel:SpringerScienceandBusinessMedia.Macneil,I.R.(1980).TheNewSocialContract.NewHaven,CT:YaleUniversityPress.Masterson,S.S.,Lewis,K.,Goldman,B.M.,andTaylor,M.S.(2000).Integratingjusticeandsocialexchange:thedifferingeffectsoffairproceduresandtreatmentonworkrelationships.AcademyofManagementJournal,43(4),738–748.Mitchell,M.S.,Cropanzano,R.S.,andQuisenberry,D.M.(2012).Socialexchangetheory,exchangeresources,andinterpersonalrelationships:amodestresolutionoftheoreticaldifficulties.InK.TörnblomandA.Kazemi(eds),HandbookofSocialResourceTheory(pp.99–118).NewYork:Springer.Moore,K.R.andCunningham,W.A.(1999),Socialexchangebehaviorinlogisticsrelationships:ashipperperspective.InternationalJournalofPhysicalDistributionandLogisticsManagement,29(2),103–121.Morgan,R.,andHunt,S.,(1994)Thecommitment–trusttheoryofrelationshipmarketing.JournalofMarketing,58(3),20–38.Morgan,N.A.,Kaleka,A.,andGooner,R.A.(2007).Focalsupplieropportunisminsuper-marketretailercategorymanagement.JournalofOperationsManagement,25(2),512–527.Morris,M.H.,Pitt,L.F.,andHoneycutt,E.D.(2001).Business-to-BusinessMarketing:AStrategicApproach.ThousandOaks,CA:SAGE.Noordewier,T.G.,John,G.,andNevin,J.R.(1990).Performanceoutcomesofpurchasingarrangementsinindustrialbuyer‒vendorrelationships.JournalofMarketing,54(4),80–93.Oliveira,M.,andHandfield,R.(2019).Analyticalfoundationsfordevelopmentofreal-timesupplychaincapabilities.InternationalJournalofProductionResearch,57(5),1571–1589.Ouchi,W.(1980).Markets,bureaucraciesandclans.AdministrativeScienceQuarterly,25(1),129–141.Pagell,M.,andHandfield,R.(2000).Theimpactofunionsonoperationsstrategy.ProductionandOperationsManagement,9(2),141–157.Redmond,M.V.(2015).Socialexchangetheory.Dissertation,IowaStateUniversity,Ames.Rinehart,L.M.,Eckert,J.A.,Handfield,R.B.,PageJr,T.J.,andAtkin,T.(2004).Anassessmentofsupplier‒customerrelationships.JournalofBusinessLogistics,25(1),25–62.Schoenherr,T.,Narayanan,S.,andNarasimhan,R.(2015).Trustformationinoutsourcingrelation-ships:asocialexchangetheoreticperspective.InternationalJournalofProductionEconomics,169,401–412.Schorsch,T.,Wallenburg,C.M.,andWieland,A.(2017).ThehumanfactorinSCM.InternationalJournalofPhysicalDistributionandLogisticsManagement,47(4),238–262.Shiau,W.L.,andLuo,M.M.(2012).Factorsaffectingonlinegroupbuyingintentionandsatisfaction:asocialexchangetheoryperspective.ComputersinHumanBehavior,28(6),2431–2444.CarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

300282Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSimon,H.A.(2000).Boundedrationalityinsocialscience:todayandtomorrow.MindandSociety,1(1),25–39.Spina,G.,Caniato,F.,Luzzini,D.,andRonchi,S.(2016).Assessingtheuseofexternalgrandtheoriesinpurchasingandsupplymanagementresearch.JournalofPurchasingandSupplyManagement,22(1),18–30.Steinbach,T.,Wallenburg,C.M.andSelviaridis,K.(2018).Me,myselfandI:non-collaborativecus-tomerbehaviorinserviceoutsourcing–thekeyroleofoutcomeorientationandoutcomeattributabil-ity.InternationalJournalofOperationsandProductionManagement,38(7),1519–1539.Tangpong,C.,Hug,K.,andRo,Y.,(2010).Theinteractioneffectofrelationalnormsandagentcooper-ativenessonopportunisminbuyer–supplierrelationships.JournalofOperationsManagement,28(5),398–414.Terpind,R.,Krause,D.,Handfield,R.,andTyler,B.(2008).Buyer–supplierrelationships:derivedvalueovertwodecades.JournalofSupplyChainManagement,44(2),22–55.Thibaut,J.W.,andKelley,H.H.(1959).TheSocialPsychologyofGroups.NewYork:Wiley.Thomas,S.P.,Thomas,R.W.,Manrodt,K.B.,andRutner,S.M.(2013).Anexperimentaltestofnego-tiationstrategyeffectsonknowledgesharingintentionsinbuyer–supplierrelationships.JournalofSupplyChainManagement,49(2),96–113.Wagner,S.,Bode,C.,Kozmol,P.(2009).Supplierdefaultdependencies:empiricalevidencefromtheautomotiveindustry.EuropeanJournalofOperationalResearch,198,150–161.Wallenburg,C.M.(2009).Innovationinlogisticsoutsourcingrelationships:proactiveimprovementbylogisticsserviceprovidersasadriverofcustomerloyalty.JournalofSupplyChainManagement,45(2),75–93.Webster,F.,andWind,J.(1980).Industrialmarketing:thesleepinggiant.JournalofMarketing,44(4),6–7.Wieland,A.,Handfield,R.,andDurachC.(2016).MappingthelandscapeforfutureresearchtopicsinSCM.JournalofBusinessLogistics,37(3),205–212.Wilson,D.,andCunningham,W.(1984).FromtheEditor.JournalofMarketing,48(4),5–6SUGGESTEDFURTHERREADINGForanoverview:Cropanzano,R.,andMitchell,M.S.(2005).Socialexchangetheory:aninterdisciplinaryreview.JournalofManagement,31(6),874–900.Lambe,C.J.,Wittmann,C.M.,andSpekman,R.E.(2001).Socialexchangetheoryandresearchonbusiness-to-businessrelationalexchange.JournalofBusiness-to-BusinessMarketing,8(3),1–36.ForanexcellentreviewofthecurrentstateofSETapplicationinorganizationalbehaviour:Cropanzano,R.,Anthony,E.L.,Daniels,S.R.,andHall,A.V.(2017).Socialexchangetheory:acriticalreviewwiththeoreticalremedies.AcademyofManagementAnnals,11(1),479–516.CarlMarcusWallenburgandRobertHandfield-9781839104503DownloadedfromPubFactoryat05/28/202209:10:48AMviaColumbiaUniversityLibrary

30118.TherelationalviewFeigao(Kelly)Huang,EugeniaRosca,LydiaBalsandWendyL.TateINTRODUCTIONThedynamicsofcompetitionhavebeenchanging;competitionistakingplacemorebetweenpairsornetworksofpartneringfirmsratherthanbetweensinglefirms(Slone,2004).Organizationsareincreasinglyrecognizingtheneedtostopsolelyfocusingontheinternalresourcesandlookoutsideforcriticalexternalresourcesfromthenetworks,asevidencedbytherapidproliferationofstrategicinterfirmalliances(Powelletal.,1996).Therelationalview(RV),introducedintheseminalpaperbyDyerandSingh(1998),wasadvancedagainstthisbackgroundtoprovideinsightsforcompaniestogainbenefitsfrominterfirmrelationships.Inthepasttwodecades,theRVlenshasbeenusedtoexplainwhyandhowfirmsformstrategicalliances(Kaleetal.,2002;Kaleetal.,2000),andinthecontextofsupplychainmanagement(SCM)whyandhowsupplychainpartnerscollaborate(Chenetal.,2013;DyerandNobeoka,2000)toachievevaluecreationandinterorganizationalcompetitiveadvantage.Varioustheorieswereadvancedtoexplainwhyfirmsperformdifferently.Oneofthetheo-riesistheresource-basedview(RBV).AccordingtotheRBV,companiespossessaportfolioofinternalresourcesandcapabilities,whichcanleadtoalong-termcompetitiveadvantageiftheyarerare,valuableandhardtoimitateorsubstitute(Barney,1991).Hence,thelevelofanalysisintheRBVisasinglefirm.TheRVcomplementstheRBVandproposesthatafirm’scriticalresourcesandcapabilitiesmayextendbeyondafirm’sboundariesandmaybeembed-dedininterfirmrelations.ThecentralargumentoftheRVisthat‘idiosyncraticinter-firmlinkagesmaybeasourceofrelationalrentsandcompetitiveadvantage’(DyerandSingh,1998,p.661).Inessence,apairornetworkoffirmscandevelopinterfirmrelationshipsthatcanproducerelationalrents,whichfirmsneedtocollectivelygenerateratherthanworkingindividually,andcanleadtointerorganizationalcompetitiveadvantage(EsperandCrook,2014).Therefore,companiescanbuildcompetitiveadvantagenotonlyfromtheinternalresourcesownedbyafirmitselfbutalsofromtheexternalresourcesembeddedintherela-tionalnetworks(Lavie,2006).ThelevelofanalysisintheRVisafirmdyadornetwork,andthishasmadetheRVparticularlyrelevantforempiricalresearchinsupplychainmanagement.KEYVARIABLESANDDEFINITIONSThefocusoftheRVisoncommonbenefitsthatcollaborativepartnerscannotgenerateinde-pendently.TheoutcomevariableintheRVisrelationalrent,whichrefersto‘asupernormalprofitjointlygeneratedinanexchangerelationshipthatcannotbegeneratedbyeitherfirminisolationandcanonlybecreatedthroughthejointidiosyncraticcontributionsofthespecificalliancepartners’(DyerandSingh,1998,p.662).Partneringfirmscangeneraterelational283Feigao(Kelly)Huang,EugeniaRosca,LydiaBals,andWendyL.Tate-9781839104503DownloadedfromPubFactoryat05/28/202209:10:51AMviaColumbiaUniversityLibrary

302284Handbookoftheoriesforpurchasing,supplychainandmanagementresearchrentsthroughthefollowingfoursources:(1)relation-specificassets;(2)knowledge-sharingroutines;(3)complementaryresourcesandcapabilities;and(4)effectivegovernance(DyerandSingh,1998).Thesefourmechanismsrequirejointcontributionoftheexchangepartnersandgenerateinterorganizationalresourcesandcapabilitieswhichareverydifficultforthecompetitorstoimitateorreplicateduetotheiridiosyncrasy(DyerandSingh,1998).Thefourpotentialsourcesofrelationalrentsaredescribedindetailinthefollowingsubsections.Relation-SpecificAssetsDyerandSingh(1998)proposedthatinvestmentinrelation-specificassetsisadeterminantofrelationalrent.Relation-specificassetsrefertothoseassetsthataretailoredtowardtheneedsofaspecificrelationship(DyerandSingh,1998).Williamson(1985)differentiatedthreetypesofassetspecificity.Forexample,thegeographicalproximityofplantsofthepartneringfirms–whatWilliamson(1985)calledsitespecificity–canleadtogreaterproductivitybecauseitreducesexchangetimeandimprovescommunicationqualityandproblemsolving.Inaddition,thecustomizedcapitalinvestmentsforparticularpartnerssuchasmachineryandtools–whatWilliamson(1985)calledphysicalassetspecificity–canleadtoproductdifferentiationandimprovedquality.Whatismore,partner-specificknow-howandtalentssuchasdedicatedper-sonneltospecificpartners–whatWilliamson(1985)calledhumanassetspecificity–canleadtomoreefficientcommunicationandincreasespeedtomarket.Partner-tailoredassetscanhavebetterfitwiththeassetsownedbythepartner,andthefitcancreatemoresynergyeffectsforbothparties(Weberetal.,2016).Andthespecializedinvestmentmakesithardforoutsiderstocomprehendhowassetspecificitycontributestosuperiorperformance;hence,theoutsidersarelesslikelytoimitateorreplicatethecombinationofrelation-specificassetstoachievesimilarperformance(DyerandSingh,1998).Asaresult,investmentinrelation-specificassetshasthepotentialtocreatelong-terminterorganizationalcompetitiveadvantage.DyerandSingh(1998)pointedoutthattherearetwokeysubprocessesthatinfluenceinterconnectedfirms’gainsfromrelation-specificassets.Thefirstisthedurationofsafeguardtoprotectagainstopportunism.Typically,relation-specificassetsinvolveupfrontcosts,andsomeassetsaremoredurableandmorecostly,suchasdedicatedplants.Partnersneedtohavesafeguardstobecommittedtocostlyinvestment(Williamson,1985).So,along-termsafeguardagainstopportunismispositivelyassociatedwithpartner-specificinvestment.Thesecondisthevolumeofexchangebetweeninterfirmpartners.Inlinewiththelogicofscaleeconomythatabiggervolumeincreasesproductivity,themoretransactionswiththeexchangepartners,themoreincentivizedthepartnersaretoinvestinspecializedassets.Knowledge-SharingRoutinesKnowledge-sharingroutineisanotherdeterminantofrelationalrents.Itisdefinedas‘aregularpatternofinterfirminteractionsthatpermitsthetransfer,recombination,orcreationofspe-cializedknowledge’(DyerandSingh,1998,p.665).Thesemechanismsarepurposefullydesignedtoaccumulate,integrateandexchangerelevantinterorganizationalknowledge.Theycanfacilitateinterorganizationallearning,whichiscriticaltocompetitivesuccess(Grant,1996;Powelletal.,1996).Forexample,DyerandNobeoka(2000)examinedhowToyotaanditssupplierslearnfasterthanthecompetitors.TheyfoundthatanimportantfactorisToyota’sOperationsManagementConsultingDivision,whichisaspecialunitofknowledgeFeigao(Kelly)Huang,EugeniaRosca,LydiaBals,andWendyL.Tate-9781839104503DownloadedfromPubFactoryat05/28/202209:10:51AMviaColumbiaUniversityLibrary

303Therelationalview285transferconsultantsdesignedtocentrallycoordinateandsharevaluableproductionknowledgethroughoutToyota’ssuppliernetwork.DyerandSingh(1998)namedtwosubprocessesofhowpartnerscreateknowledge-sharingroutines.Thefirstispartner-specificabsorptivecapacity,whichrepresentsafirm’sabilityofidentifyingandassimilatingvaluableinformationfromaparticularpartner.Severalfactorsinfluencethisabsorptivecapacity,forexample,theextentofoverlappingknowledgebasesbetweenthepartners,theabilityofidentifyingthe‘what’and‘where’ofcriticalinforma-tion,andthecreationofinterorganizationalprocessesthatfacilitateinformationsharingandsocio-technicalinteractionsacrossfirmboundaries.Thesecondisthealignmentofincentivestoencouragetransparencyanddiscouragefree-riding(Eisenhardt,1989).Partnersneedtodedicaterequiredresourcestoensureknowledgetransfer,whichcanbeabigcommitmentinthecaseofvaluableproductionknowledge.So,formaland/orinformalincentivesshouldbeputintoplacetogoverninformationsharingandcreateatransparentenvironment.Also,free-ridingisdetrimentaltothecollectivegoodofthisparticularrelationship.Free-ridersenjoythebenefitsofknowledgeacquisitionfromthepartnership,butrefusetosharetheirknowledge,whichhurtsthegenerationofrelationalrents(DyerandNobeoka,2000).ComplementaryResourcesandCapabilitiesDyerandSingh(1998)proposedcomplementaryresourcesandcapabilitiesasadeterminantofrelationalrent,andtheydefinedcomplementaryresourceendowmentsas‘distinctiveresourcesofalliancepartnersthatcollectivelygenerategreaterrentsthanthesumofthoseobtainedfromtheindividualendowmentsofeachpartner’(p.666).Theyarguedthatthefirmleveragesthepartner’sresourcesandcapabilitiesinconjunctionwiththecomplementaryresourcesofitsowntogeneratesupernormalprofitsbyaccessingscarceresourcesthatwouldotherwisebedifficulttoobtaininasecondarymarket.TheexampleofCoca-ColaandNestléworkingtogethertodistributehotcanneddrinksthroughvendingmachinesisacaseinpoint(DyerandSingh,1998).NestlébroughtcompetenceinproductdevelopmentandCoca-Colabroughtastrongdistributionnetworktothiscollaboration,andthecombinationofcomple-mentarycapabilitiescreatessynergyeffectsandcollaborativeadvantageforbothparties.DyerandSingh(1998)talkedabouttwotypesofcomplementarities.Thefirstisstrategicresourcecomplementarity.Itshouldbenotedthatnotalltheresourcesofapotentialpartnerarecomplementary.Firmsneedtothinkaboutthestrategiccomplementarityofpotentialresources.Animportantfactoristheabilitytorecognizethevalueinpotentialresources.Givenimperfectinformation,itisverychallengingforfirmstoplaceavalueonpotentialresourcesandhaveacorrectjudgementonthepotentialstrategicresourcecomplementarityofthepartnership.Thesecondisorganizationalcomplementarity,whichreferstothecom-patibilityintheorganizationalsystems,processesandculturesofexchangepartners.Thesemechanismsfacilitatecoordinationinthepartnershipandarenecessaryforthepartnerstorealizethebenefitscomingfromstrategicresourcecomplementarity.EffectiveGovernanceFinally,DyerandSingh(1998)proposedeffectivegovernanceasadeterminantofrelationalrent,arguingthatgoodgovernancelowerstransactioncostsandincentivizesexchangepartnerstoworktowardvaluecreationinitiatives.ResearchintransactioncosteconomicsFeigao(Kelly)Huang,EugeniaRosca,LydiaBals,andWendyL.Tate-9781839104503DownloadedfromPubFactoryat05/28/202209:10:51AMviaColumbiaUniversityLibrary

304286Handbookoftheoriesforpurchasing,supplychainandmanagementresearch(TCE)alsosuggeststhatfirmsapplygovernanceinadiscriminatingway,namely,governingdifferenttypesoftransactions(withdifferentattributes)withdifferentmodesofgovernancetominimizetransactioncostsandimproveefficiency(Williamson,1991).Inthecontextofcollaborativerelationships,DyerandSingh(1998)suggestedthatitismoreeffectivetorelyonself-enforcinggovernancemechanismsthantousethird-partyenforcementmechanismssuchaslegalcontracts.Forexample,self-enforcementremovescontractingcostsandreducesmonitoringcosts.Besides,unlikecontractswhicharefixedandhavelimitedspaceinoutliningallpossiblecontingencies,self-enforcingagreementsprovidemoreflexibilityforexchangepartnerstoadaptandrespondtounforeseenchanges.Withinself-enforcinggovernancemechanisms,informalsafeguardingsuchastrustorembeddedness(Uzzi,1997)ispreferredoverformalsafeguardingsuchaseconomichostages(Williamson,1983)becauseofitseffectivenessofcurbingopportunisminthepartnershipfeaturingrelation-specificassetsandoffacilitatingcomplexexchanges(DyerandChu,2003;Uzzi,1997).Inadditiontolowercostsincurred,informalsafeguardsaremoredifficulttobeimitatedbycompetitorsthanformalsafeguards,whichisconducivetorelationalrentgeneration.Table18.1andFigure18.1helptoclarifyanddefinethevariablesandrelationshipsofRV.Figure18.1OverviewofRVelementsDOMAINWHERETHETHEORYAPPLIESThecoreargumentoftheRVisthatafirm’scriticalresourcesandcapabilitiesmayextendbeyondafirm’sboundariesandmaybeembeddedininterfirmlinkages(DyerandSingh,1998;Lavie,2006).So,thedomainoftheRVrangesfromdyadicrelationshipstonetworklinkages(Dyer,1997).Theseinterfirmresourcesandcapabilitiescancreatejointcompeti-tiveadvantageandcommonbenefitsforcollaborativefirms.TheRVprovidesfourmech-anismsthatfirmscanusetocreateexclusive,partner-specificrents,namely:investinginrelation-specificassets;settingupknowledge-sharingroutines;combiningcomplementaryFeigao(Kelly)Huang,EugeniaRosca,LydiaBals,andWendyL.Tate-9781839104503DownloadedfromPubFactoryat05/28/202209:10:51AMviaColumbiaUniversityLibrary

305Therelationalview287SupportingreferencesDyer,1997;DyerandNobeoka,2000;DyerandSingh,1998Dyer,1997;DyerandNobeoka,2000;DyerandSingh,1998DyerandSingh,1998;Mesquitaetal.,2008;Weberetal.,2016Chenetal.,2013;Dyer,1996;DyerandSingh,1998;Jap,1999;Mesquitaetal.,2008;Weberetal.,2016;Williamson,1985Chenetal.,2013;DyerandHatch,2006;DyerandNobeoka,2000;DyerandSingh,1998;Grant,1996;Kaleetal.,2002;Mesquitaetal.,2008;Weberetal.,2016DyerandSingh,1998;Jap,1999;Weberetal.,2016Chenetal.,2013;Dyer,1996;DyerandChu,2003;DyerandSingh,1998;Kaleetal.,2000;Mesquitaetal.,2008;PoppoandZenger,2002;Weberetal.,2016;Williamson,1985ExplanationRelationshipsbetweenoramongorganizations.Firmdyadornetwork.Surplusprofitsthatcanonlybegeneratedthroughjointrelation-specificcontributionsfrombothpartners.Assetspecificityfacilitatescollaboration.Themorepartneringfirmsinvestinrelationship-specificassets,thegreaterthepotentialwillbeforrelationalrents.Thetwosubprocessesthataffecttheinvestmentinspecificassetsarethedurationofsafeguardstoprotectagainstopportunism,andthevolumeofinterfirmexchange.Interorganizationallearningiscritical.Knowledgesharingroutinesareinstitutionalizedprocessesthatfacilitateinterfirmknowledgeexchanges.Themorepartneringfirmsengageinknowledgesharingandexchange,thegreaterthepotentialwillbeforrelationalrents.Thetwosubprocessesthatcanimproveknowledgesharingarepartner-specificabsorptivecapacity,andincentivestoencouragetransparencyanddiscouragefreeriding.Complementaryresourcesrefertodistinctiveresourcesownedbyindividualfirmswhichcombinedcangenerategreaterrentsthanthesumofindividualgains.Themorepartneringfirmscombinecomplementaryresourcesandcapabilitiesinauniqueway,thegreaterthepotentialwillbeforrelationalrents.Thetwosubprocessesthatcanimproveresourcecombinationaretheabilitytoidentifyandevaluatecomplementarystrategicresources,andtheroleoforganizationalcomplementarity.Governanceaffectstransactioncostsandpartners’willingnesstocollaborate.Themorepartneringfirmsuseeffectivegovernance,thegreaterthepotentialwillbeforrelationalrents.Thetwosubprocessesthatcaninfluencegovernancearetheabilitytoemployself-enforcementgovernancemechanisms,andtheabilitytoemployinformalself-enforcementsafeguards.DefinitionsofRVvariablesTable18.1ElementUnitofanalysisLevelofanalysisKeyvariables/definitionsRelationalrentRelation-specificassetsKnowledgesharingroutinesComplementaryresourcesandcapabilitiesEffectivegovernanceFeigao(Kelly)Huang,EugeniaRosca,LydiaBals,andWendyL.Tate-9781839104503DownloadedfromPubFactoryat05/28/202209:10:51AMviaColumbiaUniversityLibrary

306288Handbookoftheoriesforpurchasing,supplychainandmanagementresearchresourcesandcapabilities;andhavingeffectivegovernanceinplace(DyerandSingh,1998;Weberetal.,2016).TheprimarydomainoftheRVincludesalliancesandsupplychains.Itprovidesguidanceonmanagingpartnercooperation,includinginterorganizationalprocessesandroutinesandgovernancestructures.RELATIONSHIPSBETWEENTHEVARIABLESFirst,relation-specificassetscanpositivelyimpacttherelationshipperformance.Comparingautomaker‒supplierrelationshipsintheUnitedStates(US)andJapan,Dyer(1997)foundthattheJapanesetransactionrelationshipshaveahigherlevelofassetspecificity.Forexample,aNissanseatsupplierbuiltaplantclosetoaNissanassemblyplant(sitespecificity)andthetwopartiesjointlybuiltaconveyor(physicalassetspecificity)tocarrytheseatstoenhanceperformance.Second,settingupknowledge-sharingroutineshasapositiveimpactonrela-tionalrents.Theimportanceofknowledgesharingandorganizationallearninghasbeenestab-lishedintheliterature(Grant,1996;Powelletal.,1996).InastudyofsupplierssellingtobothToyotaandUSautomakers,DyerandHatch(2006)foundthatevenusingthesamesuppliernetworkfirmscanstillachieveacompetitiveadvantageandenjoyqualityandproductivitybenefitsiftheyhavemoreknowledgetransferswiththesuppliers.Third,complementaryresourcesandcapabilitiesarepositivelyrelatedtothegenerationofrelationalrents.Amajorreasonforstrategicalliancesisthatfirmswanttoaccessexternalresourcesinconjunctionwithinternalresourcestocreatesynergyeffects(Gulati,1995).AsthepreviousexampleofCoca-ColaandNestléshows,itisdifficultforasinglefirm’sresourcestogeneratethebenefitsthatcanoutweighthecommonbenefitscomingfromthecollaboration(DyerandSingh,1998).Finally,effectivegovernancecanpositivelyinfluencerelationshipperformance.ThecentralpropositionofTCEisthatthemodeofgovernanceneedstomatchthetransactionattributessoastominimizecoordinationcosts(Williamson,1991).Usinglongitudinaldataofthreeindustriesovera20-yearperiod,GulatiandSingh(1998)foundthatfirmsusedifferenttypesofalliancetypes(governancestructures)toaddresscoordinationcostsandappropriationconcernsintherelationship.Intheoriginalframework(DyerandSingh,1998),thefourkeyvariablesaredirectlyrelatedtorelationalrents,althoughtheauthorstalkedabouttheinteractionsamongthefourdeter-minantsintheargument.Forinstance,witheffectivegovernanceinplace,exchangepartnersaremorelikelytoinvestinrelation-specificassets,employknowledgesharingroutinesandcombinecomplementaryresourcesandcapabilities.However,theinteractionsbetweenthosefourvariableswerenotmadeexplicitatthattime.Yet,scholarsstartedtomakeeffortsontheoryrefinement,andresearchshowsthatthefourdeterminantsareinterconnectedwhilegeneratingrelationalrents.Forexample,Mesquitaetal.(2008)indicatedapositiverelationshipbetweeninvestmentinpartner-specificassetsandrelationalgovernancemechanisms.AndChenetal.(2013)suggestedthatspecializedassetscreatevaluepartlythroughknowledgeexchange.Weberetal.(2016)tookastepfurtherandexaminedtheinterrelationsamongallthefourdeterminants.Specifically,inthecontextofcorporateventurecapital,theauthorsproposedthatinadditiontothedirecteffectonrelationalrents,complementaryresourcesandcapabilitiesalsoindirectlyinfluencerelationshipperfor-manceviatheotherthreedeterminants,namely,relation-specificassets,knowledgesharingroutinesandinformalself-enforcinggovernancemechanisms(Weberetal.,2016).Feigao(Kelly)Huang,EugeniaRosca,LydiaBals,andWendyL.Tate-9781839104503DownloadedfromPubFactoryat05/28/202209:10:51AMviaColumbiaUniversityLibrary

307Therelationalview289THEORETICALPREDICTIONS(FACTUALCLAIMS)Theoriginalframework(DyerandSingh,1998)isadirectmodeldepictingthefourdeter-minantsofrelationalrents;namely,themoreexchangepartnersinvestinrelation-specificassets,engageinknowledgesharingandexchange,combinecomplementaryresourcesandcapabilitiesinauniqueway,anduseeffectivegovernance,thegreaterthepotentialwillbeforrelationalrents.Twentyyearsafterthetheorywasadvanced,Dyeretal.(2018)extendedtheRVandofferedadynamicperspective(seeFigure18.2).Theauthorsarguedthattheoriginalmodelwasastaticmodelanddidnotconsidertheunfoldingofcooperationovertime(Dyeretal.,2018).Forexample,inlinewiththeoriginalpredictions,researchersfindthatahighleveloftrustleadstolowertransactioncostsandsuperiorrelationshipperformance(DyerandChu,2003).However,somestudiesshowanegativeassociationbetweentrustandrelationshipper-formance(Villenaetal.,2011).Dyeretal.(2018)arguedthatanevolutionarylenscanexplaintheinconsistentresults,sayingthattrustincreasesovertimeinpartnership,andmayleadtocomplacencyandhencerelationshipdeterioration.Figure18.2AdynamicRVmodelSimilarlytoWeberetal.(2016),Dyeretal.(2018)arguedthatcomplementaryresourcesareapreconditionfortheotherthreedeterminantsbecausecomplementaritymotivatesfirmstoseekpartnership.Asseenfromthedynamicmodel,complementaryresourcescangeneraterelationalrentsontheirown.Asmentionedearlier,Coca-ColaandNestlébroughtdistinctiveresourcestothecooperationofmarketinghotdrinks.Thetwopartneringfirmsmaybeabletocreatevaluewithoutinvestinginrelation-specificassetsorknowledgesharingroutines.However,thisisonlylikelytohappenwhenthecombinedresourcesareoflowinterdependence.Thompson(1967)differentiatedthreetypesofinterdependence–pooledormodularinterdependence,sequentialinterdependence,andreciprocalinterdependence–withthecoordinationneedsinvolvedinanascendingorder.Forinstance,reciprocalinterdependencerequiresexchangepartnerstocloselyandcontinuouslycoordinatewitheachothertogenerateFeigao(Kelly)Huang,EugeniaRosca,LydiaBals,andWendyL.Tate-9781839104503DownloadedfromPubFactoryat05/28/202209:10:51AMviaColumbiaUniversityLibrary

308290Handbookoftheoriesforpurchasing,supplychainandmanagementresearchsynergies.Thecomplexityofcoordinationrequirespartneringfirmstomakesubsequentinvestmentsinrelation-specificassetsandknowledgesharingroutines.Andinvestmentinonetendstoincreaseinvestmentintheotherbecauseofinterconnectednessoftheinvestments.Therefore,Dyeretal.(2018)proposedthatrelation-specificassetsandknowledgesharingroutinesmediatetherelationshipbetweencomplementaryresourcesandrelationalrentsinthecaseofahighlevelofresourceinterdependence,andthatthetwotypesofinvestmentsreinforceeachother.Inaddition,resourceinterdependencealsoinfluencesthechoiceofgovernancemech-anisms.Highresourceinterdependenceispositivelyassociatedwithhighinvestmentsinrelation-specificassetsandknowledgesharingroutines,whichentailhighercoordinationcosts(Williamson,1991)andrequirepropergovernancetoaddressappropriationconcerns(Williamson,1985).Ifexchangepartnersanticipateappropriationconcernsandhighcoordi-nationcosts,theyaremorelikelytousemorehierarchicalgovernancestructurestofacilitatecoordinationandalignincentives,henceensuringcooperation(GulatiandSingh,1998).Thus,governanceplaystheroleofamediatorintherelationshipbetweencomplementaryresourcesandrelationalrents,andisinterconnectedwithrelation-specificassetsandknowledgesharingroutines.ItcanbeseenfromabovethatresourceinterdependenceplaysanimportantroleinthedynamicRVmodel.Besidestheeffectontherelationshipsbetweenthefourdeterminants,italsoaffectsthegenerationofrelationalrents,whichalsodemonstratestheevolutionaryperspective.Whenresourceinterdependenceislow,therentgenerationwillbequick,sinceexchangepartnersarelesslikelytoinvestinrelation-specificassets,knowledgesharingroutinesordeployingappropriategovernancemechanisms,whichalltaketime.Likewise,therelationalrentsgeneratedwillalsodisappearratherquicklybecausethepartnershipismoredecomposable.Hence,Dyeretal.(2018)proposedaninvertedUshapeforthegenerationofrelationalrentsinthecaseoflowresourceinterdependence.Ontheotherhand,thecasewouldbedifferentwhenthecomplementaryresourcesareofhighinterdependence.Thepartnerswillspendtimetodeviseplanstoexploitandcombinethehighlyinterdependentresources.Initially,therentgenerationwillbeslowbecauseittakestimeforthepartnerstolearntolearnandfortheinvestmentstodevelopandcontributetovaluecreation(DyerandNobeoka,2000).Similarly,afterrelationalrentsreachtheirpeak,theydeclineslowlybecausetherelationshipislessdecomposableduetothegoodwilltrustdevelopedthroughcloseinteractions.Therefore,fortherentgenerationinthecontextofhighresourceinterdependenceboththeupwardcurveandthedownwardcurvearesmootherthanthoseintheinvertedUshapeinthecaseoflowresourceinterdependence(Dyeretal.,2018).HOWHASTHISTHEORYBEENUSED?TheRVwasproposedwhentherewasan‘explosionofalliances’(DyerandSingh,1998).Analliancereferstoastrategicagreementbetweenoramongfirmstopoolresourcestotapmarketopportunities,suchasjointventures,researchanddevelopment(R&D)alliancesanddirectinvestment(Gulati,1995).TheRVhasbeenextensivelyusedtounderstandthestrategicalliancesandunderwhichconditionstheycanleadtorelationalrents.Someresearchsuggeststhatfirmswithpastallianceexperiencesaremorelikelytohaveabettermarketperformanceandenjoygreateralliancesuccess(AnandandKhanna,2000).Buildingonthislogic,KaleFeigao(Kelly)Huang,EugeniaRosca,LydiaBals,andWendyL.Tate-9781839104503DownloadedfromPubFactoryat05/28/202209:10:51AMviaColumbiaUniversityLibrary

309Therelationalview291etal.(2002)surveyed78firmsandtheir1572alliances,andfoundthatfirmswhichsetupadedicatedalliancefunctiontodisseminateallianceknowledgeandcoordinateallianceactivitiesrealizegreateralliancesuccess.Inadditiontoknow-howacquisition,alliancepart-nersalsowanttoprotecttheirowncoreproprietaryassets.Kaleetal.(2000)suggestedthatrelationalcapitalfosterslearningduetothewide-rangingandcontinuouscontactbetweenalliancemembers,andprotectsagainstleakageofcoreproprietaryassetsduetoitsabilitytocurbpartneropportunism.Thisshowstheimportanceofinformalself-enforcinggovernanceinhelpingfirmsbalance‘tryingtolearnandtryingtoprotect’andincreasepotentialrelationalrents.ThelevelofanalysisintheRVhasmadethistheoryparticularlyattractiveforsupplychainscholarstoexplorewhyandhowfirmscollaborateacrossthesupplychain.Supplychainman-agementisessentiallysystemicandstrategiccollaborationwithinthefocalfirmandacrossfirmsinthesupplychain(Mentzeretal.,2001).Informationsharing,resourcesharing,jointknowledgecreationandcollaborativecommunicationareessentialtosupplychaincollabo-rationandgoodsupplychainperformance(CaoandZhang,2011).WielandandWallenburg(2013)foundthattherelationalcompetenciessuchascommunicationandcooperationhaveapositiveeffectonimprovedresilience;which,inturn,enhancesthesupplychain’scustomervalue.Chenetal.(2013)indicatedthathospital‒supplierinformationtechnologyintegrationandknowledgeexchangepositivelyinfluencethelevelofhospital‒supplierintegration,whichcontributestosuperiorsupplychainperformance.AndGölgecietal.(2019)suggestedthatrelationalcapabilityorthecapabilitytomanageandleveragefirmrelationshipshelpstoenhanceenvironmentalcollaborationbetweensupplychainpartners,whichhasapositiveimpactonenvironmentalperformance.Specificallyinthecontextofpurchasingandsupplymanagement,InemekandMatthyssens(2013)foundthatsuppliers’innovativenessmaybenefitfromcollaborationinnewproductdevelopmentandcloserelationaltieswithbuyers.Socializationmechanismsbetweenbuyersandsuppliers,suchasjointteamworkandsupplierconferences,enablefirmstodeveloprelation-specificassetsandfacilitatetheexchangeofinformationandideas,thusenhanc-ingsuppliers’operationalandcommunicationperformance(CousinsandMenguc,2006).Exploringhowtomakecollaborationinpurchasinginthepublicsectormoreeffective,Walkeretal.(2013)foundthateffectivegovernanceisagreatenablerofcollaborativeprocurement;specifically,formingagoverningboardimprovesgovernanceandreducestransactioncostsbecauseorganizationscanenjoygreatereconomiesofscaleandlessencostsassociatedwithsuppliersearchandnegotiations.SupplychainscholarshaveoftenusedtheRVincombinationwithothertheoreticallenses,namelytheRBV,socialnetworktheory,socialcapitaltheoryorTCE(Hittetal.,2016).Forinstance,Mesquitaetal.(2008)comparedtheRBVandtheRVandsuggestedthatsuppliers’investmentinpartner-specificassetsandcapabilitiesismorepositivelyassociatedwithexclu-sive,dyad-specificperformancebenefitsthanwithredeployablebenefitsinotherpartnerships.Johnsonetal.(2007)combinedinsightsfromtheRVandTCEtoshowhowtheadoptionofe-businesstechnologiescandecreasedyadiccoordinationcostsandshiftresourcestowardmorestrategicandproductiveareas,suchassupplierdevelopmentandstrategicsourcing.Feigao(Kelly)Huang,EugeniaRosca,LydiaBals,andWendyL.Tate-9781839104503DownloadedfromPubFactoryat05/28/202209:10:51AMviaColumbiaUniversityLibrary

310292Handbookoftheoriesforpurchasing,supplychainandmanagementresearchOUTLOOKONFUTURERESEARCHOPPORTUNITIESAsmentionedintheprevioussection,theRVhasbeenusedtoexplainallianceperformanceandsupplychainperformanceinthepasttwodecades.Manystudiesexaminetherentgener-atingeffectsofonlyoneofthedeterminants(DyerandNobeoka,2000),andfewresearchersdealwithmorethanonedeterminant(Mesquitaetal.,2008).Weberetal.(2016)isanotableexceptionthatoperationalizesandempiricallytestsallfoursourcesofrelationalrents.FurthereffortstoexpandtheRVcanbeundertakeninnewlyemergingresearchcontexts,suchasalliancesandpartnershipsinthecontextoforganizationsundergoingdigitaltransformations.Previousstudieshavealreadyexploredhowe-businesstechnologiescanreducedyadiccoor-dinationcostsandleadtoimprovedfinancialperformance(Johnsonetal.,2007).Yet,thephenomenonofdigitaltransformationprovidesaninterestingcontextfortheoreticaladvance-mentsofestablishedviews(Haneltetal.,2021).HowdothefourRVdeterminantsenablethecreationofrelationalrentsfordigitallytransformedalliancesandorganizations?Itisworthwhiletoexplorehowdigitaltechnologiesandnewsoftwaresolutionsreshapealliances,collaborationsandtheresultingrelationalrents.ExtantliteraturehasfocusedexclusivelyonusingtheRVtounderstandcommercialandtraditionalalliances,whilerecentresearchsuggeststhatnon-traditionalpartnerscanhaveanimportantroleinaddressingkeysustainabledevelopmentchallenges(Heueretal.,2020).Inthiscontext,afruitfuldirectionforfurtherresearchistoapplytheRVtonewcontexts,namely,differenttypesofpartners(forexample,non-governmentalorganizations,communityassociations)anddifferenttypesofrelationalrents(forexample,socialimpact,environmentalvalue).Asfirmsneedtotransitiontowardmoresustainableorganizationsandsupplychains,andembraceprinciplesofsocialequity,inclusionandenvironmentalawareness,theRVcanbefurtherelaboratedtoexplainandpredicthowfirmscancollaboratewithsupportactors(forexample,brokers)toenhancethesustainabilityimpactoftheirsupplychains.Also,inthecontextofmovingtowardacirculareconomy,questionsregardingamoresystemicperspectiveofrelationalrentsarise.Therefore,theincorporationofsustainabilityconsiderationsrequiresanoveldefinitionandconceptualizationof‘relationalrents’beyondtraditionaleconomicmeasures,andmightunravelnewvariables,beyondthefourproposedbyDyerandSingh(1998).Anothercontextworthhighlightingisresilienceresearch(WielandandWallenburg,2013),asitalsorequiresabroaderunderstandingofrentsaswellastheactorsinvolved.Withglobalissuessuchaspotentialsupplydisruptionsduetoclimatechange,polit-icalissuesorcrisessuchastheongoingCOVID-19pandemic,thereisampleopportunityforrelevantresearch.Intermsofdomain,sustainabilityandresilienceissuesmayrequireasys-temicoratleastnetworkperspective,regardingtheinterfirmlinkagesinscope.Moreover,consideringabroaderrangeofstakeholders,therecouldevenbeadomainadaptionfrominter-firmtointerorganizationallinkages,deliberatelytakingintoaccounttheaforementioneddif-ferenttypesofpartners(forexample,non-governmentalorganizations)beyondcorporations.Inaddition,themajorityoftheRVresearchhasexaminedthedirectmodelasoutlinedintheoriginalframework(DyerandSingh,1998).Theinterrelationshipsbetweenthefoursourcesofrelationalrentsremainunderexplored.NotableexceptionsincludeMesquitaetal.(2008)andWeberetal.(2016).ThedynamicmodelproposedbyDyeretal.(2018)offersopportunitiestostudytheinterconnectednessofthevariables.Specifically,theresourceinterdependenceconceptandthelifecycleofpartnershipsentailedbytheevolutionarylensprovideresearcherswithtoolstodigdeeperintofirmdifferentialperformance.Feigao(Kelly)Huang,EugeniaRosca,LydiaBals,andWendyL.Tate-9781839104503DownloadedfromPubFactoryat05/28/202209:10:51AMviaColumbiaUniversityLibrary

311Therelationalview293Competitionisincreasinglytakingplaceatthelevelofthesupplychain.Individualfirmscompetewitheachother,andatthesametimesupplychainsalsocompetewitheachother(Slone,2004).So,firmsneedtoshiftfocusfromfirm-levelcompetitiveadvantagetosupplychainornetworkcompetitiveadvantage.AndtheRVprovidesthislensforacloserexamination.REFERENCESAnand,B.,andKhanna,T.(2000).Dofirmslearntocreatevalue?Thecaseofalliances.StrategicManagementJournal,21(3),295–316.Barney,J.B.(1991).Firmresourcesandsustainedcompetitiveadvantage.JournalofManagement,17(1),99–120.Cao,M.,andZhang,Q.(2011).Supplychaincollaboration:Impactoncollaborativeadvantageandfirmperformance.JournalofOperationsManagement,29(3),163–180.Chen,D.Q.,Preston,D.S.,andXia,W.(2013).Enhancinghospitalsupplychainperformance:Arela-tionalviewandempiricaltest.JournalofOperationsManagement,31(6),391–408.Cousins,P.D.,andMenguc,B.(2006).Theimplicationsofsocializationandintegrationinsupplychainmanagement.JournalofOperationsManagement,24(5),604–620.Dyer,J.H.(1996).Doesgovernancematter?KeiretsualliancesandassetspecificityassourcesofJapanesecompetitiveadvantage.OrganizationScience,7(6),649–666.Dyer,J.H.(1997).Effectiveinterfirmcollaboration:Howfirmsminimizetransactioncostsandmaximizecomplements.StrategicManagementJournal,23(8),707–725.Dyer,J.H.,andChu,W.(2003).Theroleoftrustworthinessinreducingtransactioncostsandimprovingperformance:EmpiricalevidencefromtheUnitedStates,Japan,andKorea.OrganizationScience,14(1),57–68.Dyer,J.H.,andHatch,N.W.(2006).Relation‐specificcapabilitiesandbarrierstoknowledgetransfers:Creatingadvantagethroughnetworkrelationships.StrategicManagementJournal,27(8),701–719.Dyer,J.H.,andNobeoka,K.(2000).Creatingandmanagingahigh‐performanceknowledge‐sharingnetwork:TheToyotacase.StrategicManagementJournal,21(3),345–367.Dyer,J.H.,andSingh,H.(1998).Therelationalview:Cooperativestrategyandsourcesofinterorganiza-tionalcompetitiveadvantage.AcademyofManagementReview,23(4),660–679.Dyer,J.H.,Singh,H.,andHesterly,W.S.(2018).Therelationalviewrevisited:Adynamicperspectiveonvaluecreationandvaluecapture.StrategicManagementJournal,39(12),3140–3162.Eisenhardt,K.M.(1989).Agencytheory:Anassessmentandreview.AcademyofManagementReview,14(1),57–74.Esper,T.L.,andCrook,T.R.(2014).Supplychainresources:Advancingtheoreticalfoundationsandconstructs.JournalofSupplyChainManagement,50(3),3–5.Gölgeci,I.,Gligor,D.M.,Tatoglu,E.,andArda,O.A.(2019).Arelationalviewofenvironmentalper-formance:Whatroledoenvironmentalcollaborationandcross-functionalalignmentplay?JournalofBusinessResearch,96,35–46.Grant,R.M.(1996).Towardaknowledge‐basedtheoryofthefirm.StrategicManagementJournal,17,109–122.Gulati,R.(1995).Doesfamiliaritybreedtrust?Theimplicationsofrepeatedtiesforcontractualchoiceinalliances.AcademyofManagementJournal,38,85–112.Gulati,R.,andSingh,H.(1998).Thearchitectureofcooperation:Managingcoordinationcostsandappropriationconcernsinstrategicalliances.AdministrativeScienceQuarterly,43,781–814.Hanelt,A.,Bohnsack,R.,Marz,D.,andAntunesMarante,C.(2021).Asystematicreviewofthelit-eratureondigitaltransformation:Insightsandimplicationsforstrategyandorganizationalchange.JournalofManagementStudies,58(5),1159‒1197.Heuer,M.A.,Khalid,U.,andSeuring,S.(2020).Bottomsup:Deliveringsustainablevalueinthebaseofthepyramid.BusinessStrategyandtheEnvironment,29(3),1605–1616.Hitt,M.A.,Xu,K.,andCarnes,C.M.(2016).Resourcebasedtheoryinoperationsmanagementresearch.JournalofOperationsManagement,41,77–94.Feigao(Kelly)Huang,EugeniaRosca,LydiaBals,andWendyL.Tate-9781839104503DownloadedfromPubFactoryat05/28/202209:10:51AMviaColumbiaUniversityLibrary

312294Handbookoftheoriesforpurchasing,supplychainandmanagementresearchInemek,A.,andMatthyssens,P.(2013).Theimpactofbuyer–supplierrelationshipsonsupplierinno-vativeness:Anempiricalstudyincross-bordersupplynetworks.IndustrialMarketingManagement,42(4),580–594.Jap,S.D.(1999).Pie-expansionefforts:Collaborationprocessesinbuyer–supplierrelationships.JournalofMarketingResearch,36(4),461–475.Johnson,P.F.,Klassen,R.D.,Leenders,M.R.,andAwaysheh,A.(2007).Utilizinge-businesstech-nologiesinsupplychains:Theimpactoffirmcharacteristicsandteams.JournalofOperationsManagement,25(6),1255–1274.Kale,P.,Dyer,J.H.,andSingh,H.(2002).Alliancecapability,stockmarketresponse,andlong‐termalliancesuccess:theroleofthealliancefunction.StrategicManagementJournal,23(8),747–767.Kale,P.,Singh,H.,andPerlmutter,H.(2000).Learningandprotectionofproprietaryassetsinstrategicalliances:Buildingrelationalcapital.StrategicManagementJournal,21(3),217–237.Lavie,D.(2006).Thecompetitiveadvantageofinterconnectedfirms:Anextensionoftheresource-basedview.AcademyofManagementReview,31(3),638–658.Mentzer,J.T.,DeWitt,W.,Keebler,J.S.,Min,S.,Nix,N.W.,etal.(2001).Definingsupplychainman-agement.JournalofBusinessLogistics,22(2),1–25.Mesquita,L.F.,Anand,J.,andBrush,T.H.(2008).Comparingtheresource-basedandrelationalviews:Knowledgetransferandspilloverinverticalalliances.StrategicManagementJournal,29(9),913–941.Poppo,L.,andZenger,T.(2002).Doformalcontractsandrelationalgovernancefunctionassubstitutesorcomplements?StrategicManagementJournal,23(8),707–725.Powell,W.W.,Koput,K.W.,andSmith-Doerr,L.(1996).Interorganizationalcollaborationandthelocusofinnovation:Networksoflearninginbiotechnology.AdministrativeScienceQuarterly,41,116–145.Slone,R.E.(2004).Leadingasupplychainturnaround.HarvardBusinessReview,82(10),114–121.Thompson,J.D.(1967).OrganizationsinAction:SocialScienceBasesofAdministrativeTheory.NewYork:Sharpe.Uzzi,B.(1997).Socialstructureandcompetitionininterfirmnetworks:Theparadoxofembeddedness.AdministrativeScienceQuarterly,42(1),35–67.Villena,V.H.,Revilla,E.,andChoi,T.Y.(2011).Thedarksideofbuyer–supplierrelationships:Asocialcapitalperspective.JournalofOperationsManagement,29(6),561–576.Walker,H.,Schotanus,F.,Bakker,E.,andHarland,C.(2013).Collaborativeprocurement:Arelationalviewofbuyer‒buyerrelationships.PublicAdministrationReview,73(4),588–598.Weber,C.,Bauke,B.,andRaibulet,V.(2016).Anempiricaltestoftherelationalviewinthecontextofcorporateventurecapital.StrategicEntrepreneurshipJournal,10(3),274–299.Wieland,A.,andWallenburg,C.M.(2013).Theinfluenceofrelationalcompetenciesonsupplychainresilience:Arelationalview.InternationalJournalofPhysicalDistributionandLogisticsManagement,43(4),300–320.Williamson,O.E.(1983).Crediblecommitments:Usinghostagestosupportexchange.AmericanEconomicReview,73(4),519–540.Williamson,O.E.(1985).TheEconomicInstitutionsofCapitalism:Firms,MarketsandRelationalContracting.NewYork:FreePress.Williamson,O.E.(1991).Strategizing,economizing,andeconomicorganization.StrategicManagementJournal,12(S2),75–94.Feigao(Kelly)Huang,EugeniaRosca,LydiaBals,andWendyL.Tate-9781839104503DownloadedfromPubFactoryat05/28/202209:10:51AMviaColumbiaUniversityLibrary

31319.Supplynetworks:dyads,triadsandnetworksZhaohuiWuandThomasY.ChoiINTRODUCTIONResearchintosupplychainrelationshipsarosefromtheincreasingneedsofbuyerstomanagesuppliers.Oftenassumingtheperspectiveofafocalbuyer,researchershaveexploredthedyadicrelationshipbetweenabuyeranditssupplierontheupstreamside(EllramandHendrick,1995;Helper,1991)orbetweenamanufactureranditsdistributoronthedown-streamside(AndersonandNarus,1990).Instudiesofsupplymanagement,scholarsoftenresorttotransactioncosteconomicstounderstandthenatureoftherelationships(forexample,voiceversusarm’s-length)(EllramandHendrick,1995;Helper,1991)andhowafocalbuyercanhelpandevaluatesupplierstoimproveoperationalperformance(ChoiandHartley,1996;HartleyandChoi,1996).Supplychainmanagersunderstandthattheirsuppliers,inturn,workwithothersuppliersinthenexttier,wheretherearerelationshipsamongthesesuppliers.Manyrelationshipsintheextendedsupplychainsmaynotbevisibletothefocalbuyersbutwouldaffecttheiroperationsperformanceinwaystheymaynothaveanticipated(Choietal.,2021).Thenaturalextensionofbuyer‒supplierrelationshipstudiesinthedyadiccontextistoextendouttothenexttierandincludeoneadditionalsupplier.Hereentertriadsandtriadicrelationships.Triadsarethesmallestfunctionalandanalyticalunitofanetwork(ChoiandWu,2009a;Simmel,1950;WassermanandFaust,1994).Onefamiliartypeoftriadicrelationshiptakesplaceinadualsourcingorparallelsourcingsettingwhereafocalbuyerusestwosuppli-ers.Tothebuyer,thepracticalissueiswhetherandhowtoinfluencetherelationshipbetweenthetwosuppliers.ProminentamongthisresearchistheworkofChoiandcolleagues.Oneoftheirfirststudiesinthisgenre(Choietal.,2002)beginswiththeobservationthatasfirmsreducethenumberofdirectsuppliersthattheyuse,theyseektoinfluencetherelationshipsbetweensuppliersmoreactively.Thisstudylooksathowdualsourcingandparallelsourcingscenarioswithinteractions,orlackthereof,betweentwosupplierscanaffecttheoperationsperformanceofthecommonbuyer.Thestudyspecifiedthreearchetypalsupplier–supplierFigure19.1Buyer‒supplier‒supplierrelationshiptriad295ZhaohuiWuandThomasY.Choi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:53AMviaColumbiaUniversityLibrary

314296Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable19.1SummaryofresearchontriadsUnitofanalysisSupportingreferencesRelationshipsamongindividualsAlessio,1990;CartwrightandHarary,1956;Davis,1963,1970;Heider,1958;Obstfeld,2005Relationshipsamongsocialgroups(forexample,Gimeno,1999;WuandChoi,2005departments)andproductionplantsRelationshipamongfirmsGimeno,1999;Madhavanetal.,2004;Wuytsetal.,2004TheoreticalargumentSentimentandcognitivebalanceHomans,1950;StreufertandStreufert,1978PowerbalanceandrelationaldependenceBastletal.,2013;Caplow,1968;Homans,1950StructuralholesBurt,1992;RossettiandChoi,2005MediationandnetworkchangeFinneandHolmström,2012;LiandChoi,2009;Obstfeld,2005relationships:competitive,cooperativeandcoopetitive,anddevelopspropositionsregardinghoweachofthesearchetypesaffectstheperformanceoutcomesforbothsuppliersandtheircommonbuyer.Asimpleillustrationofthebuyer‒supplier‒suppliertriadisshowninFigure19.1.Fromthere,theinterestintriadsreceivedastrongboostamongsupplychainmanagementscholarsaround2008–2009,withvariousconceptualpapers,empiricalstudiesandessays,andadebatebetweenChoiandWu(2009b,2009c)andDubois(2009)intheJournalofPurchasingandSupplyManagement.Inthisdebate,ChoiandWuargue:‘Weneedtostudyhowinanetwork,adyadisaffectedbyanotherdyad.Therefore,tostudyanetwork,studyingtriadsbecomesimperative...Simply,dyadsareinadequateincapturingtheinteractivenatureinherentinanetwork’(ChoiandWu,2009b,p.265).Dubois(2009)agrees,butadvancesthattriadsalsofallshortofadequatelydepictingnetworkprocesses.Inarejoinder,ChoiandWu(2009c)trytoclarifythat‘atriadisthesmallestnetworkunitwherewecanobservehowalinkaffectsalinkoranodeaffectsalinkeitherdirectlyorindirectly…thereisnothingarbitraryaboutstudyingtriads.Ifwesaythatwestudynetworks,wehavetobeginbystudyingtriads.’Table19.1summarizesthekeytheoreticalargumentsandunitofanalysisofstudiesontriads.THEORETICALFOUNDATIONOFTRIADSGeorgeSimmel,asociologistandphilosopher,wasthefirsttocontemplatetheconceptualdif-ferencebetweenadyadandatriad.Hestudiedandwroteaboutseveralsubjects,buthisworkontriadicsocietalrelationships(thatis,kinshipsandothersettingsineconomicsandtrade)isofimmediaterelevance(Simmel,1950).Hesawtheshiftfromdyadtotriadasafundamentaltransformation,andidentifiedtwopossiblerolesforthethirdmemberofatriad.Thefirstistheroleofamediator,whoactsimpartially,quellsconflictbetweentheothertwomembers,andperhapsensuresthetriad’scontinuedexistence.Simmelcalledthisrolethetertiusiungensorthethirdwhochannels.Thesecondandperhapsmoreinterestingroleisthethirdwhoprofitsorexploitstheothertwo.Simmelreferredtothisthirdasthetertiusgaudens.Asanextension,athirdpossiblerolemaybeonewhodividesandrules,amemberwhoactivelyfomentscon-flictbetweentheothertwoinordertofurthertheirowninterests,butthiscanbeviewedasanextremecaseoftertiusgaudens.Byactingastertiusgaudens,thethirdinthebridgepositionexertscontroloverthedisconnectedfirmsbyactivelyseparatingtheothertwoandnurturingZhaohuiWuandThomasY.Choi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:53AMviaColumbiaUniversityLibrary

315Supplynetworks:dyads,triadsandnetworks297thestructuralhole.Thisbridgeorbrokerbenefitsfrominformationorresourceasymmetrybetweenthetwodisconnectednodes.StructuralHoleTheoryBurt(1992)drawsonSimmel’snotionofteriusgaudenstoexplaintherelationalbehaviourofnodesinasocialnetwork.Hecoinstheterm‘structuralhole’torefertoastateofdiscon-nectbetweentwonodesinatriad,withoutdirectlinksexceptthroughacommonthird.Thiscommonnodeisabridgebetweenthetwonodeswithoutthedirectlink,andplaystheroleofabroker.Thisstructuralarrangementisreferredtoasatriadwithastructuralhole(Burt,1992).Astructuralholeembedstension(Burt,1992,p.32),implying‘notension,notertius’.Here,theabsenceofadirectlinkleadstocompetitivetensionsbetweenthedisconnectednodeswithinthetriad.BakerandObstfeld(1999)refertothetertiusgaudensasastrategythatfocusesondisunionbetweentwodisconnectednodesinatriad.Insuchatriadicarrangement,thedisconnectednodesmaybeawareofeachotherbutdonotdirectlyinteract(Burt,1997;ChoiandWu,2009c;Madhavanetal.,2004).ThenotionofastructuralholeisconsistentwithGranovetter’s(1973)‘weaktie’conceptwherethetertiusconnectstwodifferentnetworks;theyarenetworksofdistinctknowledgesetsorsocialgroups.Thetertiusiungens,theothermechanismdeliberatedbySimmel,receivedlessattentioninmanagementresearchuntilthemid-2000s.WeacknowledgeObstfeld(2005)asamongthefirsttobringattentiontothisconcept.Tertiusiungensfocusesontheunionofthetwodisconnectednodesbyanon-partisanthirdnodeinatriad.Obstfeld(2005)arguesthatbyapplyingthetertiusiungensrelationalstrategy,thebrokerjoinsthedisconnectedfirmstofacilitateinteractionbetweenthem.Thebrokerrelinquishesitspowerandcontrolinexchangeforsynergy,cooperationandself-coordinationinthetriad(Obstfeld,2005).Whenanagent(thatis,individualorfirm)continuouslyenactsthetertiusiungensstrategy,theagentbecomesamatchmaker.Thisrolerequiresgeneralistknowledgeandthedevelopmentandmaintenanceofawiderangeofconnections.Atertiusiungensstrategyalsoimplicatesthemechanismofnetworkevolutionbeyondthetriad.Obstfeld(2005,p.122)presentsasequenceofrecursivestepsbasedonthetertiusiungensstrategytoexplainhowreciprocityasaresultof‘makingtheconnection’couldleadtomoreconnectionsandcorrespondinglycreatemorestructuralholes.Thismechanismshedslightonthemicro-processesofcreatingcooperationandcompetitiondynamicsinnetworks.BalanceTheoryBalancetheorycamefrombehaviouralpsychologyandhasbeendevelopedbyresearcherssincethe1950s,focusingonrelationshipsamongindividualsinsocialgroups(Alessio,1990;CartwrightandHarary,1956;Davis,1963,1970;DavisandLeinhardt,1972;Heider,1958;Taylor,1967).Thetheorywasdevelopedlargelybyconsideringtherelationshipsamongindi-vidualsinteamsorsocialgroups.Managementresearchershaveelevatedtheunitofanalysisfromsocialgroupstofirms(Gimeno,1999;LitwakandMeyer,1966;Madhavanetal.,2004;MongeandContractor,2001).Withrespecttobusinesstriads,balancetheoryexamineshowfirmsseektoestablishequitablerelationships.Thekeyconceptsofbalancetheoryaddresshowindividualentitiesinatriaddealwiththecognitivetensioninanunbalancedrelationshipstate,andhowanunbalancedstateZhaohuiWuandThomasY.Choi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:53AMviaColumbiaUniversityLibrary

316298Handbookoftheoriesforpurchasing,supplychainandmanagementresearchwouldmovetowardabalancedstate(Anderson,1975;Morrissette,1958;Newcomb,1961;Rodrigues,1967;RodriguesandColeta,1983).Thisisthe‘structuraltheorem’(seeCartwrightandHarary,1956).Simplyput,theenemyofmyfriendismyenemy,andthefriendofmyenemyismyenemy.Inabalancedtriad,therewouldbeeitherthreepositive(thatis,friendly,cooperative)relationshipsoronepositivewithtwonegative(thatis,adversarial,confronta-tional)relationships.Accordingly,entitiesinanunbalancedtriadwouldattempttoaddresstherelationalinequityormistrustthatcausestheunbalance,untilitisresolvedandthetriadachievesbalance.Asageneralrule,anunbalancedtriadtendstotransformintoabalancedstate,andanewrelationshiparrangementoftenresults(Heider,1958).Thischaracteristicletsuspredictrelationshipformationpatternsandthenatureofthenewrelationships.Forinstance,abuyerworkshardtoestablishcooperativerelationshipswithbothofitssuppliersinatriad.Thebuyerasksthetwosupplierstosharecapacitytogether;however,thetwosupplierscannotbringthemselvestocooperate.Assuch,thistriadwithtwopositiveandonenegativerelationshipisinastateofunbalancedrelationship.Perbalancetheory,thisunbalancedstatewilltrytomovetowardabalancedstate.Onepossibleoutcomeisthebuyerworkinghardtochangetherelationshipbetweenthetwosuppliersintoapositiveone,thusreachingabalancedstateofallpositiverelationships.Otherwise,ifthenegativerelation-shipbetweentwosuppliersremainsnegative,whatwilllikelyhappenisoneofthepositiverelationshipswithtwosuppliersthebuyerhasworkedhardtoestablishwilllikelyturnintoanegativerelationship.SeeChoiandWu(2009a)forsimilarexamples.Figure19.2providesillustrationsofbalancedandimbalancedrelationalstates.Balancetheoryhasconceptualconnectiontoothertheoriesinbehaviouralpsychology,suchascognitivedissonancetheory(Festinger,1957;Scott,1963;StreufertandStreufert,1978),exchangeanddependencytheory(Blau,1964;Emerson,1962;Homans,1950),theoriesonsentiments(Homans,1950)andequitytheory(Adams,1963;Hatfieldetal.,1979;Walsteretal.,1978).Sociologistshaverecognizedthatindividualbehaviouralprinciplesinagroupcanbegeneralized(Alessio,1990).Theyhaveappliedtheseindividual-leveltheoriestoexaminesocialprocessesingroupsandorganizations(seeGimeno,1999;LitwakandMeyer,1996;Madhavanetal.,2004;MongeandContractor,2001;Moore,1979;Ritter,2000;Wuytsetal.,2004).Besidesthebalanceofrelationalsentiments,anotherformofbalanceisthebalanceofpower.Caplow(1968)proposesacoalitiontheoryfortriads.Simplystated,thetwoweakermembersofatriadarelikelytoformacoalitiontocounterbalancethestrongestmemberamongthethree.Heenumeratesseveralassumptionsconcerningtheuseofpower,aswellassixpossibletriadicpowerdistributions.Surprisingly,Caplowalsocontendsthat‘thenatureofthetriadicsituationoftenfavorstheweakoverthestrong’.Bastletal.(2013)lookmorecloselyatsuchcoalitionsintriads.Theyexaminerelationshipsamongbuyersandsuppliersintriadsinvolvingweakerplayers,anddeveloparchetypalarrangementsthatcanresult.Theycomparecoalitionsandstrategicalliancesinsuchcircumstancesalongsixdimensions,includ-ingpurpose,focusandduration.TheyofferaquotefromCaplow(1956)that:‘theformationofgivencoalitionsdependsupontheinitialdistributionofpowerinthetriadand...maybepredictedtosomeextentwhentheinitialdistributionofpowerisknown’(p.489).Triadsinsupplychainmanagementstudieshelptodescribetherelationaldynamicsamongthreefirmsinvarioustriadicsettings(forexample,buyer‒supplier‒supplier;supplier‒buyer‒endcustomer).Triadicdynamicsalsodescribethelarger-scaledynamicsofindustrysectors.RossettiandChoi(2005)findthatwhenaerospaceoriginalequipmentmanufacturers(OEMs)ZhaohuiWuandThomasY.Choi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:53AMviaColumbiaUniversityLibrary

317Supplynetworks:dyads,triadsandnetworks299Figure19.2Illustrationsofbalancedandimbalancedrelationalstatechoketheirsupplierswithshort-term,cost-drivendecisions,theybecomecompetitorsintheaftersalesmarket.Thesuppliersseekouttheendcustomers(airlines)tosellafter-marketparts,andbydoingsotheydisintermediatetheOEMs,ultimatelyalteringthetriadandbreakingthelinearchain.Here,thetriadicframeworkclarifiesindustrydynamics.Inrecentyears,researchershaveleveragedthetriadicframeworktoanswersomeverypracticalsupplymanagementissues.Onesalientdevelopmentisservicetriads,inwhichfirmsfocusonwhattheydobestandoutsourcetheremainingtaskstooutsidesuppliers(Wynstraetal.,2016).Theensuingrelationshipsbetweensupplier,buyerandendcustomercanbeviewedasa‘servicetriad’,inwhichthebuyer(themiddleman)contractswithasuppliertodeliverservicesdirectlytothebuyer’scustomer(LiandChoi,2009;NiranjanandMetri,2008).LiandChoi(2009)focusonshiftingrelationshipstructuresandinparticularonthepositionofthe(services)buyervis-à-visthatofthesupplierandendcustomer.Inthiscase,thebridgepositionofthebuyerbetweensupplierandcustomer,providinginformationandmonitoringbenefits,maydecayasthesuppliercomesintodirectcontactorinteractionwiththecustomer,leadingtoerosionofthosebenefits.Theywarnthat‘leftunmanaged,thisstateoftransferredbridgepositionhasseriousperformanceimplicationsforthebuyer’.Asserviceoperationsbecomeevermoreprominentinoperationsmanagementresearch,scholarshavebeguntoassessvariousformsofservicetriadtogaininsightsonserviceper-ZhaohuiWuandThomasY.Choi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:53AMviaColumbiaUniversityLibrary

318300Handbookoftheoriesforpurchasing,supplychainandmanagementresearchformanceandmanagementstrategy.Forinstance,FinneandHolmström(2012)analysetheprocessbywhichsubsystemsuppliersbypasssystemintegrators(buyers)anddirectlybuildrelationswithcustomers.Theirstudydemonstratesthattriadiccooperationamongsupplier,buyerandcustomerimprovesthevaluetothecustomer‘byimprovingservicequality’,anditalso‘alignstheinterestsandcapabilitiesofsupplierandintermediary’.MenorandJohnson(2012)elaborateonvariousaspectsofservicequalityandtherolesthatservicetriadactorshaveinmanagingquality,andPengetal.(2010)useatriadicapproachtostudymaintenanceservices.SUPPLYNETWORKSAsupplynetworkreferstoaninterconnectedsystemoffirmsengagedinthemanufactureandassemblyofpartstocreateafinishedproduct(ChoiandHong,2002).Assupplychainmanagementpractitionersandresearchers,weoftenconceiveofasupplynetworkasan‘egonetwork’.Thefocalfirmfunctionsastheegoasitlooksupstreamanddownstreaminasupplychaintounderstandhowitisconnectedtoothersthroughtheflowofinformation,materialsandcontractualrelationships.Thenetworkperspectivefindsbothintellectualheritageandanalyticaltoolsinsocialnetworkanalysis(seeWassermanandFaust,1994,foranoverview).Thisapproachfacilitatestheinvestigationofthestructuralcharacteristicsofsupplynetworks.Thenetworkperspectivehasrapidlygainedtractionacrossseveralsciences,fromanthro-pologytophysics.BorgattiandLi(2009)provideacomprehensiveoverviewofsocialnetworkanalysis,coveringbothspecificconcepts,suchasstructuralholesorbetweennesscentrality,andthegenericexplanatorymechanismsthatnetworktheoristsoftenemploytorelatenetworkvariablestooutcomes.Theypointoutthatmanynetworkconceptsprovidepotentialstartingpointsforsupplychainmanagement(SCM)research.Scholarsoverthepasttwodecadeshaveoftenlookedtosocialnetworkresearchforboththeoriesandmethodology.Inresponse,Kimetal.(2011)offerphysicalmeaningtovariouscentralitymeasures;forinstance,theyconsideranodewithhighindegreecentralityasonethathandleshighsupplyload.SupplyNetworkStructure,NetworkPositionandPerformanceOneoftheearlieststudiesofsupplynetworksisastructuraldepictionofthreevehiclesubas-semblies(ChoiandHong,2002).Thesenetworkssupplythepartsforthecentreconsolesofthreedifferentautomobiles:theHondaAccord,AcuraCL/TLandDaimlerChrysler(DCX)GrandCherokee.Basedonthesesupplynetworks,thestudyexaminesthesupplynetworkstructuresandhowtheyoperate.Usingtheexistingliterature,theauthorsframestructureinthreedimensions:formalization,centralizationandcomplexity.Theyconcludethatthethreestructuraldimensionsaffectoneanotherprogressively,andcostconsiderationsappeartobethemostsignificantfactorshapingsupplynetworkstructure.Later,Kimetal.(2011)appliedthesocialnetworkanalysistothesupplynetworkstructurescompiledinChoiandHong(2002).SeeFigure19.3foranexample.Boththestructureofasupplynetworkandthepositionsofitsconstituentfirmsinfluenceindividualfirms’innovativenessandinfluenceoverothers.CarnovaleandYeniyurt(2015)utilizeamanufacturingjointventurenetworkdatasettoidentifytheeffectsofvariousnetworkconstructssuchasbetweenness,density,brokerageandweaknessonnetworkinnovation.ZhaohuiWuandThomasY.Choi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:53AMviaColumbiaUniversityLibrary

319Supplynetworks:dyads,triadsandnetworks301Source:AdaptedfromLinetal.(2014).Figure19.3USdomesticfoodflows(intons)bycountyTheyfindsupportfortheideathatinnovationinasupplychaindependsheavilyonthestruc-tureoftheinterfirmnetwork.Bellamyetal.(2014)examinethestructuralcharacteristicsofsupplynetworksandinvestigatetherelationshipbetweenafirm’ssupplynetworkaccessibilityandinterconnectedness,anditsinnovationoutput.Theirresultsalsoindicatethatintercon-nectedsupplynetworksstrengthentheassociationbetweensupplynetworkaccessibilityandinnovation.Moreover,theinfluenceofthetwostructuralcharacteristicsoninnovationoutputcanbeenhancedbyafirm’sabsorptivecapacityandthelevelofinnovationofitssupplynetworkpartners.ArchetypesofSupplyNetworkSupplynetworkscancapturedifferentbusinessactivitiessuchasagricultural,manufacturing,information-basedservicesandproductdevelopmentprocesses(Harlandetal.,2001;MilesandSnow,2007;Pathaketal.,2014).Pathaketal.(2014)identifyfoursupplynetworkarchetypes.Theirarchetypesincludecommunitiesthatworktowardsimilargoalswithoutdirectcompetition.Communitiesmaypartnertemporarilyforactivitiessuchaslogisticsorpromotion.Federationsworktomanufactureparts(orsubassemblies)ordeveloptechnologiestosatisfyacustomer’sdemands.Aconsortiumdevelopsknowledge;itperformsresearchanddevelopment.Inahierarchy,firmsperformseparatetasksbutmaycooperateinsomeoper-ationalactivitieswhilecompetingoveraccesstocommonresourcesorevenoverprice.TheZhaohuiWuandThomasY.Choi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:53AMviaColumbiaUniversityLibrary

320302Handbookoftheoriesforpurchasing,supplychainandmanagementresearchresearchersdiscusshowasupplynetworkcouldshiftfromonetypeintoanother,andproposethepossibilityofadditionalnetworkarchetypes.SupplyNetworksasComplexAdaptiveSystemsAnagent(individualsorcollectiveentitiessuchasbusinesses)asanodeinasupplychaincanlooktowarditssuppliersanditscustomers,butvisibilityineitherdirectionisinvariablygoingtobelimited.Whatliesbeyondtherealmofitsvisiblerangesimplyemergesforthefocalfirm.Choietal.(2001)proposethenotionthatsupplynetworksneedtobeunderstoodasacomplexadaptivesystem(CAS).TheCASperspectivehighlightstheemergentnatureofanopensystem,implyingthatdecisionmakersshouldallowforautonomousnetworkactivity,andbalancecontrolandemergencetoinducebothstabilityandflexibility.ThisCASperspec-tivehasbeenadoptedbymanyresearchers.Forinstance,applyinganagent-basedsimulationmodel,Giannoccaroetal.(2017)findthattherelationshipbetweenscopeofcontrolandsupplynetworkperformancefollowsaninvertedUshape.TheComplexAdaptiveSupplyNetworkresearchgroupinitiatedbyChoiandDooleyhasdrawnsupplychainscholarsacrosstheworldtocollaborate,andhasproducedmanydistinc-tiveresearchpapersinthepastdecade(seehttps://research.wpcarey.asu.edu/supply-networks/what-we-do/),asevidencedinmanyrecentsupplynetworkresearchstudies.Wereviewsomeoftheminthefollowingsections.NexusSuppliersYanetal.(2015)proposethetheoryofnexussupplierstoemphasizetheimportanceofhiddencriticalsuppliers,whereanexussupplierisdefinedas‘anysupplierinamulti-tieredsupplynetworkthatpotentiallyexertsaprofoundimpactonabuyer’sperformanceduetoitsnetworkposition’.Anexussuppliermaybeseveraltiersremovedinthesupplynetwork,andmaynotbeimmediatelyvisibletothefocalbuyingfirm.AccordingtoYanetal.(2015),nexussup-plierscanbecategorizedintothreetypes:operational,monopolisticandinformational.Whilemanagingstrategicplayersamongtop-tiersuppliersiswellunderstood,wehaveonlyrecentlybeguntorecognizenexussuppliers.TheideaofcreatinganindexfornexussuppliersisfirstproposedinaHarvardBusinessReviewOnlineForumbyChoietal.(2015).Subsequently,Shaoetal.(2018)thendemonstrateonepossiblewaytocomputenexussupplierindexesthroughabusinessanalyticsapproach.Theybuildamathematicalmodelwhichtheycallthenexussupplierindex(NSI),throughdataenvelopmentanalysis(DEA).TheNSIincorporatesvariousnetworkcentralitymeasures(thatis,degree,betweenness,eigenvectorandcloseness)toprovideacombinedmetrictoevaluateasupplier’spotentialforbeingacriticalsupplierbasedonitsnetworkposition;thatis,anexussupplier.CompetitionNetworkHistorically,alinkbetweentwofirmswouldbeconsiderednon-existingunlesstheyhaveadirectrelationship,suchasabuyer‒supplierrelationshipornewventurerelationship.However,SkiltonandBernardes(2014)argueotherwise.Theyarguethatacompetitiverelationshipisalink:iftwofirmsareinacompetitivecontextandareawareofeachother,ZhaohuiWuandThomasY.Choi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:53AMviaColumbiaUniversityLibrary

321Supplynetworks:dyads,triadsandnetworks303theiractionsareinterdependentandtheircompetitiverelationship,albeitwithoutadirectinteraction,constitutesalink.SkiltonandBernardesproposeandtestatheoryoftheeffectsofcompetitionnetworkstructureonproductmarketentry.Competitionnetworksaredefinedasthepatternsofinterdependencebetweenrivalsthatemergefromdirectcompetition.Bystudyingnetworksbasedoncompetitiveinterdependence,theyextendsocialnetworktheoryandimprovetheunderstandingofproductmarketentry.Basedondatadrawnfromtheaircraftmodificationindustry,theyfindthatthesize,interconnectednessanddiversityofcompetitionnetworkssystematicallyinfluencesubsequentproductentryintoamarket.NetworkResiliencyKimetal.(2011)areamongthefirsttoexaminesupplychaindisruptionatthenetworklevel.Theyconceptualizesupplynetworkdisruptionandresiliencebyexaminingthestructuralrelationshipsamongnetworkedentities.Theycomparefourfundamentalsupplynetworkstructurestohelpunderstandsupplynetworkdisruptionandresilience.Theiranalysisshowthatnode/arc-leveldisruptionsdonotnecessarilyleadtonetwork-leveldisruptions,anddemonstratetheimportanceofdifferentiatinganode/arcdisruptionfromanetworkdisruption.Theirresultsalsoindicatethatnetworkstructuresignificantlydeterminesthelikelihoodofdisruption.Theirworksuggeststhatresilienceimproveswhenthestructuralrelationshipsinanetworkfollowthepowerlaw.Theirworkalsoaddressesausefulanalyticalapproachtoassessingtheresilienceofsupplynetworkstructures.Morerecently,Durachetal.(2020)describeasupplychainresiliencestudyinatetradiccontextinvolvingabuyer,twofirst-tiersuppliers,andacommonsecond-tiersupplier.Theirstudyshowshowthetwofirst-tiersup-pliersinacoopetitiverelationshipactuallyhelptheresilienceofthefocalbuyercomingfromasourcenotvisibletothefocalbuyer:thesecond-tiersupplier.RESEARCHOPPORTUNITIESRecentsustainabilitystudiesfocusonlargesupplynetworks.Theydifferfrompreviousworkintheirscale.Specifically,thesupplynetworksunderinvestigationarenotnecessarilyproduct-orfirm-specific;rather,theresearchisconcernedwiththeflowofresourcesandprocessesinabroadeconomicsystem.Forinstance,Linetal.(2014)analysethestructureofthevirtualwatertradeassociatedwiththeglobalfoodcommerce,andobserveahierarchyinwhichnationsthattradelargevolumesofwateraremorelikelytolinkupandassociatewithothersimilarnations,particularlywhenthetradedirectionalityisconsidered.Linetal.(2019)studydomesticfoodflowswithintheUnitedStatesofAmerica(USA)(seeFigure19.4).Thenetworkpropertiesindicatepotentialvulnerabilitytothedisturbanceofkeynodes.Byexam-iningthetransportationandlogisticsinfrastructureofacountry,thisanalysisoffersinsightstonationalpolicybeyondthetypicalresearchfocusandintereststhatfocusonfirmsandfor-profitsupplychains.Dooleyetal.(2019)examinehowthestructuralandfunctionalchar-acteristicsofaproduct’sprocessnetworkimpactuponthenetwork’scollectivegreenhousegasemissions.Collectively,thesestudiessuggestadifferentconception,scaleofsustainabilitybeyondthefirmlevel,totacklethemuchlargernetworkstructuresanddesignsofouroveralleconomicsystems.ZhaohuiWuandThomasY.Choi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:53AMviaColumbiaUniversityLibrary

322304Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSource:AdaptedfromLinetal.(2014).Figure19.4USdomesticfoodflows(intons)bycountyAnotheropportunityexistswhenconsideringcombiningsupplynetworkresearchandinsti-tutionaltheoryresearch.Supplynetworksactasthecarriersofinstitutionsandinstitutionaldynamics(BhakooandChoi,2013).Supplynetworkresearchershavemadeinroadsintoanalysingstructuralembeddedness(ChoiandKim,2008)andculturalembeddedness(WuandPullman,2015).Structuralembeddednessreferstotheimportanceofframingsuppliersasbeingeconomicallyandcontractuallycommittedtootherparticipantsinlargersupplynetworksratherthaninisolation.Culturalembeddednesslooksatbehaviouralnormsbasedonshared(ormutuallyunderstood)politicalsystems,valuesandideologies.Byadoptingtheconceptofstructuralembeddedness,welearnthatabuyingcompanyneedstolookatasupplier’sextendedsupplynetworktomorefullyunderstandasupplier’sperfor-mance(KimandChoi,2021).Emphasizingtheconceptofstructuralembeddedness,ChoiandKim(2008)suggestthatfirmsconsidernetworkstructuralcharacteristicswhenevaluatingsuppliers.Asupplier’sstructuralembeddednessreferstotheextenttowhichitscriticalitydependsonitsextendedsupplynetwork.ChoiandKimarguethatsupplierperformanceisinfluencedbyothercompaniesintheirsupplynetworks,soasupplier’sstructuralembedded-nesscanbeasimportantastheirinternalcapabilities.BorgattiandLi(2009)callformoredevelopmentofnetworkperspectives,andsuggestthatsocialnetworkconceptssuchasego-networkstructure,structuralholes,nodecentrality,networkcohesionandstructuralequivalencemightbeappliedtosupplychainmanagement.Theseconceptscanbeappliedtoexaminethestructuralcharacteristicsandefficacyoflogis-ticsnetworks(Carteretal.,2007).Lietal.(2021)exploretheimpactoffinancialsqueezeonZhaohuiWuandThomasY.Choi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:53AMviaColumbiaUniversityLibrary

323Supplynetworks:dyads,triadsandnetworks305supplychainnetworkstructureandoperationaloutcomes.Theyfindthatfinancialsqueezeaffectsthestabilityofthesupplychainnetwork,andtheeffectvariesdependingontheloca-tionofthesuppliers.Kimetal.(2011)applyseveralkeysocialnetworkanalysismetricstosupplynetworks.Theyexamineindividualsupplynetworkmembersintermsoftheirstructuralpositioninthenetwork,andsuggestthatbuyingfirmsconsiderthepotentialrolesofsuppliersbasedontheirnetworkcentralitymeasuressuchasdegree,closeness,betweennessandeigen-vector.Mazzolaetal.(2018)explorehowfirmsreconcilethedichotomybetweencentralandstructuralholesnetworkpositions,bydynamicallyshiftingfromacentraltoastructuralholesposition(andviceversa)overtime.Thisstudysuggeststhatadynamicperspectiveemployedincreasestheabilityofafirmtodevelopnewproducts.Inrecentdevelopment,companiessuchasResilinc(www.resilinc.com/)areusingsupplierandtransportationdatatocarryoutnetworkmappingforthepurposeofmonitoringreal-timeglobalmovementsofgoods.Suchsupplynetworksmappingleveragingdynamicbigdatawillraiseinterestingresearchquestionsonsupplynetworktraceability,transparencyandreal-timedecision-making.ThosebuyingcompaniesthathaddonethenetworkmappinghadaclearadvantageoverthosethatdidnotwhentheCOVID-19pandemicfirststruckChina(Choietal.,2020).Culturalembeddednessprovidesinsightintowhyindividualsandfirms,imprintedwithvalues,normsandlogic,behaveastheydo,andhowtheirbehaviourscaninfluencenetworkstructureandstructuralchange.Becausesupplynetworksoperatewithinthebroadercontextofindustrysectors,theanalysisofsupplynetworksoffersameso-theoryofthemechanisms,pat-ternsandprocessesofinstitutionalchange.WuandJia(2018)pointoutthattheinstitutionallensbroadensthescopeofwhatweconsiderassupplynetworksbyconsideringtherolesofgovernment,non-profitorganizationsinsupplychainmanagement.Lastly,thefocusandcontextofsupplynetworksarechanging,andsoarethenodesandboundaryofsupplynetworks.AsevidencedthroughtheCOVID-19pandemicandtradewarbetweentheUSAandChina,governmententities,andnon-governmentalorganizations(NGOs)andintergovernmentalorganizations(IGOs),arebecomingimportantplayersinafocalfirm’sresearchanddevelopmentandproductionnetworks.Likewise,weneedtostudythesupplynetworksofthegovernmententities.Theshortageofpersonalprotectionequipment(PPE)requiresprivateandpublicpartnership.Understandingnetworkstructureandstructur-ing,collaborationandnetworkgovernancegainsurgencyaswetacklenewchallengesinthisnewpoliticalandeconomicsetting.CONCLUDINGREMARKSInthischapterwehavetakenstockoftheevolutionofsupplynetworkresearch.Webeganbyconsideringdyadsandtriads.Wehighlightedthekeyconcepts,includingtertiusgaudens,tertiusiungens,structuralholeandbalancetheory.Theseconceptsconstitutethetheoreticalunderpinningoftriads.Wethenexpandedouttosupplynetworks.Ourreviewsuggeststhatthesupplynetworkhasbecomeanestablishedareaofinquiry,andresearchershavemadegreatstridesinunderstandingsupplynetworkstructure,embeddedness,competitionnetworksandnexussuppliers.Thesestudiesprovidepracticalinsightsonperformanceatbothfirmandnetworklevels.Lastly,wepointedouttheopportunitiesanddirectionsofsupplynetworkresearchbyhighlightingthebroadeningscopeofsupplynetworksthatincludeinstitutionalactorsandnewwaysofconceivingsupplynetworkstotacklesustainabilitychallenges.ZhaohuiWuandThomasY.Choi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:53AMviaColumbiaUniversityLibrary

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32820.StakeholdertheoryGyöngyiKovácsINTRODUCTIONStakeholdertheoryhelpsinthestructuringandmanagementofsocietalproblems,andinbringingpeopletogethertosolvethem.Yetitisnotalwaysthatclearwhatisatstake,norwhohasastake,oraninterest,intheproblemathand.Secondtothatisthequestionofwhoanorganisationshouldprioritiseamongallthestakeholderswhenitcomestosolvingaproblem.Originally,muchofthedebatecentredaroundwideningtheviewfromafocusofafirm’sstockholderstowiderinterestgroups,whichthenwerecalledstakeholders.Thiscomesfromtheproblemcompanieshavestartedtofacewheneverythingtheydidboileddowntohowtheirsharesfaredonthestockexchange.Quarterlyearningsreportsbecamethenorm,withgoodfinancialresultsrequiredinevershortertimeperiods.Yettheparadoxisthatgoodfinancialresultsalonearenotenough;themarketalsoreactstoothernews,goodorbad.Agoodreturnoninvestmentinanoperationcanquicklybeovershadowedbyascandal,astheexpectationisforthecompany’scustomers(wherefinancialflowsoriginatefrom)tovotewiththeirfeetandturnawayfromscandal-riddensuppliers.Butifthatisthecase,andiftheneoclassicaleconomicviewdoesnotsuffice,whoshallacompanylistento,andwhoisitaccountableto?ONE,ORSEVERALSTAKEHOLDERTHEORIES?Inspiteofacommonfocustoidentifyinterestgroupsbeyondshareholders,stakeholdertheoryhasafewdifferentorigins.Mostprominentistheeconomistversusstakeholdertheoristdebate,sometimescalled‘FriedmanvsFreeman’(Agleetal.,2008).WhileFriedman,comingfromafocusonmarkets,focusesonthevariousgroupsandcompaniesabusinessneedstotakeintoaccountandalignforbeingabletooperate,andwhatitmeanstomanageacompanywellandindeedmaximiseprofit,Freemanfocusesonwhetherbusinessandethicscanbeseparatedfromoneanother(theycannot),andtheresponsibilitiesofbusiness.Importantly,whileFriedmanconsidersstakeholdertheoryasatheoryofthefirm,Freemanasapragmatistviewsitasatheoryofstrategicmanagement,andanideaofhowtocreatevalue(Agleetal.,2008).Thisdistinction,andtheunderlyingquestionofthenormativevalueofstakeholdertheory,isinfactitsmostcontestedpoint(DonaldsonandPreston,1995).Afterall,ifatheoryisnotnormative,isitstillatheory?Stakeholdertheoryhasbeenmuchcriticisedfornotbeingabletocometomorethandescriptionsofwhyanyfirmoutperformsanother.Ontheotherhand,manyofstakeholdertheory’ssuggestionsfor‘better’decision-makingareseenasnormative(Freemanetal.,2020).Whatismore,stakeholdertheoryoffersaviewthatdoesnotfocusonshort-termsolutionsonly,butcanalsoconsiderthelong-termimpactofdecisions.310GyöngyiKovács-9781839104503DownloadedfromPubFactoryat05/28/202209:10:55AMviaColumbiaUniversityLibrary

329Stakeholdertheory311DOMAINWHERETHETHEORYAPPLIESStakeholdertheory(ST)canbeappliedtomanydifferenttypesofproblems.Ithasbeenusedextensivelyinbusinessethics,andcorporatesocialresponsibility,whenfocusingonmoralproblemsanddilemmas.Ithasalsobeenusedasanewwaytoseecorporategovernance.HowSTisbeinguseddependsverymuchonwhatisatstake,andwhoseperspectiveistaken.Problemframingisalsokeytodeterminingtheunitofanalysis.Isthemanagementofacompanyconcernedwithwhotheyareaccountabletoingeneral?Oristhereaspecificproblemthatwouldneedtobediscussed,wantingtogetpublicopinionbehindapotentialwayforward?Conversely,isthereaproblemthatapotentialstakeholderwantstoraisewiththefirm?Fromthecompanyperspective,muchofthefocusisondeterminingwhoarethecompany’s,orthespecificproblem’s,stakeholdersinthefirstplace.Andwhiletherearealwaysmanypotentialones,italsobecomesaquestionofprioritisingbetweenthem.Thisisamatterofboththealignmentofastakeholderwiththecompany,anditssalience.KeyVariablesandTheirDefinitionsStakeholdertheoryisfirstandforemostconcernedwithsomethingthatisatstake.Thisisusuallyaproblemortopicthatisofinteresttovariousinterestgroups;infact,itisthisthatbringsthemtogether.Theseinterestedparties,calledstakeholders,maynotsharetheirreasons,motivesoragendawithregardtowhatisatstake,andoftentheywouldnotengageinanyinteractionwithoneanotherifitwasnotforthisproblemathand.Yet,dependingontheproblemandperspective,theyarenotofequalimportancetotheproblemowner,andmaynothavethesamemeanstopushfortheiragenda.Therefore,STdistinguishesbetweenafewimportantnotionsaboutstakeholders(Table20.1).Thealignmentofastakeholderreferstothedegreeofinternalisationofastakeholder;thatis,whetheranyofthemareinternalstakeholderssuchasemployeesorowners,orexternalones.Amongexternalones,thereisafurtherdistinctionbetweensuppliersandcustomersintheinput‒outputenvironment–thatis,thesupplychain–versuscompetitorsfromthecompet-itiveenvironment,variouslayersofgovernmentandeventradeorganisationsinaregulatoryenvironment;versusnon-governmentalorganisationsthatcanbeseenasinafurtherexternal(sometimescalledlateral;Polsa,2002)relationshiptothefirm(Achroletal.,1983;CarterandEllram,1998;FriedmanandMiles,2004).Arguably,theinterdependenciesoftheinput‒outputenvironmentplacethosestakeholdersinaprimepositiontoexertpressureonthefirm.Thisisinherentalsoinsupplychainmanagement,totheextentthatonceextendingtheunitofanalysistothesupplychain,thesestakeholdersbecomeinternalised(Kovácsetal.,2006);alsoinlightofsupplychainversussupplychaincompetition(Christopher,1998).Yetthisisnotwhatdistinguishesstakeholdertheoryfromothertheories;rather,itsuniquepropositionliesintheverynotionofalsoconsideringothersthanownersandthesupplychain.Astakeholder’ssaliencetosomeextentstemsfromitsdegreeofinternalisationandalignment,butthereareafewadditionalfactorsthathavebeenhighlightedintheliterature.Mitchelletal.(1997)suggestthatstakeholdersalienceisamatteroftheirpower,legitimacyandurgency.FriedmanandMiles(2004),ontheotherhand,focusontheirnecessityandcompatibility.Fromasupplychainperspective,thenecessityofsuppliersandcustomersisengrainedintheircontractualrelationshipswiththefirm;thussupplychainmembersareGyöngyiKovács-9781839104503DownloadedfromPubFactoryat05/28/202209:10:55AMviaColumbiaUniversityLibrary

330312Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable20.1DefinitionsofSTvariablesElementExplanationSupportingreferencesStakeThekeycommonissueorproblemthatbringsdifferentFriedmanandMiles(2002)groupstogether.StakeholderAninterestedpartywithaspecificvieworagendaaboutFriedmanandMiles(2002)theproblemathand.Itistheirinterestthatdefinesthemasbeingastakeholder,andnotwhethertheproblemowneracknowledgestheirinterest.Keyvariables/definitionStakeholdersalienceTherelativeimportanceofaninterestedpartytoaproblemMitchelletal.(1997);Friedmanandowner.Thisisdefinedintermsofstakeholderattributes,Miles(2004)suchas:(1)power,legitimacy,andurgency;or(2)necessityandcompatibility.StakeholderpressureThedemandsofaninterestedpartyontheproblemownerKovács(2008)withregardtotheissueathand.KeyassumptionsPerspectiveoftheproblemThereisaspecificproblemowner(forexamplecompany,FriedmanandMiles(2002)ownerchiefexecutiveofficer)fromwhoseperspectivestakeholdersaliencecanbeassessed,andonwhompressuremaybeexerted.VoiceofthestakeholderStakeholdersareactivepartiesthatcanengageinFriedmanandMiles(2002)adialoguewiththeproblemownerand/oroneanother.PurposeofbusinessCorporationsfocusontheirself-interestandongeneratingDonaldsonandPreston(1995)short-termshareholdervalue.apriorityfromtheperspectivesofboththeiralignmentwiththefirmasbelongingtoitsinput‒outputenvironment,aswellastheirsalienceduetotheirnecessity.Notsurprisingly,thecus-tomerbeingking(orqueen)isreiteratedinmanytopicstowhichstakeholdertheoryhasbeenapplied,includingthatofgreenpurchasing(CarterandJennings,2004).Stakeholdersthatarenotcontractuallyboundareseenascontingent;yettheycanalsoexertstakeholderpressureonthefirm,asforexamplegovernmentsdothroughlegislation,regulationandpolicy(Sarkisetal.,2010).Importantly,however,stakeholdersalienceisnotstatic,andtheproblemowner(company)mayperceiveastakeholderdifferentlyovertime(FriedmanandMiles,2002).Yettheirperceptionofastakeholder’ssaliencewillimpactonhowtheyaddressthecommonissueorproblem(seeFigure20.1).Stakeholdersalienceaside,therearedifferentwaysofrelatingtostakeholders.Stakeholdersexertingpressureonthecompany,andthecompanyrespondingtosuchpressure,isjustoneoftheseways.Thepressureperspectivewouldseecompaniesactinginself-interestintheirdeci-sionofwhosepressureandonwhichmattertheychoosetoreactto.Inotherwords,companiesdeveloptheircapabilitiestorespondtostakeholderpressurewhilefacingit(Sarkisetal.,2010).Thisis,though,alsoaverypassiveviewofcompanies,whichcanthemselvesinitiatestakeholderdialogue,andwherethespectruminthesedialoguescanvaryfromreciprocitytoco-creation.AsFreemanetal.(2020)say,attheend,weareinthisboattogether.GyöngyiKovács-9781839104503DownloadedfromPubFactoryat05/28/202209:10:55AMviaColumbiaUniversityLibrary

331Stakeholdertheory313Figure20.1OverviewofSTelementsLevelsofAnalysisLetusquicklyrevisitthematterofthelevelofanalysis.Stakeholdertheoryhasbeenusedasalensthroughwhichtolookatacommonproblemoraparticularcompany.Insupplychainmanagement,stakeholdertheoryhasevenbeenappliedtoend-to-endsupplychains,withthesupplychainbeingthelevelofanalysis.Delineatingandalsodelimitingacommonproblemcanbeveryuseful,notjusttoseeproblemsbeyondcompanies,suchastheprotectionofaspeciesinaspecificregion,oraproblemthatiscommontoacityorindeedanindustryorasupplychain,butalsotoidentifystakeholdersthatwouldbesalienttothisproblem.Anycompanymayalsobepartofmanydifferenttypesofproblemsdependingontheirlocation:fromemployment-relatedissuesinonecountry,tohealthandsafety-relatedonesatanotherfacility;topollutionpreventiononesintheirsupplychain.Problemsthataretypicallylookedatthroughthelensofstakeholdertheoryrarelyfocusontheeconomicbottomlineofthefirm,however.Rather,thequestionisgearedtowardsecological,social,healthandsafety,orethicalquestions;andissuesthatfirmsrarelytacklealone(Sarkisetal.,2010).Thatsaid,shareholdersandfinanciersareincludedamongstthestakeholdersofacompany,andSTdoesnotexcludeeconomicquestionsbydefinition.Apartfromdefiningacommonproblem,thelevelofanalysiscanalsobethatofthelinkbetweenstakeholdersandthefirm,orstakeholdersandthesupplychain;thatis,withquestionsfocusingonhowtomanagesuchrelationships.Thisisalsodifferentfromthemainstreamrela-tionshipmanagementliteratureonthesupplychain,asfewoftheserelationshipsarebasedoncommercial,orfrequent,transactions.Thus,asopposedtomostothertheoriesofthefirm,thecommondenominatorforarelationshipbetweenstakeholdersisnotaneconomictransactionbutasharedinterestinacommonissue.Furthermore,thelevelofanalysismaydifferfordifferentproblems.Someproblemsareboundtospecificlocationsorregions,wherebythelocationofacompany,itsheadquartersoritsproductionfacilitiesmaymatter.Otherproblemsextendto,forexample,questionsofpollutionoverall,inwhichcasetheproductionfacilitiesandtheproductchain,orthelifecycleofaproduct,canbethelevelofanalysis.Problemsthatfocusonlabourissuescanbegeo-graphicallybound,oraddressedonthesupplychainlevel.Increasingly,thelevelofanalysisisGyöngyiKovács-9781839104503DownloadedfromPubFactoryat05/28/202209:10:55AMviaColumbiaUniversityLibrary

332314Handbookoftheoriesforpurchasing,supplychainandmanagementresearchthesupplychain,whetheritisfocusedonconflictmineralsorhumanrightsormodernslavery,forexample.RELATIONSHIPBETWEENTHEVARIABLESANDTHEORETICALPREDICTIONSIfthereisonethingstakeholdertheoryismuchcriticisedfor,itisfornotbeingabletomakeanytheoreticalpredictions.Itsstrengthliesinseeingproblemsbeyondeconomicfirmperfor-mance,andinbeingabletoidentifytheinterestgroupsthathaveastakeintheseproblems.Thiswidenstheownerandshareholderfocustothatoftheinterestgroupandstakeholders.Conceptually,themainquestionbecomesnotjusthowtodefineastakeholder,butalsohowimportant,orsalient,anygivenstakeholderistotheproblem,ortoacompany.Here,theframeworksvary,andlookatstakeholdersaliencefromtheperspectiveofeitherpower,legit-imacyandurgency,orastakeholder’snecessityandcompatibility.Theoutcomeoftheirsali-ence,andtherelationshipwiththem,canthenbemeasuredintermsofthetimeandresourcesspentonthemanagementofthatrelationship(Chenetal.,2018).Thisistotakeaconvergentviewonstakeholders,wheretheyallplayaroletogethertotackleaproblem.Mitchelletal.’s(1997)frameworkfurtherdefinesseventypesofstakeholderswithvaryingdegreesofpower,legitimacyandurgency,andtheeighthtypeofthenon-stakeholder.Inthisvein:1.Dormantstakeholdershavepowerbutlacklegitimacyandurgency.2.Discretionarystakeholdershavelegitimacybutneitherpowernorurgency.3.Demandingstakeholdershaveurgencybutneitherpowernorlegitimacy.4.Dominantstakeholdershavepowerandlegitimacybutnourgency.5.Dangerousstakeholdershavepowerandurgencybutnolegitimacy.6.Dependentstakeholdershavelegitimacyandurgencybutnopower.7.Definitivestakeholdershaveallthree.8.Non-stakeholdershavenone.Conversely,thosethatpossessallthreeattributesarealsoseenas‘highlysalient’,thosewithtwooutofthreeas‘expectant’,andthosewithoneofthethreeas‘latent’stakeholders.Thisframeworkisveryusefulinidentifyingwhotoengagewithwhenitcomestoaparticularproblem,butalsohowtoengagewiththem.Iftheunitofanalysisistherelationshipbetweenastakeholderandthefirm,thesalienceofthestakeholdercanguidethefirminwhethertoengageaparticularstakeholderinonequestiononly,orwhethertoengagewiththeminanadvisorymanner,involvethemontheboardofadecisionmakinggroup,orlobbywithorthroughthem.Thisisalsocalledthe‘instrumentalview’onstakeholders(seeDonaldsonandPreston,1995).Onthisbasis,AapaojaandHaapasalo(2014)distinguishbetweenthestakeholdersthathaveresponsibilitiesforaprojectorproblem,thosetokeepinformed,thenextleveltokeepsatisfied,versusthosetouseminimumefforttoengagewith.Thescaletheyuseincludesthecombinationofstakeholderattributesofpower,legitimacyandurgency,andcombinesthesewiththestakeholder’sassessedprobabilitytoimpactuponorabilitytocontributetothematterathand.Importantly,however,thewayacompanychoosestoengagewithparticularstakeholdersbearsfurtherimplicationsforhowtheirlegitimacyisperceivedGyöngyiKovács-9781839104503DownloadedfromPubFactoryat05/28/202209:10:55AMviaColumbiaUniversityLibrary

333Stakeholdertheory315henceforth,whichmaythenbecomeaself-fulfillingprophecyfortheirfutureprioritisation(Chenetal.,2018).Fromaglobalsupplychainperspective,however,itisworthnotingthatanystakeholder’sattributeswillvaryacrossthevariouslocationsinthesupplychain.Multinationalcorporations,forexample,aremorelikelytofocusonstakeholdersthatexhibithigherstakeholdersalienceinthelocationoftheirheadquarters,asKovács(2008)alsoconfirmedacrossthesupplychain.Thisbringssomeinterestingnewquestionstotheforefront,suchashowstakeholderscancontributetothedevelopmentandimplementationofglobalenvironmentalstandards(Sarkisetal.,2011).EXAMPLESINPURCHASINGANDSUPPLYCHAINMANAGEMENTPurchasingandsupplychainmanagementliteraturehasprimarilyusedstakeholdertheoryinthesphereofgreening,fromenvironmentalpurchasing,togreeningoperations,lifecycleassessment,togreenandreverselogistics.OneofthemostinterestingarticlesthatcomparesthemeritsofstakeholdertheorytothatofothersisSarkisetal.’s(2011)reviewofvariousorganisationaltheoriesandtheircurrentversuspotentialcontributiontogreensupplychainmanagement.Fromadifferentperspective,PålssonandKovács(2014)attributethedriversandmotivesforgreeningthesupplychaintoeithertheresource-basedview(RBV)ortostakeholdertheory,thoughfocusingmostlyonexternalstakeholdersthatwouldnotbeencompassedbyRBV.Butwhiletheyseethetwoasfundamentallydifferent,albeitcomplementarytheories,oneofthefathersoftheRBVhassincehimselfarguedthattheRBVneedstoencompassastake-holderperspectiveaswell(seeBarney,2018).Adifferentmergerofthetwocanbeseeninprocurementliterature,wherestakeholdertheoryhasbeenusedtodeterminewhoapurchasingmanagershouldlistentowhendevelopingtheirownpurchasingcompetence(Kernetal.,2011).Whilesuppliersandcustomersareoftenregardedasexternalstakeholders,insupplychainmanagement,theyareinternaltothesupplychain(seeKovácsetal.,2006).Interestingdif-ferencesinsupplychainmanagementliteraturecanbeseenwithregardtothealignmentofstakeholders,withwhotoincludeinsupplychaindecisionsbeyondsuppliersandcustomers(PullmanandWikoff,2017),butalsowithbringingforwardnon-organisationalstakeholderssuchas‘society’and‘theenvironment’(Oliveiraetal.,2020).Theformeristhemoreprev-alentinpublicprocurementliterature,wheretheimportanceofsocietyatlargeisthemorecritical.Apartfromgreening,stakeholdertheoryhasalsobeenusedinsupplychainmanagementliteratureconcerningpublichealth,orevendisastermanagementandhumanitariansupplychains.Overall,alsoinsupplychainmanagement,stakeholdertheoryisusedmostoftenwhereprofitisnottheonlydrivingobjective.GyöngyiKovács-9781839104503DownloadedfromPubFactoryat05/28/202209:10:55AMviaColumbiaUniversityLibrary

334316Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSTAKEHOLDERTHEORYINHUMANITARIANSUPPLYCHAINSWithregardtohumanitariansupplychains,thearticlebyHeaslipetal.(2012)highlightsthedifferenceinidentifyingthestakeholdersofdisasterreliefasopposedtothenetworkofactorsthathadbeendiscussedinearlierliterature.Whilstnotstrictlyadheringtothestakeholderattributesasdescribedearlier,Heaslipetal.(2012)identifyprimaryandsecondarystake-holders,orinotherterms,overtandlatentstakeholders.Fromasupplychainperspective,itisinterestingtoseethattheprimarystakeholdersareagainthosethatareinvolvedwithmaterialflows.Whatremainsdebatableistheroleofdonorsastheoriginsofmonetaryflowsinthissupplychain,versusthatofbeneficiariesasaidrecipients,withoutanypurchasingpowerintheoriginalsense.Infactitisdonorsandtheheadquartersofhumanitarianorganisationsthatarethestakeholdershere(SchifflingandPiecyk,2014),evenifbeneficiariesaresometimesputatthecoreofhumanitarianstakeholdermodels(asinFontainhaetal.,2017).Addressingtheimbalancebetweendonorsbeingpowerfulstakeholders,whilebeneficiariesarelegitimateandurgentbutpowerlessstakeholders,humanitariansupplychainsaremovingtowardscash-basedinterventions,inwhichitisnotgoodsorservicesin-kindbutrathermoneythatisdeliveredtobeneficiaries.Therebybeneficiariesaretoregaintheirpurchasingpowerand,withthat,thepossibilitytoinfluencewhattheyareabouttoget,aswellastoregaintheirdignityinthisprocess.Thisisrathersimilartothethinkinginsocialwelfareprogrammes.Fromastakeholdertheoreticalperspective,itimportantlyredistributesthepowertobenefi-ciaries,elevatingtheirstakeholdersalience.Fontainhaetal.(2017)arguethatstakeholdersvary,dependingonwhoseperspectiveonetakesinadisaster,aswellasdependingonthephaseofdisasterrelief.Theyfindastaggering41differentwaysofhowdisastermanagementandhumanitariansupplychainliteratureviewsstakeholdersandtheiralignment.AsSchifflingandPiecyk(2014)putit,thereisnosinglekeystakeholderinhumanitariansupplychainsthatwouldfocusontheireconomicbottomline,whichmakesitsomewhatmoreconfusingandalsocomplextoanalysestakeholderattributesinrelationtoanypotentialperformancemeasure.Mostinterestingly,thisisanareaofsupplychainmanagementwherethereareattimesnotonebutseveralfocalorganisations,withallsortsofhierarchicaltofuzzyrelationshipswithoneanother(Fontainhaetal.,2017).Thisisanimportantnotion,asitascertainsthepossibilitiesofstakeholdersengagingwithoneanother,andnotjusttheproblems,orfocalorganisationsathand.Alsoconsideringstakeholders’relationshipstooneanother,Heaslipetal.(2012)furthercommentontheroleofsecondary,latentstakeholders,asthosehavingthemeanstoinfluenceprimarystakeholdersintheirwaysofengagingwiththehumanitariansector.Furthermore,stakeholdertheoryhasbeenusedinhumanitariansupplychainmanagementtostructurethevariouschallengesthatdifferenthumanitarianorganisationsfaceindisasterrelief(KovácsandSpens,2009).Thereareimportantdifferencesherebetweeninternationalhumanitarianorganisations–whichthebulkofhumanitarianlogisticsliteraturefocuseson–andlocalorgovernmentalones.Onamoredetailedlevel,SchifflingandPiecyk’s(2014)articleisthemostcomprehensiveinanalysingthestakeholderattributesofthemanydifferenttypesofstakeholdersofahumanitariansupplychain.GyöngyiKovács-9781839104503DownloadedfromPubFactoryat05/28/202209:10:55AMviaColumbiaUniversityLibrary

335Stakeholdertheory317FUTURERESEARCHOPPORTUNITIESManyofthefutureresearchopportunitiesstemfromstakeholdertheoryitself.Freemanetal.(2020)problematisehowtodescribethecontributionofacompanyinthefuture,howtoaccountforanycontributionsbeyondprofit,andhowtoaccountforstakeholdersbeinghuman(thatis,noteconomic).Economicshasevenstartedtoincludeaccountingforthevalueofhumanhappiness,whichhasbeenembracedbytheOrganisationforEconomicCo-operationandDevelopment’s(OECD)‘BetterLifeIndex’onthescaleofnationstates.Andwhilethepursuitofhappinesshasbeencriticisedforfuellingdiscontent(DelheyandKroll,2013),‘hap-piness’asaconceptinthehappinessindexinfactmeasures‘beingcontent’withwhatonehas.HowelsewouldFinlandbethehappiestcountryonearthforsomanytimesinarow?Aninterestingavenueforfurtherresearchisinthecombinationofstakeholdertheorywithothertheories(Freemanetal.,2020).Thislendsitselftoconsideringthedimensionofpeopleandtheirvoices,forexampleintheresource-basedviewas‘stakeholderresourcedependence’(Frooman,1999),inagencytheoryas‘stakeholderagencytheory’(HillandJones,1992),orBarney’s(2018)renewedresource-basedviewthatincorporatesstakeholdersaswell.Whilenotactuallynew,thesedevelopmentshaveyettofindtheirwayintosupplychainmanagementresearch.FollowingSarkisetal.’s(2011)suggestions,itishightimetousestakeholdertheorybeyondstakeholderclassificationinsupplychainmanagement,toembraceitsfullpotentialwhenanalysingglobalsupplychains.Weareyettounderstandhow,forexample,verylocalstakeholdersofveryspecificproblemscaninfluenceglobalsupplychainsintheiroperations.Forexample,localenvironmentalgroupshaveabetterunderstandingofthepollution-relatedproblemsintheirimmediateenvironment,butcompanieswithheadquartersfarawaytendnottoheedthemmuchattentionuntiltheirrelationshipbecomesadestructiveone.Yet,lookingatstakeholdersinvariouslocations,andintheglobalsupplychain,couldindeedcontributetotheriseofglobalproduct,process,butalsoenvironmentalandsocialstandards.Learningfromhumanitariansupplychains,onecouldalsoconsidermultiplefocalorganisa-tionsandtheirstakeholdersinsupplychainmanagement.Whatismore,thereismuchtolearnfromlookingattherelationshipsbetweenstakeholderstounderstandhowtheyinfluenceoneanother,andhowthatinfluencecontributestothedynamicsoftheirsalience.Newertrendsalsoneedadifferentlenstounderstandthem.Thesharingeconomycouldbemuchbetterunderstoodifitincorporatedmorethanjusttheeconomicincentivesfordiffer-entgroupsengaginginsuchactivities.Newbusinessmodelswoulddefinitelybenefitfromunderstandingnotjustexistingbutalsofutureusers’andnon-users’perspectivesonwhattheyintendtodo.Inaddition,itishightimetomoveawayfromtheoutspokenstakeholderswithavoicetoindeedconsidertheenvironment,orsocietyatlarge,asstakeholders.Afterall,theLoraxisnotalwaystheretospeakforthetrees.REFERENCESAapaoja,A.andHaapasalo,H.(2014),‘Aframeworkforstakeholderidentificationandclassificationinconstructionprojects’,OpenJournalofBusinessandManagement,2(1),article42090.Achrol,R.S.,Reve,T.andStern,L.W.(1983),‘Theenvironmentofmarketingchanneldyads:aframe-workforcomparativeanalysis’,JournalofMarketing,47(4),55–67.GyöngyiKovács-9781839104503DownloadedfromPubFactoryat05/28/202209:10:55AMviaColumbiaUniversityLibrary

336318Handbookoftheoriesforpurchasing,supplychainandmanagementresearchAgle,B.R.,Donaldson,T.,Freeman,R.E.,Jensen,M.C.,Mitchell,R.K.andWood,D.J.(2008),‘Dialogue:towardsuperiorstakeholdertheory’,BusinessEthicsQuarterly,18(2),153‒190.Barney,J.B.(2018),‘Whyresource‐basedtheory’smodelofprofitappropriationmustincorporateastakeholderperspective’,StrategicManagementJournal,39(13),3305‒3325.Carter,C.R.andEllram,L.M.(1998),‘Reverselogistics:areviewoftheliteratureandframeworkforfutureinvestigation’,JournalofBusinessLogistics,19(1),85‒102.Carter,C.R.andJennings,M.M.(2004),‘Theroleofpurchasingincorporatesocialresponsibility:astructuralequationanalysis’,JournalofBusinessLogistics,25(1),145‒186.Chen,J.,Harrison,G.andJiao,L.(2018),‘Whoandwhatreallycount?Anexaminationofstakeholdersalienceinnot-for-profitservicedeliveryorganizations’,AustralianJournalofPublicAdministration,77(4),813‒828.Christopher,M.(1998),LogisticsandSupplyChainManagement.StrategiesforReducingCostandImprovingService,2ndedn.London:PrenticeHall.Delhey,J.andKroll,C.(2013),‘A“happinesstest”forthenewmeasuresofnationalwell-being:howmuchbetterthanGDParethey?’In:Brockmann,H.andDelhey,J.(eds),HumanHappinessandthePursuitofMaximization.Dordrecht:Springer,pp.191‒210.Donaldson,T.andPreston,L.E.(1995),‘Thestakeholdertheoryofthecorporation:concepts,evidence,andimplications’,AcademyofManagementReview,20(1),65‒91.Fontainha,T.C.,Leiras,A.,deMelloBandeira,R.A.andScavarda,L.F.(2017),‘Public‒private‒peoplerelationshipstakeholdermodelfordisasterandhumanitarianoperations’,InternationalJournalofDisasterRiskReduction,22,371‒386.Freeman,R.E.,Phillips,R.andSisodia,R.(2020),‘Tensionsinstakeholdertheory’,BusinessandSociety,59(2),213‒231.Friedman,A.L.andMiles,S.(2002),‘Developingstakeholdertheory’,JournalofManagementStudies,39(1),1‒21.Friedman,A.L.andMiles,S.(2004),‘Stakeholdertheoryandcommunicationpractice’,JournalofCommunicationManagement,9(1),89‒97.Frooman,J.(1999),‘Stakeholderinfluencestrategies’,AcademyofManagementReview,24(2),191‒205.Heaslip,G.,Sharif,A.M.andAlthonayan,A.(2012),‘Employingasystems-basedperspectivetotheidentificationofinter-relationshipswithinhumanitarianlogistics’,InternationalJournalofProductionEconomics,139(2),377‒392.Hill,C.W.andJones,T.M.(1992),‘Stakeholder-agencytheory’,JournalofManagementStudies,29(2),131‒154.Kern,D.,Moser,R.,Sundaresan,N.andHartmann,E.(2011),‘Purchasingcompetence:astakeholder-basedframeworkforchiefpurchasingofficers’,JournalofBusinessLogistics,32(2)122‒138.Kovács,G.(2008),‘Corporateenvironmentalresponsibilityinthesupplychain’,JournalofCleanerProduction,16(15),1571‒1578.Kovács,G.andSpens,K.(2009),‘Identifyingchallengesinhumanitarianlogistics’,InternationalJournalofPhysicalDistributionandLogisticsManagement,39(6),506‒528.Kovács,G.,Spens,K.M.andKorkeila,R.(2006),‘Stakeholderresponsetofuturechangesinthereversesupplychain’,InternationalJournalofLogisticsSystemsandManagement,2(2),160‒176.Mitchell,R.K.,Agle,B.R.andWood,D.J.(1997),‘Towardatheoryofstakeholderidentificationandsalience:Definingtheprincipleofwhoandwhatreallycounts’,AcademyofManagementReview,22(4),853‒886.Oliveira,M.V.D.S.S.,Simão,J.anddaSilvaCaeiro,S.S.F.(2020),‘Stakeholders’categorizationofthesustainablepublicprocurementsystem:thecaseofBrazil’,JournalofPublicProcurement,20(4),423‒449.Pålsson,H.andKovács,G.(2014),‘Reducingtransportationemissions:areactiontostakeholderpres-sureorastrategytoincreasecompetitiveadvantage’,InternationalJournalofPhysicalDistributionandLogisticsManagement,44(4),283‒304.Polsa,P.(2002),‘PoweranddistributionnetworkstructureinthePeople’sRepublicofChina–thecaseofaninlandcityintransition’,DoctoralThesis,Helsinki:SwedishSchoolofEconomicsandBusinessAdministration.GyöngyiKovács-9781839104503DownloadedfromPubFactoryat05/28/202209:10:55AMviaColumbiaUniversityLibrary

337Stakeholdertheory319Pullman,M.andWikoff,R.(2017),‘Institutionalsustainablepurchasingpriorities:stakeholderpercep-tionsvsenvironmentalreality’,InternationalJournalofOperationsandProductionManagement,37(2),162‒181.Sarkis,J.,Gonzalez-Torre,P.andAdenso-Diaz,B.(2010),‘Stakeholderpressureandtheadoptionofenvironmentalpractices:themediatingeffectoftraining’,JournalofOperationsManagement,28(2),163‒176.Sarkis.J.,Zhu,Q.andLai,K.-H.(2011),‘Anorganizationaltheoreticreviewofgreensupplychainmanagementliterature’,InternationalJournalofProductionEconomics,130(1),1‒15.Schiffling,S.andPiecyk,M.(2014),‘Performancemeasurementinhumanitarianlogistics:acustomer-orientedapproach’,JournalofHumanitarianLogisticsandSupplyChainManagement,4(2),198‒221.GyöngyiKovács-9781839104503DownloadedfromPubFactoryat05/28/202209:10:55AMviaColumbiaUniversityLibrary

33821.InstitutionaltheoryKatriKauppiINTRODUCTIONInstitutionaltheoryisfocusedonexplainingsimilarity,notvariety,inorganizationalpractices:whatcausesorganizationswithinanindustrytobecomeverymuchlikeeachotherinthepracticesandstructurestheyhaveastimepasses(DiMaggioandPowell,1983).Thetheoryexplainshoworganizationsconformtoinstitutionalrulesinhowtheyworktogainpublicacceptance,accesstovariousresourcesandtoimprovetheirlikelihoodofsurvival(MeyerandRowan,1977).Theseinstitutionalrulesarearguedtospreadthroughthreespecificinstitutionalpressures:coercive,mimeticandnormative(DiMaggioandPowell,1983).Inconformingtothesepressures,organizationsgraduallybecomesimilar(isomorphic);whichthenincreasesthelegitimacyoftheseorganizations(Deephouse,1996).Aslegitimacy(generalacceptanceofhowtheorganizationoperates)isseenasnecessarytocompete,organizationsadoptthosepracticesperceivedasmostlegitimate.Thiseventuallyleadstosimilarityinhoworganizationsoperateandhow,forexample,supplychainsarestructured.Anotherkeyconstructrelatedtothetheory,thoughsurprisinglyrarelyincorporatedintoempiricalstudies(seeKauppi,2013),isuncertainty.Highenvironmentaluncertaintyparticularlyencouragestheneedtostriveforlegitimacybyimitatingotherparties(DiMaggioandPowell,1983).Whenthereishighuncertaintydueto,forexample,economicinstabilityorthevisibilityoneorganizationhastoitssupplychain,itcanbesafertousesimilaroperatingpracticesthateveryoneelseusesratherthantestnewones(whichpotentiallycouldbemoreeffective).Whereinstitutionaltheoryperhapsdiffersfrommanyotherorganizationaltheoriesisthelogicthatorganizationsadoptstructuresandpracticesnotduetotheireffectivenessorefficiencyinproducingoutcomes,butduetothelegitimacyandpublicacceptancethattheiradoptiongrantstotheorganization(AlvessonandSpicer,2019).Itisthusgearedtowardsexplainingbehavioursthatmaydefyrationaleconomicexplanation(Suddabyetal.,2013).Accordingtoinstitutionaltheory,organizationalsuccessrestsnot(only)onhowefficientanorganizationis,butalsoonwhethertheorganizationisacceptedbyitsinstitutionalenviron-ment,andthusreceivestheresourcesitneedsforsurvival(MeyerandRowan,1977;TolbertandZucker,1999)suchasfinancing,stakeholderacceptanceandcustomerorders.Thiscancreateconflictsbetweenwhatmightbethemostefficientwaytohandleoperationsgiventhepracticalrealitiesoftheoperatingenvironment,andthestructuresandpracticesthatshouldbeadoptedbasedoninstitutionalrulesandmyths(MeyerandRowan,1977;Scott,2008).Suchconflictscanbesolvedbyceremonialconformity;loosecouplinganddecouplingbetweentheactualoperationsandtheformalstructuresandpracticesthatarisefrominstitutionaldemands(MeyerandRowan,1977).Anexampleofdecouplingwouldbeasuppliermakingcosmeticchangesinitssustainabilitypracticesafterafailedauditinordertopassthenextone,butinpracticereturningtooldunsustainablehabitsinbetweentheaudits(Wilhelmetal.,2016).Whentalkingtoanorganizationaltheorist,institutionaltheorycantakeonvariousmeaningsaspresented,forexample,byScott(1987).Wheninstitutionaltheoryisappliedinpurchasing320KatriKauppi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:57AMviaColumbiaUniversityLibrary

339Institutionaltheory321andsupplychainresearch,however,itusuallyrelatestothestudyofisomorphism,thatis,similarityinorganizationalpracticesandforms.Anexampleofisomorphisminasupplychaincontextwouldbethatmostorganizationsuseacodeofconductastheirkeytoolinachievingsupplychainsustainability.Morespecifically,whatisoftenstudiedarethecausesofsuchiso-morphism,focusingthusparticularlyonwhatisalsoknownasneo-institutionaltheory.Thischapterwillfocusonthistheoreticalperspectivewhenexplaininginstitutionaltheory,buildingonthekeyreferencesofMeyerandRowan(1977)andDiMaggioandPowell(1983),mostoftencreditedforthebirthofthis(neo)-institutionaltheory.Towardstheendofthechapter,abriefoverviewofsomeoftheothervariantsofinstitutionaltheoryisalsopresented.KEYVARIABLESANDDEFINITIONSDiMaggioandPowell(1983),intheirseminalwork,havepresentedthreemechanisms,orformsofpressure,towardsinstitutionalisomorphism:coercive,mimeticandnormative.Thesepressuresdriveorganizationstowardsisomorphism,whichinturnsincreasestheirlegitimacy.TheseandotherkeyvariablesofthetheoryaredefinedinTable21.1.Intheirfoundingwork,DiMaggioandPowell(1983)presenttestablehypothesesforbothorganizationalandfield-levelbehaviour.Anorganizationalfieldisdefinedas‘organizationsthat,intheaggregate,constitutearecognizedareaofinstitutionallife:keysuppliers,resourceandproductconsumers,regulatoryagencies,andotherorganizationsthatproducesimilarservicesorproducts’(DiMaggioandPowell,1983,p.148).Earlyon,muchsociologicalneo-institutionalresearchfocusedonhigherlevelsthantheindividualorganization(Scott,2008).Later,manyreviewstudiesofinstitutionaltheoryinsubfieldsofmanagementshowtheorganizational-levelunitofanalysistobethemosttypicalapproach(seeKauppi,2013;Weerakkodyetal.,2009).Thisislikelybecausesubfieldsofmanagementoftenfocusonfunc-tionalpracticeswithinanorganization,andtheresearchtraditionhasnotbeentoexaminethebehaviourandprocessoffieldsandindustriesoverall.Thetheorycanbeappliedatbothlevels.InstitutionalIsomorphismInstitutionalisomorphismisaprocessthroughwhichorganizationsconformtoinstitutionalrules,becominghomogeneousovertime(DiMaggioandPowell,1983).Threetypesofiso-morphismareintroducedbyDiMaggioandPowell(1983):coercive,mimeticandnormativeisomorphism.Institutionaltheoryfocusesoninstitutionalisomorphism,butotherformsofisomorphismexist.Specifically,competitiveisomorphismisoftendiscussedinpopula-tionecologymodels(seeHannanandFreeman,1977);competitiveisomorphismexplainssimilaritybasedonselectionandsurvivalofthefittestorganizationalformsinaparticularenvironment.CoercivePressureCoercivepressuresarerequirementsimposedfromoutsidetheorganization,bypartiestheorganizationreliesonforresourcesorsupport(DiMaggioandPowell,1983).Sourcesofcoercivepressureinclude,forexample,dominantsuppliersandbuyers,investorsandgovern-mentalparties.AccordingtoMizruchiandFein(1999),coercivepressuresaredrivenbytwoKatriKauppi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:57AMviaColumbiaUniversityLibrary

340322Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable21.1DefinitionsofinstitutionaltheoryvariablesElementExplanationSupportingreferencesUnitofanalysisMosttypicallyorganizationalorfield-levelanalysis,butalsoDiMaggioandPowell,1983;Scott,individual,organizationalfunction,supplyrelationshipor2008;Weerakkodyetal.,2009;Kauppi,societylevelanalysis,forexample.2013;Svejvig,2013LevelofanalysisMacro-level,lookingathoworganizationalfieldsbecomeDiMaggioandPowell,1983;Aksomisomorphic;ormicro-level,lookingathoworganizationsetal.,2020conformtoinstitutionalpressures.KeyvariablesDefinitionInstitutionalisomorphismConstrainingprocessthatimpelsoneorganizationtobecomeDiMaggioandPowell,1983similartoothersinapopulationundersimilarconditions.CoercivepressureCoercivepressuresarecausedbyentitiesanorganizationDiMaggioandPowell,1983dependson,forexamplepowerfulsuppliersorcustomers,orregulatorybodieswhichdemandtheuseofcertainpractices.MimeticpressureMimeticpressures,orimitativepressures,describetheDiMaggioandPowell,1983pressuretoimitatesuccessfulorganizationswhenfacedwithuncertaintybetweenmeansandends.NormativepressureNormativepressuresarearesultofprofessionalnormsDiMaggioandPowell,1983andstandardswithinindustriesandfunctions,spreadbyprofessionalassociationsandeducationalbodies,forexample.LegitimacyPerceptionorassumptionthattheactionsofanorganizationSuchman,1995;MeyerandRowan,(or,forexample,purchasingfunctionorasupplychain)are1977desirableandappropriateintheinstitutionalenvironmenttheorganizationoperateswithin.DecouplingTheprocessofanorganizationadoptingstrategiesandMeyerandRowan,1977practicesbasedoninstitutionalexpectationsandpressureswithoutproperlyimplementingsuchpractices.Inthisinstance,theorganizationpractices‘ceremonialconformity’,appearingpubliclyasifchangingitspractices,butactuallynotchanginghowitoperatesonadailybasis.AssumptionsabouthumanIndividualsareassumedtobe‘oversocialized’,acceptingandDiMaggioandPowell,1991,p.14;naturefollowingsocialnormswithoutquestioningtheirrationality.TolbertandZucker,1999Humanbehaviourisseenasunreflectiveandroutine.forces:(1)pressuresfromotherorganizationswhichanorganizationisdependenton;and(2)pressuretoconformtotheculturalexpectationsofthelargersociety.ExampleswouldincludeabuyingorganizationdemandingInternationalOrganizationforStandardization(ISO)stand-ardsfromitssuppliers,orpressurefromstakeholdersforconsumergoodsmanufacturerstopresentsustainabilitycertificatelabelsfortheirproducts.MimeticPressureMimeticisomorphismoccurswithinindustrygroupstomaintainlegitimacybyimitatingsuccessfulstrategies.Organizationswillascribecompetitors’successtotheirstrategicchoicesandimitatethepracticesofthesecompetitors(Liuetal.,2010).AclassicexampleisthespreadofleanmanufacturingpracticesfromToyota,whichwerecreditedtobebehindtheirsuccessintheautomotiveindustryandsinceadoptedacrossindustries.MimeticpressurescanbeveryKatriKauppi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:57AMviaColumbiaUniversityLibrary

341Institutionaltheory323stronginsituationswithuncertaintybetweenactionsandoutcomes,oroverallenvironmentaluncertainty(DiMaggioandPowell,1983).NormativePressureNormativepressuresareaboutsharingofnormsandvaluesamongpeoplewhobelongtosamenetworksthrough,forexample,theirworkorprofession(Basagliaetal.,2009).Employeeswithcomparableeducationalbackgrounds,linkedtosameinstitutions,andwithsimilarindustryexperiences,oftendefineproblemsandfilterinformationinthesameway(DiMaggioandPowell,1983).DiMaggioandPowell(1983)discusstwomainsourcesofisomorphismthroughprofessionalization:formaleducationthroughuniversities,andprofessionalnetworksspanningorganizationsanddiffusingnewpractices(examplesinthesupplychainmanage-mentdomainwouldincludetheInstituteofSupplyManagementintheUnitedStatesandCharteredInstituteofProcurementandSupplyintheUnitedKingdom).LegitimacyLegitimacyisakeyelementininstitutionaltheory,asstrivingforitleadstoadoptionofparticularstructuresandpractices.MeyerandScott(1983,p.201)presentorganizationallegitimacyasthedegreeofculturalsupportforanorganization.AwidelyciteddefinitionbySuchman(1995,p.574)providesamoredetaileddescriptionofthisconceptas:‘ageneralizedperceptionorassumptionthattheactionsofanentityaredesirable,proper,orappropriatewithinsomesociallyconstructedsystemofnorms,values,beliefsanddefinitions’.Suchman(1995)furtherdefinesthreedifferentformsoflegitimacy:pragmatic,moralandcognitive.WhileDeephouseetal.(2017,p.33)suggestthattherearefourstatesoforganizationallegiti-macyresultingfromlegitimacyevaluations:accepted,proper,debatedandillegitimate.DecouplingPreferably,thealignmentbetweenstructuresandactivitiesinanorganizationistight(MeyerandRowan,1977).Butinthepresenceofconflictinginstitutionalpressures,orwhenfacedwithinstitutionalpressuresthatareinconflictwiththeirtaskenvironments,organizationswilldecoupletheirformalstructurefromactualproductionactivities(BoxenbaumandJonsson,2008,p.86).Thismeans,forexample,thatanorganizationcansymbolicallyadoptsomeISOstandardsbutonly‘gothroughthemotions’relatedtothemratherthantrulyintegratetheassociatedpracticesintotheirperformanceimprovementsystems.Somelaterstudiesdistin-guishbetweenpolicy‒practicedecoupling(adoptingapracticesymbolicallywithoutproperimplementation)andmeans‒endsdecoupling(complyingwithapolicybutfailingtoachievethegoalsofsuchapolicy)(HaackandSchoeneborn,2015).DOMAINWHERETHETHEORYAPPLIESInstitutionaltheoryseekstoexplainhomogeneity,notvariation(DiMaggioandPowell,1983).Itpredictshoworganizationsand,asaresult,organizationalfieldsbecomesimilar,andtheprocessesthroughwhichorganizationalstructuresareadopted(Aksometal.,2020;KatriKauppi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:57AMviaColumbiaUniversityLibrary

342324Handbookoftheoriesforpurchasing,supplychainandmanagementresearchDonaldson,2008,p.5).Theemphasisofthetheoryisthusonthecausesoforganizationalstructure,butitalsoincludestheideaofconsequences:adoptionofthecorrectstructureasapprovedintheinstitutionalenvironmentleadstolegitimacyandsupport(DiMaggioandPowell,1983;Donaldson,2008,p.7).Thetheorycanthusbeusedtoexplaintheadoptiondecisionsofanorganization,asupplychainor,forexample,thepurchasingfunction:whatmakestheseunitsadoptsimilarpractices,technologiesorstructures.Further,thetheorycanexplainhowadoptionofsuchpractices,technologiesandstructuresimpactsuponperformancethroughincreasedlegitimacyandaccessto,forexample,financialresources.Arelevantexampleissustainabilitypractices:organizationsnotdemonstratingtheuseofsustainablesupplychainpracticestotheirstakeholdersareatriskofbeingnegativelyportrayedin(social)media,andmayalsobesubjecttolessadvantageousloantermsbyfinancialinstitutions.RELATIONSHIPSBETWEENTHEVARIABLESFigure21.1presentsthekeyvariablesofthetheoryandtheirrelationshipswitheachother.Therelationshipsbetweenthevariablestakeplacewithinanorganizationalfield.Inaparticularfield,thethreetypesofinstitutionalpressuresleadtoisomorphismofpracticesatthefieldlevel,andtoadoptiondecisionsatanorganizationallevel.Increasedenvironmentaluncer-taintyinthefieldmoderatesthisrelationship,increasingparticularlytheimpactofmimeticpressures.Theadoptionoftheinstitutionalizedpracticesgivestheadoptingorganizationslegitimacyandincreasedsurvivalprospects.Theactualperformanceofsuchinstitutionallyadoptedpractices,however,isalsocontingentontheextenttowhichtheyarecoupledordecoupledwithactualoperations.Severalstudiesin,forexample,qualitymanagementhaveshownthatinstitutionallymotivatedadoptionsofISOcertificationstendtoleadtoweakerimplementationoftheassociatedpracticesandhencealsotheperformanceofsuchpractices.THEORETICALPREDICTIONS(FACTUALCLAIMS)Bothseminalarticles,MeyerandRowan(1977)andDiMaggioandPowell(1983),presentasetoftheoreticalpredictions,theformeraspropositionsandthelatterashypotheses.ThesepredictionsfollowwhatispresentedinFigure21.1concerningtherelationshipsbetweenkeyvariablesinthetheory.Specifically,MeyerandRowan(1977,p.352)predictthat‘organizationsthatincorporatesociallylegitimatedrationalizedelementsintheirformalstructuresmaximizetheirlegitimacyandincreasetheirresourcesandsurvivalcapabilities’.Butastheinstitutionaldemandscanbeatoddswiththedemandsofthebusinesscontext,theyfurthertheorizethat‘elementsofstructurearedecoupledfromactivitiesandfromeachother’(MeyerandRowan,1977,p.357).DiMaggioandPowell(1983)postulateinmoredetailtheprocessesleadingtoorganiza-tionalisomorphismthroughcoercive,mimeticandnormativepressures.Higherdependenceonanotherorganizationisexpectedtoleadtohigherresemblancetothatorganization.Higherlevelsofuncertaintybetweenmeansandends,aswellashigherlevelsofgoalambiguity,increasethelikelihoodthatanorganizationwillimitateothersthatitperceivesassuccessful.Higherrelianceonacademiccredentialsinhiring,aswellashigherlevelsofparticipationinprofessionalorganizations,increasethelikelihoodthatanorganizationwillstarttoresembleKatriKauppi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:57AMviaColumbiaUniversityLibrary

343Institutionaltheory325Figure21.1Overviewofinstitutionaltheorykeyvariablesandtheirrelationshipsotherorganizationsinitsfield.Mostotherarticlesfollowasimilarlogic,suggestingthatthethreetypesofpressure(whichtakeonparticularcharacteristics,giventhephenomenastudied)leadtoincreasedlevelsofadoptionofaparticularform,structureorpractice.DiMaggioandPowell(1983)furtherspecifyfield-levelhypotheses,theorizingthefactorsthatmakeanorganizationalfieldlikelytobecomehighlyhomogenous.Theseinclude,forexample,dependenceonasinglesourceofvitalresources,theextentoftransactionswiththestate,thelimitednumberofalternativeorganizationalmodels,andtechnologicaluncertainty.HOWHASTHISTHEORYBEENUSED?Inthe1980s,institutionaltheorystartedtogatherempiricalsupportasorganizationalscien-tists,mainlythroughlargequantitativedatasets,exploredtheprocessesofinstitutionalization(AlvessonandSpicer,2019).Inoperationsmanagement,aswellasinsupplychainmanage-ment,thetheorywasalateemergerintheearly2000s(comparedto,forexample,contingencytheory,theresource-basedviewandagencytheory).Kauppi(2013)providesareviewofinstitutionaltheoryusageinoperationsandsupplychainmanagement(OSCM)researchupto2012ineightkeyjournalsinthearea(JournalofOperationsManagement,InternationalJournalofOperationsandProductionManagement,ManufacturingandServiceOperationsManagement,ProductionandOperationsManagement,InternationalJournalofProductionEconomics,InternationalJournalofProductionResearch,SupplyChainManagement:InternationalJournalandtheJournalofKatriKauppi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:57AMviaColumbiaUniversityLibrary

344326Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable21.2OverviewofinstitutionaltheoryusageinOSCMjournalsApplicationareaAuthorsOverviewoftimelineandmethodsEnvironmentalAdebanjoetal.,2016b;Agarwaletal.,2018;DubeyetAtotalof23articles,withthepeakofsustainabilityal.,2015,2017;Gloveretal.,2014;Gonzalezetal.,2008;publications(15)appearingbetween2012Grekovaetal.,2014;Heras-Saizarbitoriaetal.,2011;and2016.Hoejmoseetal.,2014;Huangetal.,2016;Lietal.,2019;20ofthearticlesusethesurveymethodology,LoandShiah,2016;Miemczyk,2008;Selesetal.,2016;1isaconceptualstudy,and2arequalitativeShietal.,2012;Simpson,2012;Tachizawaetal.,2015;studies.Wuetal.,2012;Yangetal.,2019;Yeetal.,2013;Zhu,2016;ZhuandSarkis,2007;Zhuetal.,2013SocialsustainabilityAdebanjoetal.,2013;CastkaandBalzarova,2008;Flynn,Atotalof9articles,with8publishedafter2019;KauppiandHannibal,2017;Loetal.,2014;Mani2012.andGunasekaran,2018;MoxhamandKauppi,2014;Avarietyofmethods:1survey,3qualitativeVenkateshetal.,2020;YawarandKauppi,2018studies,2conceptualstudies,2secondarydataanalyses,and1mixedmethods.QualitymanagementAdebanjoetal.,2016a;BoiralandRoy,2007;Atotalof10articles,withmostpublishedBraunscheideletal.,2011;Dubeyetal.,2018;Loetal.,between2007and2011.2011;LoandYeung,2018;Martinez-Costaetal.,2008;Most(6)aresurveys,with2secondarydataNairandPrajogo,2009;Prajogo,2011;Sila,2007analysesand2qualitativestudies.SupplierintegrationCaietal.,2010;Huoetal.,2013;WongandBoon-itt,Atotalof4articlesbetween2006and2013.2008;Yeungetal.,20063surveysand1casestudy.InformationBarrattandChoi,2007;BhakooandChoi,2013;HewetAtotalof8articlesbetween2006and2013.technology/al.,2020;Liuetal.,2010;Saldanhaetal.,2015;SoderoetAmixofmethodswith4qualitativestudies,3informationsystemsal.,2013;Xieetal.,2016;ZhangandDaliwal,2009surveys,and1secondarydataanalysis.SustainabilityinGrosvoldetal.,2014;Sanchaetal.,2015;Sayedetal.,Atotalof4studiesbetween2014and2017.general2017;Wilhelmetal.,20164casestudies,1combiningsurveyandsecondarydata.Othertopics(1articleChengandChen,2016;Dobrzykowski,2019;GopalandAtotalof12studiesspreadthroughoutpertopicarea)Gao,2009;Hirschingeretal.,2016;Howardetal.,2007;2005‒2019.Meehanetal.,2016;MunirandBaird,2016;Rogersetal.,Amixofmethodsincludingsurvey,secondary2007;Tateetal.,2009;Wangetal.,2018;Wuetal.,2013;data,delphistudy,qualitativestudiesandZsidisinetal.,2005mixedmethods.Topicsinclude,forexample,outsourcing,modularityandsupplierdevelopment.SupplyChainManagement).Forthischapter,anabstract-basedkeywordsearchofinstitu-tionaltheoryusageinthesameoperationsandsupplychainmanagementjournals,andalsotheJournalofPurchasingandSupplyManagement,wasconductedtoprovideamoreupdatedusageofthetheoryinourfield.ThecombinedoverviewbasedonthisreviewandthatofKauppi(2013)inthesenineOSCMjournalsisprovidedinTable21.2.Thisoverviewdemonstratesthatsustainability-relatedtopicshavereceivedbyfarthemostattentionintheuseofinstitutionaltheory.Sucharticlesrepresent36outofthetotal66articlesusingthetheorypublishedbetween2005and2020.Whileearlierapplicationsofthetheoryfocusedmostlyonexplainingtheadoptionofqualitymanagementpracticesanddifferentinformationtechnologyandsystemsandsupplierintegration(thebulkofthisworkconductedbetween2006and2013),environmental,socialandoverallsustainability-relatedtopicsdominatedinthefollowingyears(mostlypost-2012).Surveyshavebeenthedominantmethodologicalchoice,with37outof66articlesusingsurveyinstruments.Kauppi(2013)KatriKauppi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:57AMviaColumbiaUniversityLibrary

345Institutionaltheory327criticizedtheitemformationforsurveyslookingatinstitutionalpressures,notingthatmoststudiesonlyuseasingleconstructforexternalpressuresoverall.Suchagroupedconstructforalltheinstitutionalpressures,however,doesnotprovideadetailedexplanationonhowexactlysupplychainpracticesareinfluenced:aretheyshapedbyeducationorlegislativepressureor,forexample,bymimickingleadingmultinationalorganizations.Inthisrespect,someimprove-mentshavebeenmade.Whilesingleconstructstudiesstillcontinuetobepublished,therearealsoseveralusingseparateconstructsforeachoftheinstitutionalpressures(seeforexampleDubeyetal.,2017;Dubeyetal.,2018;Hewetal.,2020;Huoetal.,2013;MunirandBaird,2016;Zhuetal.,2013;Zhu,2016).Surveyshavebeenthedominantmethodparticularlyinexaminingenvironmentalsustainability-relatedissues(20/23).Otherapplicationareasshowamorevarieduseofmethods,includingqualitativemethods,conceptualstudiesandsecond-arydata.Mostreviewedstudiesusethecompanyororganizationastheirunitofanalysis;thatis,theentitybeingimpacteduponbyinstitutionalpressures.Theresultsofthisreviewareinlinewiththoseof,forexample,Walkeretal.(2015),whonotesupplychainmanagement,sustainabilityandtotalqualitymanagementasthetopareasinwhichinstitutionaltheoryhasbeenapplied.Institutionaltheoryhasalsobeensubjecttocomparativestudiesofexplanatoryvaluewithothertheories(seeforexampleAdebanjoetal.,2016b;Rogersetal.,2007;Tateetal.,2009;Zsidisinetal.,2005),particularlyinrecentyearsinrelationtothenaturalresource-basedview(Grekovaetal.,2014;Lietal.,2019).ABRIEFLOOKONTHEOTHERVARIANTSOFINSTITUTIONALTHEORYANDTHEIRUSEINTHEFIELDWhileinstitutionaltheoryexaminesisomorphism,ironicallythetheoryitselfhasmanyvar-iants(TolbertandZucker,1999).Foradetaileddiscussiononthese,thereaderisreferredtotheworksofScott(1987,2008).InthischapterthefocushasbeenonthestreamthatreliesheaviestonMeyerandRowan’s(1977)andDiMaggioandPowell’s(1983)seminalworks;thishasalsobeenthestreamofinstitutionaltheorymostappliedinOSCM(andinotherfieldssuchasenterprisesystemsresearch;seeSvejvig,2013).Thereare,however,severalotherstreamsofthetheory,whichhaveseenlimiteduseinOSCMsofarbutareequallyimportantinexplainingphenomenainourfield.Abriefoverviewofthreesuchstreamsisprovidedhere,alongwithkeyreferencesforinterestedreaders.EconomicVariantofInstitutionalTheorySimilarlytotheinstitutionaltheorystemmingfromtheworksofDiMaggioandPowell(1983)discussedabove,theeconomicvariantofinstitutionaltheoryemphasizestheroleofuncer-taintyindrivingisomorphisminorganizationalpractices(Kauppi,2013).ThisstreambuildsontheworkofHaunschildandMiner(1997).Themaindifferenceinargumentationisthatorganizationsarenotseekinglegitimacy;rather,theyareeconomicallymotivatedtomimiceachothers’practices(HaunschildandMiner,1997).Particularly,organizationsengageinthreetypesofimitation:frequency-based(mimickingpracticesadoptedbymany),trait-based(mimickingpracticesfromorganizationsofprestige,highperformanceandlargesize)andoutcome-based(mimickingpracticesappearingtohaveresultedinsuccess)(HaunschildandMiner,1997).Thiseconomicvariantofinstitutionaltheoryisusedby,forexample,KetokiviKatriKauppi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:57AMviaColumbiaUniversityLibrary

346328Handbookoftheoriesforpurchasing,supplychainandmanagementresearchandSchroeder(2004),Huangetal.(2010)andTurkulainenetal.(2017)inexplainingtheadoptionofoperationsandsupplychainmanagementpractices.InstitutionalWorkAsecond,relativelynewstreamofinstitutionalstudiesdealswithinstitutionalwork.Thisthe-oreticalstreammovesthefocusfromthestructuresasoutcomesofinstitutionalizationtotheprocessesofinstitutionalization:whatcreates,maintainsanddisruptsinstitutions(LawrenceandSuddaby,2006,pp.215‒216;Suddabyetal.,2013).ThisstreambuildsonthekeyworksofDiMaggio(1988),Oliver(1991,1992)andLawrenceandSuddaby(2006).DiMaggio(1988,p.14)introducestheconceptofinstitutionalentrepreneurship:actorswithsufficientresourceswhocausenewinstitutionstoarise.Oliver(1991)providesatypologyofresponsestoinstitutionalpressures,rangingfrompassiveconformitytoproactivemanipulation,alongwithantecedentstoeachofthestrategicresponses.Oliver(1992)presentedantecedentstodeinstitutionalization,thatis,factorsthatcanleadtoerosionorrejectionofaninstitutionalizedorganizationalpractice.Thisstreamhassofarseenextremelylimiteduseinourfield.NotableexceptionsincludeWuandJia(2018)whoinvestigatesupplychainlocalizationasaprocessofinstitutionalchange,arguingthatmultinationalenterprisesinChinabuildnewinstitutionalinfrastructuretodealwithinstitutionalvoids.InstitutionalLogicsInstitutionallogicsareseenas‘asetofmaterialpracticesandsymbolicconstructionslinkinginstitutionandaction’;theyexplainhowaparticularsocialworldworks(Svejvig,2013,p.7).TheseminalpieceinthisstreamofinstitutionaltheoryisthatbyFriedlandandAlford(1991,p.232),whichintroducescapitalistmarket,bureaucraticstate,democracy,familyandreligionasthecentralinstitutionsofWesternsocieties,eachwiththeirownlogic.This,alongwithotherkeypiecesinthisstream,broughtinstitutionallogicsasakeyelementindefiningthecontentandmeaningofinstitutions(ThorntonandOcasio,2008,p.100).Thisstreamhasmovedthefocusfromisomorphismtotheeffectofthese(andother,laterdefined)institutionallogicsonorganizations,aswellastohoworganizationalactorscanshapetheseinstitutionallogics(ThorntonandOcasio,2008,p.100).Akeytenetinthisstreamisthattounderstandorganizationalbehaviour,itneedstobeexaminedinaninstitutionalcontextwithitslogics,whichbothregulatessuchbehaviourandprovidestheopportunityforchange(ThorntonandOcasio,2008,pp.101‒102).ExampleapplicationsincludeLongonietal.’s(2019)workonmanagingtensionsbetweenconflictinglogicsinamigrantintegrationsupplychain,andPemerandSkjølsvik’s(2016)workonexaminingtheinstitutionallogicsofactorsinvolvedinpurchasesofknowledge-intensiveservices.OUTLOOKONFUTURERESEARCHOPPORTUNITIESWhileseveralstudiesusinginstitutionaltheory,particularlyneo-institutionaltheorywithitsfocusoninstitutionalpressuresandconformity,havealreadybeenconductedinourfield,manyopportunitiesremaintocontributetoboththeoryandpractice.Kauppi(2013)providedanextensiveresearchagendaforinstitutionaltheoryinoperationsandsupplychainmanage-KatriKauppi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:57AMviaColumbiaUniversityLibrary

347Institutionaltheory329ment,withafocusonthreeareas:(1)increasedexaminationoftheroleofuncertaintyinhoworganizationsreacttoinstitutionalpressuresandimitatepracticesofotherorganizations;(2)examiningtherelationshipsbetweenthethreetypesofinstitutionalpressuresthemselves;and(3)understandingtheroleofacademiaasasourceandtargetofinstitutionalpressures.Theseandotherinterestingavenuesarebrieflydiscussedbelow.First,includinguncertaintyasavariableinempiricalstudiesoninstitutionaltheorywasencouragedduetoitskeyroleinthetheorybutlimitedappearanceinpracticesofar(Kauppi,2013).Still,onlyahandfulofpapers(Yangetal.,2019;YawarandKauppi,2018;Reusenetal.,2020;LoandShiah,2016)explicitlydiscusstheroleofuncertaintyand/orincludeitasavariableinsurveyresearch,leavingroomtoexamineitsimpactbetweenpressureandadoption.Second,amoredetailedexaminationofthethreepressuresandtheirlinkageswassuggested,forexample,tounderstandwhichofthepressurestakesprecedenceunderwhichconditionsinasupplychainenvironment.Withtheincreaseduseofseparatemeasuresforthethreepressureconstructssincethen,someprogressinunderstandingthishasbeenmadealready.Yet,fewstudiesinvestigatewhathappensifthethreeinstitutionalpressuresareincon-flictwitheachotherintermsofthepracticestheypushontosupplychains.Relatedly,amoredetailedlookatthepartiesexertingpressure(whichactuallyfallsmoreunderthedomainofinstitutionalwork)wasalsosuggestedbyKauppi(2013).StudiessuchasthatbyKauppiandHannibal(2017)examininghowsocialsustainabilityassessmentinitiativesinstigateanduseinstitutionalpressurestodrivethird-partyaccreditationinsupplychainsarestillrare,meaningthatthereismuchscopetounderstandtheinstitutionalworkshapingmodernsupplychains.ThethirdsuggestionofKauppi(2013),ofOSCMacademicstryingtounderstandourownroleasasourceofinstitutionalpressure,isalsoaresearchavenuetobeexamined.Whileinthe1980smanagementscholarshadalreadybegunusinglargequantitativesec-ondarydatasetstoexploreinstitutionalizationofpractices(AlvessonandSpicer,2019),weareyettoseesecondarydatabeingusedextensivelytounderstandtheinstitutionalizationofparticularpracticesinthesupplychainsofdifferentindustries.Theconceptofdecouplinghasalsobeenexaminedinonlyahandfulofstudies(seeGrosvoldetal.,2014;Wilhelmetal.,2016;Yangetal.,2019).Furtheropportunitiesthusexisttounderstandtheextenttowhich,forexample,differentsustainabilitypractices(codesofconduct,sustainabilitycertifications,andsoon)actuallybringaboutchangesintheday-to-dayoperationsofglobalsupplychains,orwhethertheyareusedmoreasatooltoimproveanorganization’ssupplychainimage.Overall,Greenwoodetal.(2017,p.17)arguethatfutureinstitutionaltheoryresearchshouldfocusontheoutcomesandconsequencesofinstitutions:doestheirmaintenanceordestructionbringbenefitorharmtoorganizationsandsocieties?REFERENCESAdebanjo,D.,Ojadi,F.,Laosirihongthong,T.,andTickle,M.(2013).Acasestudyofsupplierselectionindevelopingeconomies:aperspectiveoninstitutionaltheoryandcorporatesocialresponsibility.SupplyChainManagement:AnInternationalJournal,18(5),553–566.Adebanjo,D.,Samaranayake,P.,Mafakheri,F.,andLaosirihongthong,T.(2016a).Prioritizationofsix-sigmaprojectselection:aresource-basedviewandinstitutionalnormsperspective.Benchmarking:AnInternationalJournal,23(7),1983–2003.Adebanjo,D.,Teh,P.L.,andAhmed,P.K.(2016b).Theimpactofexternalpressureandsustainablemanagementpracticesonmanufacturingperformanceandenvironmentaloutcomes.InternationalJournalofOperationsandProductionManagement,36(9),995–1013.KatriKauppi-9781839104503DownloadedfromPubFactoryat05/28/202209:10:57AMviaColumbiaUniversityLibrary

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35322.ComplexadaptivesystemsKevinJ.DooleyINTRODUCTION‘Complexadaptivesystems’isageneraltermreferringtoameta-theory.Itisnotonetheory,butratherabroadsetofassumptions,constructs,theories,modelsandmethodologies.Atitscore,complexityadaptivesystemstheories,orcomplexityscience,isasubsetofsystemstheory.Traditionalreductionistscienceheldthatsystemscouldbedescribedbytheelementsinsidethemandhowtheyinteracted.Reductionistsciencetendstoassumecausallinearityandunidirectionality.Systemstheorypositsthatcomplexityornon-linearityariseswhensystemvariablesinteractandwhenvariableshavefeedbackmechanisms;forexample,XcausesY,andYcausesX.Systemstheorywasinitiallycreatedinthe1940sasameanstocontrolmechanicalsystems.Weiner(1948)proposedthattheconceptsoffeedbackandinteractionswerecriticaltounder-standingordesigninganybiologicalorsocialsystem.VonBertalanffydevelopedgeneralsystemstheoryin1951(vonBertalanffy,1951),andsystemstheorydevelopedrapidlyindepthandapplicationthroughthefollowingdecades.Insocialsystemsapplications,includingmanagement,systemstheoryinfluencednewtheoriesconcerningevolutionaryprocessesandlearningwithinorganizations,controlmechanismsandcontingencytheory,namelyhowasystem’sexternalenvironmentshapesitsbehaviour(forexample,Simon,1957;Forrester,1961;Bateson,1972).Theconceptsofcomplexityandcomplexadaptivesystemsfirstemergedfromthesesystemstheoryrootsinthe1980s.Gleick’s(1987)Chaos:MakingofaNewSciencepopularizedchaostheoryandfractals.Chaostheoryhadbeendiscoveredatseveralpointsinhistory,butthebookintroducedthetopictoabroadpublic.Inoperationsmanagement,desktopsoftwareallowedpeopletolookforchaosinvarioustypesofoperationaltimeseriesdata(DooleyandVandeVen,1999).Attemptsweremadetousechaostheorytopredictstockmarketprices(Guastello,1995).Concurrentwiththat,PrigogineandStengers(1984)publishedOrderOutofChaos,whichillustratedtheconditionsunderwhichsmallchangesintheexternalenvironmentcanleadtoadaptivechangebythesystem.Tomanymanagementscholars,PrigogineandStenger’sworkintroducedthemforthefirsttimetotheconceptofemergence,wherebyordersandpatternsinanorganizationalorsupplychainemergefrominteractionsfromwithinthesystem,asopposedtobeingmechanicallypreplannedandcontrolled.PrigogineandStenger’sworkinfluencedmanyoftheearlyorganizationalscienceapplications(forexample,Chilesetal.,2004).335KevinJ.Dooley-9781839104503DownloadedfromPubFactoryat05/28/202209:11:01AMviaColumbiaUniversityLibrary

354336Handbookoftheoriesforpurchasing,supplychainandmanagementresearchKEYVARIABLESANDDEFINITIONSGeneralConceptsThestandarddefinitionofasystemisthatanysystemcontainsothersystems,andanysystemisapartofothersystems(Bateson,1972).Thisembeddednessisnotdefactohierarchical,butitrepresentsthenestingnatureofsystems.Acomplexadaptivesystemisasystemthat:(1)behavesincomplexwaysbecauseofthemultitudeofinteractionsbetweencomponentsofthesystem,includingcausalitythatisnonlinearandmultidirectional;and(2)throughsuchinteractionsisadaptivetoenvironmentchangesinordertomaintain,satisficeoroptimizeparticularneedsordesires.Forexample,ifweconsideranorganizationasacomplexadaptivesystem:1.Theorganizationisasysteminthatitiscomposedofothersystems;forexample,pro-duction,purchasingorhumanresources.Itisalsoapartoflargersystems;forexample,asupplychain,anindustrysector,acommunity,andsoon.2.Theorganization’sbehaviouriscomplexinthatitsactionsaretheresultofinteractionsbetweenpeopleandteamsinsideandoutsidetheorganization,andoutcomesfromtheorganizationemergeinsometimesunpredictableanddynamicways.3.Theorganizationmakeschangesthroughitsinternalprocessestoadapttotheenvironment;inotherwords,marketconditions,competitoractions,supplychainfailures,andsoon.Itisworthwhiletonotethatorganizationaltheoristshavetraditionallyassociatedtheterm‘complexity’withadescriptionoftheinnerworkingsofanorganization(Dooley,2021),oftenrelatedtosizeorvariety.Forexample,afirmwithmanyspecialistsisconsideredmorecomplexthanafirmwithfewspecialists.Inthecaseofacomplexadaptivesystem,complexityreferstothemannerinwhichthesystembehavesrelativetoitsinternalstructure.Acomplexadaptivesystem’saggregatebehaviourisemergent,inthatitisnotpredictablefromandcannotbereducedorunderstoodfromitscomponentparts(Holland,1995).Theconceptualformulationofacomplexadaptivesystemissignificantlyinfluencedbythelimitationswehaveinmakingpredictionsorunderstandinghowitworks.Sincethe‘rules’ofacomplexadaptivesystemarenotdeduciblefromobservingbehaviourandoutcomesalone,scientistswishedtoconstructmathematicalmodels,intheformofcomputersimulations.Thefirstwidelyadopteddefinitionofacomplexadaptivesystemwassimultaneouslyaspecifica-tionforacomputersimulationlanguage.Table22.1showsthedefinitionsofconceptsorconstructsassociatedwithcomplexadaptivesystems.AcommonsourceforalloftheseisHolland(1995).Agentsarethebasicelementofacomplexadaptivesystem.Inorganizationcontexts,agentscanrepresentindividualpeople,teams,divisionsorwholefirms.Agentsseektomaximizetheirfitnessbyevolvingovertime.Thefitnessoftheagentisoftenmodelledasamulti-attributeutilityfunction.Agentsscantheirinternalandexternalenvironmentandinterprettheseobservationsviatheirschemata.Schemataarementalmodelsandheuristicrulesthatdefinehowobservationsareinterpretedandwhatareappropriateresponsesforgivenstimuli.Schemataoftenevolvefromsmaller,morebasicschemata.Agentsareassumedtoberationallybounded,inthattheyhavelimitedandperhapsbiasedaccesstoinformationwithinthesystem,andschematamaydifferacrossagentsduetodifferencesinhowpeoplemakedecisions.Withinanagent,multipleandcontradictoryschematamayexist,competingKevinJ.Dooley-9781839104503DownloadedfromPubFactoryat05/28/202209:11:01AMviaColumbiaUniversityLibrary

355Complexadaptivesystems337Table22.1DefinitionsofcomplexadaptivesystemsconceptsElementExplanationUnitofanalysisCanbeappliedatanylevelofalivingsystem,fromamicrobetotheEarthasawhole.Inorganizationalsciences,theunitofanalysisistypicallythefirmoracollectionoffirms;forexample,anindustrysectororsupplynetwork.LevelofanalysisInorganizationalsciences,thelevelofanalysisistypicallythefirmoracollectionoffirms.Keyconstructs/conceptsAgentsThepeoplewhoconstituteanorganization,ortheorganizationsthatconstituteacollectionoforganizations.SchemataMentalmodelsandheuristicrulesthatdefinehowanagentobservesthecurrentsystemstateandidentifiesactionstoimproveitsfitness.FitnessfunctionA(typically)multidimensionalutilityfunctionthatrepresentshowsystemstateconditionsrelatetofitnessoftheagent.ResourcesAgentsexchangeresourceswithoneanotherorwiththeenvironment.Resourcesmaybephysical(tangible:forexample,money)ornon-physical(intangible:forexample,information).AgentinteractionsAgentscommunicatewithoneanotherandexchangeresources.AgenttagsAgentshavelabelsthatotheragentsusetointerprettheirroleinthesystem.AssumptionsabouthumannatureandrealityBoundedrationalityAgentswillactrationallyaccordingtotheirfitnessfunction,butwillbeboundedbycognitivelimitations.SatisficingAgentswillsatisficeoroptimizetheirfitnessfunction.NonlinearityAgentinteractionsleadtocausalrelationsandoutcomesthatmaybenon-linear.DynamismAgentinteractionsleadtocausalrelationsandoutcomesthataredynamic;inotherwords,theychangeovertime.EmergenceThebehavioursandoutcomesofacomplexadaptivesystememergefromtheinteractionsofitscomponents;thesystem’scollectivebehaviourcannotbeexplainedbyitscomponentsalone.viaaselection‒enactment‒retentionprocess.Schemataevolvethroughlearningactionsthatimproveagentfitness.Actionsbetweenagentsinvolvetheexchangeofinformationand/orresources,occurringthroughlinesofconnectivity.Theseflowsmaybenon-linear.Theimpactofinformationorresourcescanundergomultipliereffectsbasedonthenatureofconnectivitybetweenagentsinthesystem.Anactionbyoneagentcanbeconsideredinformationforotheragentsthatareconnectedtoit.Agenttagshelptoidentifywhatotheragentsarecapableoftransactingwithagivenagent.Forexample,inanorganizationalcomplexadaptivesystem,tagsmayidentifyagentsbelongingtodifferentfunctionsorbusinessunits,oronparticularprojectteams.Figure22.1showshowtheconceptsofcomplexadaptivesystemstheoryrelatetooneanother.ExampleGiventhatthecomplexadaptivesystemsconceptsareameta-theory,itisusefultoexamineaspecificorganizationaltheorythatdrawsfromcomplexadaptivesystemsconcepts.ConsiderPrigogineandStenger’s(1984)modelofdissipativesystemsasanexampleofhowtoapplycomplexadaptivesystemstheorytooperationsandsupplychainmanagement.Theirmodeladdressestheprocessquestionofhowcomplexadaptivesystemsadapttoenvironmentalchanges.Thetheoryfundamentallydrawsfromathermodynamicmodelofwhathappenswhenasystemabsorbsenergyfromanexternalsource;inapplicationstoorganizations,wesubstitute‘energy’by‘informationandresources’,butthemechanismsarethesame.UnderKevinJ.Dooley-9781839104503DownloadedfromPubFactoryat05/28/202209:11:01AMviaColumbiaUniversityLibrary

356338Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFigure22.1Acomplexadaptivesystemnormalloads,thesystembalancestheimportandprocessing(dissipation)ofthatenergy;asenergyabsorbedintothesystemincreases,thesystemispushedfarfromequilibrium,wheresmallperturbationscanshiftthestructureofthesystem.Thisnewstructureperformsthesamefunctionastheoriginalstructure,butisstructurallydifferent,moreabletodissipatetheenergybeingimported.Asaspecificexampleofthisdissipativemodelofadaption,considerChilesetal.(2004).InthisarticletheauthorsuseadissipativemodeltoanalysetheemergenceoftheentertainmentclusterinBranson,Missouri.Theircasestudymapshistoricaleventstofourdimensionsofthecomplexitymodel:fluctuation,positivefeedback,stabilizationandrecombination:1.Fluctuation.Agentswithinthesysteminnovateinresponsetointernalorexternalchanges,leadingtosmallexperiments,byplanorbychance.2.Positivefeedback.Fluctuationsthatimprovefitnessareamplified.3.Stabilization.Newstructuresemergeandarestabilizedbyfeedback.4.Recombination.Thesystemcontinuestomakesmall-scaleadaptationsthroughcombiningagents,schemataandresources.Table22.2showsthemappingoftheBransoncaseintothecomplexadaptivesystemsframework.ASSUMPTIONSREGARDINGREALITYAnytheoryormodelthatdrawsfromcomplexadaptivesystemstheorywillmakecertainassumptionsaboutreality.DrawinguponChoietal.(2001),whichappliescomplexadaptivesystemsconceptstosupplynetworks,anysuchtheoryshouldassumethefollowing.KevinJ.Dooley-9781839104503DownloadedfromPubFactoryat05/28/202209:11:01AMviaColumbiaUniversityLibrary

357Complexadaptivesystems339Table22.2ExampleofdissipativesystemsmodelElementExplanationUnit,levelofanalysisIndustryclusterofentertainmentbusinessesinBranson,Missouribeginningaround1955Keyconstructs/conceptsAgentsTheatreswithintheBransonarea;otherrelatedserviceprovidersandgovernmentorganizationsSchemataCollectivevisiontousescalesofeconomyandaudiencefocustodriveeconomicgrowthFitnessfunctionDecisionsbytheatresprimarilymadetosecureshortandlong-termeconomicgainthroughgrowthResourcesAsoneexample,financialresourcesforgrowthflowedinfromcountrymusiclabelswhosawanopportunitytoincreasedemandfortheirproductsAgentinteractionsAsoneexample,theatresinteractedothermediachannelsliketelevisionshowstoenhanceawarenessofBransonandco-brandAgenttagsInthiscaseperhapsthemostimportanttagswerethenamesoftheartistswhowereassociatedwithdifferenttheatresProcessmodelFluctuationSmallchangesinthelocalsystemofBransonleadtotheatreownersrecognizingtheentrepreneurialopportunityofanentertainmentclusterPositivefeedbackPopularlivemusicaleventsactedaspositivefeedback,enhancingconfidenceofinitialinvestorsandattractingmoreStabilizationBransonreinventeditselfseveraldifferenttimesduringthenextseveraldecades,eachtimemakingstructuralchangestoachievegrowthafterithadflattenedRecombinationTheatres‘reused’humanandreputationalcapitalamongstthemselvesaspartofon-goinginnovationSource:Chilesetal.(2004).First,donotassumethatorganizationswithinthesupplynetworkarerational.Organizationswillactinaboundedlyrationalway.Inasupplynetwork,inpracticethismeansthatanorgan-izationwillprefaceitsownfitness(forexample,economichealth)overotherorganizations’fitness,andthattheinformationavailableforittosensethestateofthesystemandmakedecisionswillbelimitedbecauseoflackoftraceabilityandtransparencyinsupplychains.Thecomplexadaptivesystemsperspectiveofasupplynetworkalsorecognizesthatwithinthe‘organizationasagent’isanothercomplexadaptivesystemof‘peopleasagents’,thusthebehaviouralaspectsofhumanbehaviourhavetobetakenintoaccounttounderstandtheemergentbehaviourofanorganization.Second,donotassumethatorganizationsoptimize.Organizationsrarelyhavethedesireoropportunitytooptimizetowardsagivengoal.Instead,organizationswithinasupplynetworkmakedecisionsthatleadto‘goodenough’outcomes,andthatbalancemany,sometimescon-flicting,objectives.Third,donotassume(only)linearcausality.Whilemanyofourresearchmethodsandthustheoriestendtorepresentlinearcausalitybetweencauseandeffect,theoriesandmodelsofcausalityinacomplexadaptivesystemshouldconsider:●Causalitymaybenonlinear;ormaybelinearinaregionbutnon-linearotherwise.●Causalitymaybecontingentononeormanyothercausesorstatesofthesystem.●Causalitymaybebidirectional.●Causalitymaybepresentbutunobservable.KevinJ.Dooley-9781839104503DownloadedfromPubFactoryat05/28/202209:11:01AMviaColumbiaUniversityLibrary

358340Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFourth,donotassumethatsupplynetworksremainthesameovertime.Anycomplexadaptivesystemsmodelortheoryshould,atleastinpart,beaprocessmodel(Pooleetal.,2000),inthatitdescribeshowthesystemchangesovertime.Insupplynetworks,neworganizationsenterwhilesomeleave,andnewtransactionalconnectionsaremadeorbroken.Evenifalltheorganizationswithinasupplynetworkarethesameattwopointsintime,thesupplynetworkwillbedifferent,becausethoseorganizationsandtheirinterrelationswillbedifferent.Fifth,donotassumethatorderwithinasupplynetworkiscreatedbyasinglecompany.Thereisatendencytobelievethatastrongdownstreambuyer‘designs’asupplynetworkandcontrolsitlikeamechanism.Instead,orderinthesupplynetworkemergesfromtheactionsandinteractionsofnumerousorganizations.Sometimesachangeinasupplynetworkcanbetriggeredbyasinglecompany,butitisthecollectivethatdetermines,viatheactionsofitsmembers,whathappens.HOWHASTHISMETA-THEORYBEENUSED?Dooley(2021)examineshowmuchcomplexadaptivesystemsconcepts(aswellasothercomplexityscience-relatedconcepts)havebeenadoptedbyscholarsinorganizationscience,management,operationsmanagementandsupplychainmanagement.Thesearchforrelevantarticleswasconfinedtothetop-reputationjournalsaspertheFinancialTimesjournallist.Overa20-yearperiodfrom1999to2018,thejournalsAdministrativeScienceQuarterly,JournalofManagement,ManufacturingandServiceOperationsManagement,OperationsResearch,OrganizationalBehaviorandHumanDecisionProcesses,ProductionandOperationsManagement,SloanManagementReviewandStrategicEntrepreneurshipJournalhadzerorelevantarticles.ThejournalsAcademyofManagementJournal,AcademyofManagementReview,EntrepreneurshipTheoryandPractice,JournalofBusinessEthics,JournalofBusinessVenturing,JournalofManagementStudies,JournalofOperationsManagement,ManagementScience,OrganizationScience,OrganizationStudiesandStrategicManagementJournalhadatotalof50relevantarticlesoverthe20years.Insum,complexadaptivesystemstheoryhasbeenanichetopic.Dooley(2021)reportsthattherewerethreetheoriesormodelsmostdrawnfrombythesearticles:Kauffman’s(1995)NKruggedlandscapemodel,PrigogineandStenger’s(1984)modelofchangewhendissipativesystemsareinafarfromequilibriumstate,andAshby’s(1956)lawofrequisitevariety.SomearticlesalsodrewfromBak’s(1996)sandpilemodelofself-organizedcriticality,andthemodellingtechniquesofnon-lineardynamicalsystems(Guastello,1995).LackofpresencewithinjournalsintheFinancialTimeslistdoesnotmean,however,thatcomplexity-inspiredpapersarenotbeingwrittenandpublished:itagainreflectsmoreofthenicheversusmainstreamnatureoftheseconcepts.Forexample,onlytwoarticlesintheFinancialTimessampleaddresscomplexityandleadership.Painter-Morland(2008)usescomplexadaptivesystems(CAS)conceptstoarguethatleadershipisrelationalanddistributedthroughouttheorganization;whileTourish(2018)positsthatwhilemanyleadershippapershaveadoptedanewlanguageofcomplexity,themechanismstheypositarestillsimpleandgroundedinthehistorical‘leaderashero’meme.Concurrentwiththis,though,muchscholarlyactivitywasoccurringaroundthetopic.Uhl-Bienetal.(2007,p.298)proposedthat‘threeentangledleadershiproles(adaptiveleadership,administrativeleadership,andenablingKevinJ.Dooley-9781839104503DownloadedfromPubFactoryat05/28/202209:11:01AMviaColumbiaUniversityLibrary

359Complexadaptivesystems341leadership)reflectadynamicrelationshipbetweenthebureaucratic,administrativefunctionsoftheorganizationandtheemergent,informaldynamicsofcomplexadaptivesystems’.ThearticlewaspartofaspecialissueonLeadershipandComplexity,andotherarticlesincludedtheapplicationofcatastrophetheory(Guastello,2007),agent-basedmodels(Hazy,2007),andedgeofchaos(OsbornandHunt,2007).Theworkalsoledtoanumberofconferencespecialsessions,andaneditedbook(Uhl-BienandMarion,2008).Similarly,onlyonearticleintheFinancialTimessampleconcernedcomplexadaptivesupplynetworks.Choietal.(2001)proposethatsupplychainsarebetterconceptualizedassupplynetworksthatactascomplexadaptivesystems.Theypositthatsupplynetworksarenotcontrolledordesignedbyanysingleorganization,butratheraretheevolutionaryresultofasetofmake‒buyandsupplierselectiondecisionsthataremadelocallybybuyingorgan-izationswithinthenetwork.Further,theysuggestthatthetraditionaldyadofbuyer‒supplierisinsufficienttounderstandreal-worldbehaviourinsupplynetworks.Thearticlehasover1300citationsafteralmost20years.Somearticleshavedrawnfromthegeneralframeworktodevelopcomplexity-specificmodels(Pathaketal.,2007a).Forexample,Pathaketal.(2007b)modeltheevolutionofsupplynetworkusingmulti-agentsimulationmodelling.Kauffmanetal.(2018)developtheconceptof‘tinkering’inacomplexsupplynetworkdesigninordertoaccommodate‘unknown-unknowns’.MostofthesearticlesthatciteChoietal.(2001),though,haveappropriatedtheterm‘supplynetwork’asanalternativeto‘supplychain’,andhavedoneempiricalinvestigationsusingsocialnetwork(graph)theoryandmethods(Kimetal.,2011).Inthiscase,theconceptofasupplynetworkasacomplexadaptivesystemisattractive,buttheconceptismergedbackintomorefamiliartheoreticalconstructsandempiricalmethods.OUTLOOKONFUTURERESEARCHOPPORTUNITIESComplexadaptivesystems-relatedtheoriesdescribeboththe‘how’andthe‘why’ofanorganization’sorcollectionoforganizations’changeovertime.Theyshowhowlocalchangecanleadtoglobalchange,andhowthelikelihoodforasystemtorealizesignificantchangediffersdependingonitscurrentstate.Assystemsarepushedfartherfromtheirstablestate,smallfluctuationsmaybeamplifiedthroughfeedbackandleadtostructuralchange.Thesemodelsexplicitlyconsiderhowtiming,chanceandnon-linearitycanleadtoemergentpatternsofthewholethatarenotpredictableforobservingbehaviouroftheentities(agents)insidethesystem.Asdiscussed,academicapplicationofcomplexadaptivesystemstheoryinmanagement,operationsmanagementandsupplychainmanagementhasbeenlowrelativetoitsbroaderadoptioninotherareasofthephysicalandsocialsciences.Thisissurprisinggivenitsper-ceivedapplicabilitytostudyingorganizationalandinterorganizationalchange,anditsabilitytocreatenoveltheoryandinsight.Onebarriertousingcomplexityscienceisthat,whetherusingempiricalmethodsormathe-maticalmodelling,applicationofthesetheoriesormodelsrequiresmethodologicalskillsthatmanyorganizationalscientistsdonotnaturallyobtainintheirresearchmethodstraining.Anyindividualresearchercanlearntheseskillsifdesired,butmoregenerallythereistheopportu-nityfororganizationalscholarstopartnerwithresearchersfromotherdisciplinesthatdohavetheseskills.KevinJ.Dooley-9781839104503DownloadedfromPubFactoryat05/28/202209:11:01AMviaColumbiaUniversityLibrary

360342Handbookoftheoriesforpurchasing,supplychainandmanagementresearchPerhapsmoreimportantly,though,complexitysciencecanbeacommonlanguagethatcreatesabridgeforinterdisciplinaryresearch.Forexample,whenconsideringanagriculturalsupplynetwork,supplychainscholarscanreadilyexaminethenetworkanditsstructureandevolutionfromacomplexityscienceperspective.Atthesametime,aconservationbiologistcanlookatthatsamesystemfromtheperspectiveofbiodiversityandcomplexsystems;andanagronomistcanstudythesoilsystemfromacomplexadaptivesystemsperspective.Inreality,supplychainsandlandscapesandsoilallarepartofthesamesystem.Together,integrationofthesemultipledisciplinesviaacomplexitysciencelensofferspotentialfornovelinsight,theoryandpractice.Specifictosupplychainmanagement,logisticsandprocurementresearchers,therearedifferentunitsofanalysisthatcanberelevanttofuturestudies.Alignedwithsupplynetworkresearchoverthelastdecade,complexityscienceismostreadilyappliedtointerorganizationalnetworks.Whenexaminingbehavioursandactionsatthe‘strategic’level,suchassupplierselectionorsupplierinnovation,thenacomplexadaptivesystemmodeltreatseachorgan-izationasaboundedlyrationalagent.Inthepast,supplychainscholarshavestudiedthesesupplynetworksmuchmorefromastructuralversusdynamicperspective.Inaway,wehaveemphasizedthe‘system’ratherthanthe‘adaptive’partof‘complexadaptivesystem’.Thus,oneneedwehaveisformoreprocesstheoriesofsupplynetworkevolutionandadaptation.Whenexaminingbehavioursandactionsatthe‘tactical’level,suchasinventoryplace-mentorsupplyriskatatransactionlevel,thenacomplexadaptivesystemmodeltreatseachprocessingunit(forexample,factory,warehouse,vehicle)asanagent;andinsomecontexts,caneventreatthework-in-processinventoryasanagent.Thisalignswiththeemergingdisci-plineofdatascience,whichcombinesoperationsresearch,statisticalmodellingandartificialintelligencemethodstoexplainandmanagecomplexsystems.Theseapplicationsyield‘bigdata’thatisvoluminousandlongitudinalinnature.Complexitysciencemodelsofchangemayhelpdatascienceresearcherstoexplainthechangestheyareobservinginthesystemstheyaremonitoringandmanaging.Relatedtosupplychainmanagementinpractice,innovatorsandmarketsareconstantlyborrowingfromcomplexadaptivesystemsconceptsinthecreationanddevelopmentoftheirproductsandservices.Forexample,sharedservicessuchasridesharingconceptualizeoperationsasadistributedsetofagents,whoareincentivizedinvariouswaystotakeaction,andwhousesimpleheuristicstomakedecisions.Orderwithinthesystemisnotplannedorpredetermined,butratheremergencesfromtheinteractionofdriversandcustomers,andthestructureandrulesthatdefinethesharingplatform.Intheseapplications,scholarsmighthelptocreateinnovativesolutionsandnewservicesforpracticebydeployingcomplexadaptivesystemstheoriesandmodels.REFERENCESAshby,W.R.(1956).AnIntroductiontoCybernetics,Chapman&Hall:London.Bak,P.(1996).HowNatureWorks.Springer-Verlag:NewYork.Bateson,G.(1972).StepstoanEcologyofMind:CollectedEssaysinAnthropology,Psychiatry,Evolution,andEpistemology.UniversityofChicagoPress:Chicago,IL.Chiles,T.,Meyer,A.,andHench,T.(2004).Organizationalemergence:TheoriginandtransformationofBranson,Missouri’smusicaltheaters.OrganizationScience,15,499‒519.KevinJ.Dooley-9781839104503DownloadedfromPubFactoryat05/28/202209:11:01AMviaColumbiaUniversityLibrary

361Complexadaptivesystems343Choi,T.,Dooley,K.,andRungtusanatham,M.(2001).Supplynetworksandcomplexadaptivesystems:Controlversusemergence.JournalofOperationsManagement,19,351‒366.Dooley,K.(2021),Complexityscienceandtheorganizationsciences:1999‒2018.InE.ElliottandL.Kiel(eds),ComplexSystemsintheSocialandBehavioralSciences,AnnArbor,MI:UniversityofMichiganPress,pp.64–82.Dooley,K.,andVandeVen,A.(1999).Explainingcomplexorganizationaldynamics.OrganizationScience,10(3),358‒372.Forrester,J.(1961).IndustrialDynamics.MITPress:Portland,OR.Gleick,J.(1987).Chaos:TheMakingofaNewScience.Heinemann:London.Guastello,S.(1995).Chaos,Catastrophe,andHumanAffairs.Erlbaum:Mahwah,NJ.Guastello,S.(2007).Non-lineardynamicsandleadershipemergence.LeadershipQuarterly,19(4),357‒369.Hazy,J.(2007).Computermodelsofleadership:Foundationsforanewdisciplineormeaninglessdiver-sion?LeadershipQuarterly,18(4),391‒410.Holland,J.(1995).HiddenOrder:HowAdaptationBuildsComplexity.BasicBooks:NewYork.Kauffman,S.(1995).AtHomeintheUniverse.OxfordUniversityPress:Oxford.Kauffman,S.,Pathak,S.,Sen,P.,andChoi,T.(2018).Juryriggingandsupplynetworkdesign:Evolutionary‘tinkering’inthepresenceofunknown‐unknowns.JournalofSupplyChainManagement,54,51‒63.Kim,Y.,Choi,T.,Yan,T.,andDooley,K.(2011).Structuralanalysisofsupplynetworks.JournalofOperationsManagement,29(3),194‒211.Osborn,R.,andHunt,J.(2007).Leadershipandthechoiceoforder:Complexityandhierarchicalper-spectivesneartheedgeofchaos.LeadershipQuarterly,18(4),319‒340.Painter-Morland,M.(2008).Systemicleadershipandtheemergenceofethicalresponsiveness.JournalofBusinessEthics,82,509‒524.Pathak,S.,Day,J.,Nair,A.,Sawaya,W.,andKristal,M.(2007a).Complexityandadaptivityinsupplynetworks:Buildingsupplynetworktheoryusingacomplexadaptivesystemsperspective.DecisionSciences,38(4),547‒580.Pathak,S.,Dilts,D.,andBiswas,G.(2007b).Ontheevolutionarydynamicsofsupplynetworktopolo-gies.IEEETransactionsonEngineeringManagement,54,662‒672.Poole,M.,VandeVen,A.,Dooley,K.,andHolmes,M.(2000).OrganizationalChangeandInnovationProcesses:TheoryandMethodsforResearch.OxfordUniversityPress:NewYork.Prigogine,I.,andStengers,I.(1984)OrderoutofChaos:Man’sNewDialoguewithNature.FlamingoEdition:London.Simon,H.(1957).AdministrativeBehavior.Macmillan:NewYork.Tourish,D.(2018).Iscomplexityleadershiptheorycomplexenough?OrganizationStudies,40(2),219–238.Uhl-Bien,M.,andMarion,R.(2008).ComplexityLeadership,Vol.1.IAP:Charlotte,NC.Uhl-Bien,M.,Marion,R.,andMcKelvey,B.(2007).Complexityleadershiptheory:Shiftingleadershipfromtheindustrialagetotheknowledgeera.LeadershipQuarterly,18(4),298–318.vonBertalanffy,L.(1951).Generalsystemtheory‒Anewapproachtounityofscience.HumanBiology,23,303‒361.Wiener,N.(1948).Cybernetics:OrControlandCommunicationintheAnimalandtheMachine.MITPress:Cambridge,MA.SUGGESTEDFURTHERREADINGFormoreinformationonthegeneralnatureofcomplexityadaptivesystems,see:Holland,J.(1995).HiddenOrder:HowAdaptationBuildsComplexity.BasicBooks:NewYork.Foranoverviewofcomplexityscienceappliedtosupplynetworks,see:Choi,T.,Dooley,K.,andRungtusanatham,M.(2001).Supplynetworksandcomplexadaptivesystems:Controlversusemergence.JournalofOperationsManagement,19,351‒366.KevinJ.Dooley-9781839104503DownloadedfromPubFactoryat05/28/202209:11:01AMviaColumbiaUniversityLibrary

362344Handbookoftheoriesforpurchasing,supplychainandmanagementresearchPathak,S.,Day,J.,Nair,A.,Sawaya,W.,andKristal,M.(2007).Complexityandadaptivityinsupplynetworks:Buildingsupplynetworktheoryusingacomplexadaptivesystemsperspective.DecisionSciences,38(4),547‒580.KevinJ.Dooley-9781839104503DownloadedfromPubFactoryat05/28/202209:11:01AMviaColumbiaUniversityLibrary

36323.Factormarketrivalry:ageneraltheoryofsupplychainmanagementPeterM.Ralston,MatthewA.SchwietermanandJohnE.BellINTRODUCTIONSupplychaincompetitionhasbecomemoreintenseasorganizationalboundariesblurbetweenfirmsandcompanieschoosetofocusoncorecompetencieswhileallowingpartnerstoprovidenecessaryfunctionstohelpdrivecustomervalue(ChenandMiller2015;Handley2012).Supplychainresearchoftenfocusesonmodifyingdownstreamsupplychainservicedeliverythroughimprovingspeed,providinginnovation,utilizingsalespromotionactivities,orevenloweringprices(Belletal.2015).Whileacustomerorientationhasobviousbenefits,thecompetitivesupplychainlandscapealsoextendstosupplysideactivities.Theupstreamcom-petitionforsupplychainresourcesisknownasfactormarketrivalry(FMR).Assupplychainscholarsseektoapplyageneraltheorytocreatedeductiveresearchhypothesesormakeabductiveobservationsfromempiricalresearch,theyneedtodeterminewhichtheoryisbesttoapply,howtoapplyit,andhowtobuildonthattheorythroughnewlygeneratedresearchfindings(KetokiviandChoi2014).Therefore,assupplychainscholars,itisimportanttounderstandthetenetsofFMRtheory,sinceitisrelevanttotheupstreamcom-petitionforresourcesbetweenfirmsandsupplychainsintoday’smarkets.PerhapsabriefpauseiswarrantedtodiscussFMRanditsconnectiontosupplychainmanagement(SCM).Oneissuethatmayariseisthatsupplychainsareoftenviewedasgreaterthanasimplebuyer‒supplierexchange.HowcanFMR,dealingwithfactormarketsandtheperceptionofindividualfirmscompetinginthosefactormarketsseekingaccesstoconstrainedfactors,applytoSCM?Webelievethattheanswerliesintheformationofsupplychainswhichusuallyresultfrompurposefulfirmactiontocreatelink-by-linkdyadsresultinginemergentnetworks.LeMayetal.(2017)definedSCMasthedesignandcoordinationofanetworkthroughwhichorganizationsandindividualsget,use,deliveranddisposeofmaterialgoods;acquireanddistributeservices;andmaketheirofferingsavailabletomarkets,customersandclients(LeMayetal.2017,p.1446).Whilesupplychainsarenotedtobecomprisedofnetworksoffirms(Carteretal.2015),thesenetworksareoftenaseriesofrelationshipsbetweenindi-vidualfirms(FawcettandMagnan2004).Infact,supplychainparticipationisanindividualfirm-leveldecision(Ralstonetal.2020).Firmsbalancebetweentheirneedsforself-interestandinterdependency,especiallyinlong-termcollaborativeorintegratedrelationships(Richeyetal.2010).Arealizationoftheimportanceandtotalityofsupplychainsisimportant,butfirms(andothers)needtorealizethatindividualcompanieshavearelativelynuancedviewofthesupplychain(Bowersoxetal.2000).ThisvantagepointallowsonetoviewFMR,theintenserivalrythatdevelopsoverresourcepositions(Markmanetal.2009),asageneraltheorythatiscoretothestudyofSCM.FMRholdssuchaplaceduetothesupply-sideimplicationsof345PeterM.Ralston,MatthewA.Schwieterman,andJohnE.Bell-9781839104503DownloadedfromPubFactoryat05/28/202209:11:05AMviaColumbiaUniversityLibrary

364346Handbookoftheoriesforpurchasing,supplychainandmanagementresearchthetheory,andtheresultingimpactsofdyadicFMRactivityacrossthesupplychainnetwork,fromexchangessurroundingrawmaterialsallthewaytoendcustomerpurchasingbehaviour.Overall,theoreticaldiscussionsandtheorydevelopmentcanbeconceptualizedashavingfourelements:foundationaldomain,variables,relationshipsandpredictions(Wacker1998).ThescopeofthischapterwillbetooffersuggestionsastowhentoapplyFMRinresearch,aswellashowtoapplythetheory.WealsoofferabroadrangeoffutureresearchsuggestionswheretheuseofFMRinSCMresearchmakessenseandprovidesanexcellentlensforthetypeofproblemsfacedinthemanagementofsupplychains.Therefore,wenotonlycontributetothisscholarlyeffortbyidentifyingthestructureofFMRandthemostimportantworkintheliterature,butwealsoprovidemotivationsandavenuesforexpandingontheuseofFMRtheoryinthediscipline.DOMAINOFFMRAsMarkmanetal.(2009)noteintheirseminalworkonthephenomenon,FMRisdefinedascompetitionoverresourcepositions.Factorsofproductionincludeanythingafirmrequirestoproduceordeliveragoodorserviceforconsumption.Thisincludescomponentsoforinputstoafinishedgood,oraccesstoagoodforresale,aswellasnecessarycapital(forexamplehuman,financial,technical)andservicesrequiredtoproduceandprovideagoodforconsump-tion.Whileitmaybeeasytoenvisionstrategicresourcesascriticalfactorsofproduction,otherresourcesnecessaryforcustomervaluecreationanddeliverycanbecriticalaswellwhentheirsourceisconstrained(Ellrametal.2013).Forexample,ifafirmthatutilizesathird-partylogistics(3PL)firmtofulfilandshipcustomerorders,andaseparatefirmthatalsoutilizesthe3PL,eachexperienceanincreaseindemandatnearlythesametime,the3PLfirm’scapacitymaybecomeconstrained,causingoneorbothfirmstoexperienceadecreaseindeliveryservicelevel.Anadditionalaspecttoconsiderwhenthinkingaboutfactorsofproductionisthevalueofthesefactorstoacompany’scompetitiveadvantage.Ifaninputorfactorofproductioniscriticaltothecompetitiveadvantageofmultiplefirms,competitioniscreatedbetweenthesefirms,knowinglyorunknowingly,toacquirethenecessaryfactorsofproduction(OblojandCapron2011;Pullesetal.,2014).ThegenesisofFMRoccursfromacombinationofcompetitivedynamicstheory(BaumandKorn1996;ChenandHambrick1995;ChenandMiller2015)andresource-basedtheory(theresource-basedview,RBV)(Barney1991;Penrose1959;Wernerfelt1984).Penrose(1959)isanearlyproponentoffirmsbeingcomprisedofvariousresourceswhichcontributetofirmgrowth.Wernerfelt(1984)notesthepowerofthisviewbyofferingaseriesofpropositionscentredaroundviewingfirmsasbundlesofresources.Onespecificpropositionsuggestsidentifyingresourceswhichcanleadtohighfirmprofits,andthentakingappropriatestepstoprotectthesevaluableresources.Finally,Barney(1991)suggeststhataccesstoheterogenousfirmresourcescanleadtosustainedcompetitiveadvantage,especiallyiftheseresourcesarevaluable,inimitable,rareandnon-substitutable.Additionalworksuggeststhataccesstoneededresourcesmayspanorganizationalboundariesandincludetransactingorworkingwithexternalpartners(Barneyetal.2011;DyerandSingh1998).BaumandKorn(1996)provideadetailedlookatcompetitionandinterfirmrivalry.Theauthorssuggestthatcompetitioncanoccurduetomacroeconomiceffectsoverwhichfirmshavelimitedcontrol.Competitionalsooccurswhenfirmsvieforlimitedresources(HannanPeterM.Ralston,MatthewA.Schwieterman,andJohnE.Bell-9781839104503DownloadedfromPubFactoryat05/28/202209:11:05AMviaColumbiaUniversityLibrary

365Factormarketrivalry347Table23.1KeyvariablesofFMRVariableDefinitionExamplecitationsResourcecompetitionAresultantclashwhentwoormorepartiesseekMarkmanetal.2009tosecureaccessorutilizeagiveninput.ScarcityofinputAresourceforwhichdemandexceedspresentMarkmanetal.2009;Belletal.2012;Ellrametal.supplyataparticularlocation.2013FactormarketmyopiaLimitingtheperceivedsourcesofresourcesorEllrametal.2013;Ralstonetal.2017:Opengartetal.(FMM)toonarrowlyfocusingonsolutionstoneeds.2018FactormarketresponseFirmactionoriginatingfromfactormarketCapronandChatain2008;SchwietermanandMillerrivalry.2016FactormarketFirmactionresultingfromfactormarketrivalryBelletal.2015interdictiontoimprovecompetitivepositionandweakenrivals.andFreeman1989).Rivalryiswhatoccurswhenfirmscompeteforincompatiblepositions(thatis,limitedassetstocksorafinitecustomerbase)andfeeltheneedtoproactivelymanagearesourceorreacttoacompetitor’smovesinregardtothatresource(BaumandKorn1996;Caves1984;Porter1980).Acompetitiveactionisdefinedasaspecificanddetectablemovethatafirmundertakestoimpactuponthepositionofacompetitor,whileareactionisaspecificanddetectablecountermove(ChenandHambrick1995).Thespecificacttoimpairtheposi-tionofacompetitorforaresourceistherootofrivalrousbehaviour(ChenandMiller2015).Competitionovercustomerscommonlyexistsbetweenindustryplayers,butafirmmayalsoactivelytrytocompetewithrivalsoverasupply-sideresource.Supplylimitscausefirmstotakenoteoftheirinventoryoraccesstovaluableresources(GrewalandSlotegraaf2007).Theseconstrainedresourcestocksalsomaycausefirmstonoteotherusersofthesameresources.TheuniquedistinctionofFMRisthatbattlesforresourcepositionscanoccuroutsideofafocalfirm’sindustry,andevenpositionwithinasupplychain(Markmanetal.2009).Ellrametal.(2013)detailthatcompetitorsforsupply-sideresourcesusuallyoccurinthreegeneralscenarios:(1)productmarketcompetitorswhichalsocompeteforthesamesupply-sideresources;(2)firmswhichcompeteinsimilarindustries,butmightnothaveasignificantproductmarketoverlap;and(3)firmsthatarenotinsimilarindustries,butstillutilizethesamesupply-sideresourcesineitherthesameoradifferentmanner.Anexampleofscenariothreewouldbetwomanufacturersthatproducecompletelydifferentgoods,butcompeteforthesamelimitedsupplyoftransportationbecausebothmanufacturersarelocatedgeographicallyneareachother.Thus,akeyvariableofFMRisthecompetitionforresources,dividedbetweenresourcerivalsthatarealsoproductmarketcompetitors,andresourcerivalsthatonlycompeteinfactormarkets.Assuch,thedomainofFMRincludesresourcepositionsbroadly,whilealsoanalysingsourcesofconstrainedsupply,andrivalsforthatconstrainedsupply.Table23.1summarizesthekeyvariablesofFMR.RELATIONSHIPSAMONGSTVARIABLESEllrametal.(2013)bringtheideaofFMRtotheSCMliterature.TheauthorssuggestthatFMRcanoccurforresources,eventhosenottraditionallyviewedasstrategic,thatareversatileinfunction,mobileandseeminglyubiquitous.Thechallengewitharesourcethatisseeminglyubiquitousiswhenafirmquicklyandunexpectedlyrealizesthataresourceisconstrained,andPeterM.Ralston,MatthewA.Schwieterman,andJohnE.Bell-9781839104503DownloadedfromPubFactoryat05/28/202209:11:05AMviaColumbiaUniversityLibrary

366348Handbookoftheoriesforpurchasing,supplychainandmanagementresearchthefirmlacksstrategicplanningandalternativesforhowtorespond.TheprimaryconditionwhichcreatesFMRisscarcityofavaluableresourceneededtoprovideagoodorservicetoacustomer(Belletal.2012;Ellrametal.2013:Markmanetal.2009).Withoutscarcityorconstraint,thereisnoreasonforrivalrytoexist.WhilescarcityisabaselineconditiontodriveFMR,afirm’sperceptionofwhichresourcesexistinacompetitivespaceisalsoanareaofgreatinterestwithinthistheory.FMRresearchinthesupplychainhasfocusedontworelatedaspectsofthisvariable.Ellrametal.(2013)providearationalefortheimpactofFMRandalsohowFMRmaydevelopunexpectedlybetweenfirms.Thefactthatfirmsfaceunexpectedcompetitionhintsatlimitationstofirms’conceptualizationofwhichresourcesfitwithinacompetitivearena.Ralstonetal.(2017)furtherthisideabydiscussingonecauseofFMR,namelyfactormarketmyopia(FMM).Thisviewsupportstheconjecturethatfirmsarelikelytoexperienceamyopicviewofcompetition,whichlimitstheirpropensitytosenseandactonthecompetitiveaspectsoftheresourcebase.Therootofmyopiamaycomefromboundsaroundknowledgeofalternativesourcesofsupply,alackofsubstitutableresources,orevenselectiveattentiontothecompetitivemarket(Gavettietal.2007;Simon1997).Whateverthecause,knowledgelimitsaroundagivenresourceandtheresource’spotentialuserscancreateasingularfocusandhelptospurFMM(Ralstonetal.2017).TheprimarydetrimentalresultofFMMisintenseFMR.Firmsbegintobelievethattheonlyavenuetofirmsuccessisthroughsecuringaccesstothisconstrainedfactor.Thismyopialeadstofirmslocking-inonthespecificfactor,whichmaybecomeevenmoreconstrained,insteadoflookingatalternativesourcesforthatresourceorasubstitutesolutionaltogether.OncefirmsbecomeawareofthepossibilityofFMRimpactingupontheirenvironment,thepossibilityforfirm-levelactioncomestotheforefrontofthetheory.ThishasspawnedaseparateresearchstreamonFMRwhichcentresontheabilitytouseadvantageouspositionsoflimitedfactorsforafirm’sbenefit.Limitingtheeffectivenessofaresource,orcontrollingaccesstoaresource,couldbeanotherwaytogenerateacompetitiveadvantage(CapronandChatain2008).Inthefirstsupplychainresearchdealingwiththisvariable,Belletal.(2015)coinedtheterm‘supplychaininterdiction’todiscussthedualbenefitsofafirmholdingaccesstoaresourcestockforoperationalgain,andsothatacompetingsupplychaincouldnotusethatsameresource.SchwietermanandMiller(2016)discussinternalandexternalactionsthatfirmscantakeunderperiodsofsupply-sidecompetition,suchasimprovingresourceaccessorreducingspecificresourceimportanceaswaystomoveforwardfromFMR.Opengartetal.(2018)discussbreakingdownbarrierstoFMMbylookingatnon-traditionalsourcesofsupplyforlabour.Insteadoffightingforthesamelimitedlaboursupplyoftruckdrivers,theauthorssuggestthatfirmscouldexpandthelabourpoolbyseekingnon-traditionalpopulationsofdrivers.Alternatively,firmscouldreplacetheirneedfortruckdriversbysubstitutingthedriverswithanautomatedtruckingfleet.Thispracticeofsubstitutingresourcesmayreducetherelianceonaconstrainedfactorofproduction,andisaviablesolutiontolessenFMR(SchwietermanandMiller2016).PREDICTIONSOFFMRFMRproducesasetoftheoreticalpredictionsforhowafirm’sactionswillimpactuponfirm-leveloutcomes.Additionally,FMRoutlineshowtheactionsafirmmaytakeareimpacteduponbythefirm’sabilitytoconceptualizetheresourceasexistinginacompetitivePeterM.Ralston,MatthewA.Schwieterman,andJohnE.Bell-9781839104503DownloadedfromPubFactoryat05/28/202209:11:05AMviaColumbiaUniversityLibrary

367Factormarketrivalry349arenaunderconditionsofscarcity.Assuch,FMRseemsreliantonfirm-specificcharacter-isticsandspecificcharacteristicsoftheresourceforwhichrivalryexists.Forexample,notethepotentialdifferenceinrivalrybetweencompetitorsfromthesameproductmarketsversusresourcerivalrywhichexistsbetweencompetitorswithoutproductmarketoverlap.Ifafirmonlyviewsresourcecompetitioninadownstreamdirectionorfromdirectcompetitors,thatfirmmayexperienceablindspotcausedbyignoringresourcecompetitorswithoutproductmarketoverlap.ThisboundarycanexacerbatethenegativeconsequencesofFMRwhenitlimitsafirm’sabilitytotakecorrectiveaction(Ellrametal.2013;Ralstonetal.2017).Further,theawarenessofpotentialrivalshasadirectimpactonthetypesofcompetitiveactionsafirmwillbeabletotake.WhenviewingSchwietermanandMiller’s(2016)typologyofactions,theabilityofafirmtotakeactionsontheexternalenvironmentisheavilydependentuponitsabilitytoidentifyrivalry.Moreover,ifafirmfeelsthatitisunabletospotrivalry,itmayelecttofocusmoreinwardly,andtakestepstoreducetheimportanceof,orrelianceupon,theresourceinquestion.WhenweconsiderthepossibilityoffirmsutilizingFMRactivitiesasacompetitiveweapon(Belletal.2015),itbecomesapparentthatafirmmayutilizethisstrategyifitalsocompeteswiththeresourcerivalsinproductmarkets,becauseharmingtheresourcebaseofacompetitorisonlyattractiveiftheresourcerivalalsocompetesforcustomers.Theprecedingdiscussionoffirm-levelawarenessandmotivationunderscoreshowafirmmayregardFMRfromtwoperspectives.First,firmsmaytakeanactiveapproachinthepresenceofFMRinordertoseekbenefits.Thiswouldincludestepstakentousesupplychaininterdictioninordertoimproveaccesstoascarceresource,butalsoknowingthatthiscouldhinderarivalandthereforeimprovethefocalfirm’scompetitiveposition(Belletal.2015).ApassiveapproachinthepresenceofFMRwouldbeundertakentoavoidharmcausedbyreducedaccesstoresources.Firmswanttosecureaccesstotheresourceneededtooperate,andmaytakeactionsdesignedtomaintainalong-termsourceofthesaidresources.Moreover,iftheresourceinquestionissufficientlyscarcetomakethefirmconcernedoveralong-termhorizon,firmsmaylookelsewhereforsubstitutableresourcesorworktoreducetheirrelianceontheconstrainedresourcealtogether(SchwietermanandMiller2016).FMRASAGENERALTHEORYFORSUPPLYCHAINMANAGEMENTFMRtheoryhasspecificcharacteristicsthatdrivetheframework’sapplicabilitytocertainsupply-sideinvestigations.Unequivocally,FMRexistsonthesupplysideofexchanges(Markmanetal.2009).FMRoccursforresourcesofproductionorservicedelivery.ThisdistinctionseparatesFMRfromdemand-sidecompetitionwhichexistsforcustomers,shelfspace,orwhereacompanyappearsonawebsitesearch.Promotionwars,pricebattlesandmarketsharestrugglescanabsolutelybeactivitiesthatdrivecompetition;however,theseactivitiesoccuronthedemandsideofasupplychain(JaworskiandKohli1993).AnothercorecharacteristicofFMRistheideaofresourcescarcity.Therehastobesomelevelofscarcitythatcausessupplyconstraintsforaneededresource(Markmanetal.2009).Withoutsupplyrestrictions,theideaofresourceaccess,acquisitionandaccumulationwouldtakeonadifferentmeaning(Barney1991;MaritanandPeteraf2011).TheremaybeanaturalPeterM.Ralston,MatthewA.Schwieterman,andJohnE.Bell-9781839104503DownloadedfromPubFactoryat05/28/202209:11:05AMviaColumbiaUniversityLibrary

368350Handbookoftheoriesforpurchasing,supplychainandmanagementresearchinclinationtocompeteforresourcesbecausetheyarescarce,andnotnecessarilyduetothefundamentalcontributionoftheresourcetoafirm’sgoodorservicedelivery.Realizingthatsupply-sidecompetitionandresourcescarcityarenecessaryrequirementsforFMR,wecanbegintobroadlydefinethetheory’splacewithinotherparadigmsutilizedinSCMresearch.Ellrametal.’s(2013)pieceistheseminalworkonFMRwithinSCM.TheauthorsintroducetheconceptofFMRtoSCMandshowhowthetheoryapplieswithinthefield.FutureresearchersutilizedFMRtoinvestigatebattlesforresourcepositionswithinSCM.TheseinvestigationsledtoideassuchasFMM(Ralstonetal.,2017),factormarketresponses(SchwietermanandMiller2016)andsupplychaininterdiction(Belletal.2015).InmovingFMRforward,researchersshowedtheapplicabilityofFMRtoSCM,oftenthroughmiddle-rangetheorizing.Middle-rangetheorizingutilizesaccumulatedevidencetobuildcontextualizedunderstandingofaphenomenon(MertonandMerton1968;Pellathyetal.2018).Thisgroundinginreal-worldscenariosandobservableeventscreatespracticalbusinessimplicationsthatcanofferguidancetomanagers.WhileoneshouldnotdoubtthevalueofofferinggeneralguidanceinthespecificcontextofSCM,thereexistsanopportunitytobroadentheapplicabilityofFMRtoSCMresearch.ItisourbeliefthatFMRextendsbeyondsolelybeingamiddle-rangetheoryforcertainsituations,tobeingoneofthegeneraltheoriesunderlyingSCM.AkeyconsiderationforviewingFMRasageneralsupplychaintheoryistheexclusivitytosupplychaincontexts.Justasmiddle-rangetheorymaytakeageneraltheoryandapplyittoacontextsuchasSCM,sowouldageneralSCMtheoryneedtoberootedinsupplychainphenomenaexclusively.Thisistosay,FMRwouldnotexistoutsidethecontextofSCM,giventhatthesupplybaseisthedomainofthetheory.Generaltheoriesaretypicallyframeworksfocusedoncommonantecedentswithbroadapplicability(Pellathyetal.2018;Stanketal.2017;Swansonetal.2020).ThisiswherethegreatestopportunitywithFMRmaylie.UnderstandingthatscarcityhelpstodriveFMR,researchershavedoneagoodjobofshowinghowresourcecompetitioncanexistwithinthesupplychain(Ellrametal.2013).ResearcherssuchasBelletal.(2015)andRalstonetal.(2017)havetakenaccumulatedevidencegroundedinpasteventstoprovidecontextualizedoutcomesorcounterstoFMR.SchwietermanandMiller(2016)offergeneralresponsestoFMR,butthestartingpointisstillcentredaroundresourcecompetition.Competitioncreatesbattles.Competitioncostsmoney.Competitioncreatessuboptimalsituationsanddisequilibri-umsasonefirmseeksadvantageoveranother.However,insteadofcompetitionimmediatelygeneratingFMRactivitiesforfirmsorsupplychains,wesuggestthatfirmsfirstassessthevalueoftheresourcetothefirmindeliveringcustomervalueandgeneratingfirmprofits,beforewagingfactormarketbattles.Table23.2reframesideassurroundingFMRtobridgethegapbetweenmiddle-rangetheorizingandageneraltheory.Insteadofimmediatelycompetingforaconstrainedresource,firmsneedtodeterminethevalueoftheresourcetothefirm,nomatterwhethertheresourceisastrategicorsupportinginput.Thevalueoftheresourceshouldbeestablishedintermsoftheresource’simportanceasastrategicinput,asaninputnecessaryforcustomervaluecreation,orasaninputimportanttoafirm’soverallbusinessstrategyatthecurrentpointofresourcecompetition(MaritanandPeteraf2011).Ifafirmdeemsthevalueoftheresourcetobecriticaltothefirm’sbusiness,andtherearenosubstitutes,acompanypassesthefirstinternaltestastowhetherthefirmshouldengageinfactormarketrivalry.PeterM.Ralston,MatthewA.Schwieterman,andJohnE.Bell-9781839104503DownloadedfromPubFactoryat05/28/202209:11:05AMviaColumbiaUniversityLibrary

369Factormarketrivalry351Table23.2FramingFMRtobridgethegapbetweenmiddle-rangetheoryandgeneraltheorySupplysidecompetition*Resourcescarcity*Resourcecompetition→ResourcevalueStaticscarcityofinput→Temporal(Dynamic)natureofscarcityFactormarketmyopia,factormarketOptimalfactormarketmyopia,optimalresponse,andsupplychaininterdiction→factormarketresponse,optimalsupplychaininterdictionNote:*necessaryconditionforFMR.Afterafirmassessesthevalueoftheresourcetoafirm,andifthefirmdecidestheresourceisvaluable,thenextstepistoassessthenatureofthescarcityoftheinput.Howlongwillthescarcitybeineffect?Isthereaviablesubstitutetotheresourceinquestion?Howlongmightittaketoidentifyapossiblesubstitute?Thesequestionsaddressingbothtimeandopportunityareimportantforafirmtoasknomatterwhatthecontextofthescenario.ThisfurtherplacesFMRingeneraltheorystatus.Perhapsmovingfrom‘static’scarcityofaresourceto‘dynamic’scarcityofaresourcewillalsopreventimmediatesurpriseifaproductbecomesscarceovertime(Belletal.2013).Inotherwords,companiesmaybeabletoseeconstraintsdevelop,whichcanpreventthedeleteriouseffectsofintenseFMRandinsteadleadtotheoptimallevelofFMM,optimalfactormarketresponseandoptimalsupplychaininterdiction.Specifically,asfirmspossesslimitedtimeandmanagerialbandwidthtoscantheenvironment,thedecisionofhowmuchtimetoallocatetoknownFMRissuesversusscanningforunexpectedresourcecompetitionmaybecritical.Finally,ifafirmdeterminesthatthereisalong-termpossibilityofascarceresourcewithnoviablesubstitutes,thatisalsoavaluableresourcetoafirm’soperation,thenthefirmneedstoexamineappropriateresponses.FMM,anintensefocusonsecuringaccesstoaresource,maybeappropriate(Ralstonetal.2017).However,firmsneedtobereadytoquicklypivottoanotheropportunityifoneappears.FirmsalsoneedtoestablishplanstoseeksubstitutesorinternallydevelopoptionsasanadditionalresponsetoFMR(SchwietermanandMiller2016).FMRshouldnotleadfirmsdownapathofnever-endingcompetitionforaresource.OnlywhenfirmsunderstandtheirresourcepositionincomparisontodirectmarketcompetitorsshouldfirmsuseFMRactivitiestochangetheircompetitivepositionamongstrivals(Belletal.2015;InseadandChatain2008).Ultimately,acompetitiveadvantagemayresultifafirmcansecureaccesstoaresourcewhenacompetitorcannot.ThesetestsareimportantbecauseofthecostsFMRgenerates.FMRactivitiesmaybeanecessarysteptocompeteforaresource.Forexample,rarenaturalresourcesorpermanentlyconstrainedassetsmayleadtoperpetualFMR.Afirmmustalsounderstandthecharacteristicsofthelimitedresourceandthevalueoftheresourcetothecompany’sbusinesstoensurethatitismakingasoundbusinessdecisionandhasexhaustedallotherpossibleavenuesbeforeengaginginFMRactivities.Whyisthisthecase?FMRisanexpensiveendeavour.StrategiestolimitthelengthoftimeFMRactivitiesexistbetweensupply-sidecompetitorsshouldbeadualgoalalongwithsecuringaccesstoavaluableresource.OneofthebenefitstoconsideringFMRasageneraltheoryofSCMisthewayFMRdiffer-entiatesandextendsotherunderlyingtheoreticalfoundationsofthediscipline.Forexample,Mentzeretal.(2000,2001)discussthevalueofmanagingsupplychains.Inotherwords,akeyPeterM.Ralston,MatthewA.Schwieterman,andJohnE.Bell-9781839104503DownloadedfromPubFactoryat05/28/202209:11:05AMviaColumbiaUniversityLibrary

370352Handbookoftheoriesforpurchasing,supplychainandmanagementresearchfocuswithinSCMisthecoordinationofproductorservicedeliverybetweenentitieswithinasupplychain.Thiscoordinationcanleadtoinformationsharing,improveddemandinforma-tionandreducedcosts.ThisperspectivesharessimilaritieswithLambertetal.(1998)aswellasLambertandCooper(2000)whodiscusssupplychainformationbetweenpartnersfocusedonprocessmanagement.FMRdiffersinasmuchastemporalscarcityofavaluableresourcecoulddriveincreasedcollaborationbetweensupplychainpartners.Alternatively,LambertandCooper(2000)astutelypointoutthatcreatingin-depthrelationshipswithallsupplychainmemberscouldbecounterproductive,ifnotimpossible.Theauthorssuggestseparatingsupplychainmembersintoprimaryandsupportingmembers.AkeydifferenceaffordedbytheconsiderationofFMRisthatconstrainedandvaluableresourcesprovidedbysupportingmemberswithinasupplychainmayleadtothedevelopmentofasupplychainrelationshipwiththeseproviders.ViewingsupplychainrelationshipsthroughanFMRlensmayactuallyleadtoadifferentunderstandingandclassificationofthebenefitsandvalueofcertainsupplychainrelationships.InFMR,relationshipsmaybeusedtobridgecapabilitiesbetweenpartiesinorderforafirmtoproperlysecure,orlessentheimpactof,aconstrainedresource.FMRisafirm-levelphenomenon.Asearlyas1969,DonaldBowersoxadvocatedforthinkingaboutproductswithinafirmasthecombinationofform,place,possessionandtimeutilities(Bowersox1969).WhileBowersoxrealizedthevalueofpartnerstoeffectivelymanagesupplychains,healsorecognizedtherolethatindividualfirmshadindecidingwhyandwhetherornottobeasupplychainparticipant.Researcherslaterrecognizedthattheutilitydecisionalsoappliedtoresourcesafirmmightutilize(BowersoxandCloss1996).WhereFMRdistinguishesitselfinthisutilitydiscussionistherealizationthatresourceaccessisinfluencedbyotherusersoftheresourceaswell.ThecompetitionaspectextendsFMRbeyondsolelyaccessingandprovidingaproductoraresourceintherightformattherightplaceandtime.ItextendsthisideawiththerealizationthatprovidingutilitytocustomersthroughtheaccessanduseofresourcesisdonesoinacompetitiveupstreamenvironmentwhereutilitycreationcanbelimitedbyFMRwithotherfirms.FMR’scontributiontothesupplychainliteratureisdifferentfromotherresource-orcompetition-basedtheories.Forexample,resource-dependence(R-D)theoryclearlyspec-ifiestheimportanceofresourceaccesstoafirm,anddiscussesthedependenciesfirmscandevelopupontheprovidersofresources(PfefferandSalancik1978).However,R-Dtheoryalsodiscussesthepowerimbalancethatmayresultbetweenabuyerandsupplier.Withoutadoubt,thispowerimbalancemayexist;butFMRactuallycentresaroundthecompetitionforresourceaccess.Aproperresponsetohardshipsstemmingfromsecuringresourceaccess(thatis,apowerimbalancebetweenfirms)wouldbetoseekalternativesourcesofsupplyfortheresource,orsubstitutestotheresourcealtogether(SchwietermanandMiller2016).Acompetition-basedtheorysuchastheawareness‒motivation‒capability(AMC)perspectivesuggeststhatcompetitiveactionsoffirmsaredrivenbythefirm’sawareness,motivationandcapabilitytocompete(Chenetal.2007).AMCismostoftenfocusedonrivalsdownstreaminthesupplychainandanycompetitiveactionsthatresult.AsFMRisfocusedonsupply-sidecompetition,thetheoryfurtherdistinguishesitselfasfocusedoncompetitionthatisdevelopedaroundresources.DiscussingFMRwithinthecontextofothertheoreticalparadigmsisimportantsothatwecanunderstandtheframework’srolewithinSCM.ThisdiscussionalsohelpsustorealizethatFMRisinfactasupplychaintheory.This,alongwiththefurtherconceptualizationofchar-acteristicsoffactormarketrivalryactivities,leadustoidentifyingFMRasageneraltheoryPeterM.Ralston,MatthewA.Schwieterman,andJohnE.Bell-9781839104503DownloadedfromPubFactoryat05/28/202209:11:05AMviaColumbiaUniversityLibrary

371Factormarketrivalry353ofSCM.Becauseofthefurtherrefinementoftheory,thefollowingsectionidentifiesfutureresearchareasforexploration.FUTURERESEARCHDIRECTIONS:FACTORMARKETRIVALRYANDSUPPLYCHAINMANAGEMENTFutureresearchcouldbuilduponthetemporalnatureofresourcescarcity.Someresources,suchasvariousnaturalresources,arescarcebasedontheabsoluteamountavailableforcommercialpurposes(Belletal.2013).Otherresourcesexperiencescarcitytemporarily.AnexampleofthisisEllrametal.’s(2013)descriptionoftransportationservicesscarcitybasedonincreaseddemandatvariouspointsintime.ThefactthatscarcitycanbegeneratedbytemporalfactorsisoneofthewaysinwhichFMRpresentschallengesformanagerstoidentifyproblemsbeforetheyoccur.Inadditiontotemporalscarcitycausedbyunexpectedincreasesindemand,scarcitymayalsobedrivenbyunexpecteddecreasesinsupplycausedbyexoge-nouscircumstances.OnesalientexampleisthedecreaseinpackingplantcapacityduringtheCOVID-19pandemic.Duetothelackofcapacityatfacilities,alargeamountoflivestockwasnotprocessedaccordingtoschedule(Hein2020).Thisledtomanybeingeuthanizedwithoutenteringthefoodsupplychain,duetoageingpastthedesirablepointofprocessing.ApossibleresearchareaforFMRinvolvessequentialdemandforresourcecapacity.InthecaseoftheCOVID-19packingplantcapacityshortage,thelivestockresourcesthatwereageingoutofthesupplychainwereunabletobeinventoried,duetotheprocessingcapacitybeingutilizedforlivestockattheprimeage.ResearchisneededtoidentifyandprovideguidanceforFMRsituationsstemmingfromcapacityshortages,andindustrieswithsequencingandperishabilityissuesthatleadtowasteifcapacityistemporarilyscarce.AnotheravenueforfutureresearchistoexaminetherolethatFMRplaysinthedevelopmentofexclusivityagreementsbetweentradingpartners.Exclusivitycanimplythatacustomerwillonlydealwithacertainsupplier,orthatasupplierwillonlyselltoacertaincustomerinagivenarea(GonzálezHernandoetal.2003).Exclusivityhastraditionallybeenstudiedinthecontextofmarketing,wherethepartieswantexclusivedistributiontotakeadvantageofaccesstocustomersinagivengeographicareaviaasoledistributorshipagreement.Theprimaryfocusistypicallyonbuyersagreeingtoonlyutilizeaparticularsupplierforagiveninput(USLegalInc.2021).InthecontextofFMR,theexclusivityagreementwouldlikelyincludeprovisionslimitingasupplier’sabilitytoservecompetitorsofthebuyer.Separately,motivationalbehaviourandindividualintegrity(Maak2008;McGregor1960)canimpactupontheactionsofafirmandhencethesupplychain(Castilloetal.2018).AreexclusivityarrangementsnegotiatedbecausefirmsareactivelypursuingFMRwithacompetitor?Whilefutureresearchcouldexaminetherolethatexclusivityagreementsplayinmaintainingaccesstoresourcesforafocalfirm,researchcouldexploretheroletowhichexclusivityagreementsareusedtolimittheresourceaccessofrivals.ThisresearchcouldshedlightonhowfirmsutilizethesetacticsasanalternativetoverticalintegrationandM&Aactivitywithsuppliers.FMRactionscanalsobeexecutedthroughtheuseofmergersandacquisitions(M&A),wheretheinitiatingfirmattemptstoactivelycaptureandcontrolsupplyofaresourcebyacquiringanupstreamorlateralfirm(Belletal.2015).Forexample,themergerofTurnerBroadcastingandTimeWarnerresultedinadisruptiontoTurnerBroadcasting’srivalsbecausetheycouldnolongerdistributecontentthroughTimeWarner(SchwietermanandPeterM.Ralston,MatthewA.Schwieterman,andJohnE.Bell-9781839104503DownloadedfromPubFactoryat05/28/202209:11:05AMviaColumbiaUniversityLibrary

372354Handbookoftheoriesforpurchasing,supplychainandmanagementresearchMiller2016;Suzuki2009).Therefore,futureresearchonM&Aactivities,andverticalandhorizontalintegrationinthesupplychain,couldbepositedthroughthelensofFMRtobetterunderstandhowcompetitionforresourcesisexecutedusingM&Ainthesupplychain.ThiscanincludehowM&Acanbeusedasacompetitivesupplychaintooltoincreasesupplychainperformanceandcompetitiveadvantage(Gupta2012).Orinadifferentperspective,researchcouldfocusonhowafirmmightuseM&Atominimizeorovercomeresourcedependenciesandimproveitsorganizationalautonomy(Kalaitzietal.2019).Similarly,FMRcouldbeusedasaguidingtheoryinresearchabouthowM&Acanbeleveragedasabridgingstrategytoovercomenaturalresourcescarcityandpreventcompetitorsfromcontrollingscarceresources(Belletal.2012;Kalaitzietal.2018).AdditionalfutureresearchusingFMRasaguidingtheorycouldextendintotheacademicareaoflegalscholarshipwhereantitrustlawsandthelitigatedcompetitionoverresourcesisdocumentedinlawsuits.Forexample,intheUnitedStates,antitrustlawsmaypreventcompaniesfromdisruptingandcontrollingthesupplyofresourcesinanindustry.Infact,thepracticesofStandardOilintheearlytwentiethcenturytocontroltheupstreamsupplychainintheoilindustryarecitedasmotivationforthepassingoftheShermanAnti-TrustAct(Belletal.2015;WilliamsonandDaum1959).Therefore,anavenueofresearchandsourceofdataexistsinlegalcaseswhereviolationsandtestingoftheShermanAnti-TrustActaredocu-mented.Theselegalprecedentsshoulddefinetheexactboundaries(whichmaybedynamic)ofwhatsupplychaininterdictionandFMRactionsareconsideredlegalandethicalintheUnitedStates.However,sincemostsupplychainsextendglobally,researchisalsoneededonthelegalandethicalapplicationofFMRtheoryandsupplychaincompetitionforresourcesacrossnationalboundaries,whereantitrustlawsdifferormaynotbeenforced(Belletal.2015).AnotherfruitfulavenueofresearchcouldlieinamoretechnicalapproachtodefendfirmsfromFMR,bymakingthemlessreliantonscarceresources.Forexample,Belletal.(2015)identifythatmostfirmsstopshortofproactivelydefendingtheirkeysupplyresourcesandsimplyrelyonsupplierrelationshipsandcontractincentives,similartothebridgingstrategiesidentifiedbyKalaitzietal.(2018).Instead,firmsshouldconsidermoreproactivewaystobuilddefencesagainstFMRactivitiesbyavoidingtheuseofscarceresourcesinproductdesign,findingsubstitutematerialsandresources,anddevelopingwaystocreateutilitythroughtheuseofnewinnovationsthateliminatetheneedforscarceresources.Forexample,GeneralElectric(GE)hasevaluateditsscarcematerialdependenciesinthemetalsindustryandencouragesitsdesignengineerstoavoidtheuseofraremetalssuchasrheniuminnewproductdesigns(Duclosetal.2010).Unfortunately,researchhasshownthatmanydesignengineerslacktheneededdatatoknowwhatmaterialsmightbevulnerabletorivalryastheydesignnewproducts(Kohler2013;Kohleretal.2013).Therefore,betterinformationisneededupstreaminthesupplychainatthedesignleveltoensurethatproductdesigndecisionsdonotmakefirmsvulnerabletoFMRactivitiesduringtheproductlifecycle.Finally,technicalinnovationsandhowtheyrelatetoFMRdefencestrategiesmaybeanotheropportunityforfutureresearch.Forexample,theabilityofautonomousvehiclestopotentiallyrelievetransportationcompa-niesandshippersfromneedingmorescarcedriverresourcescouldhelpfirmstodefendagainstdriverlossestocompetitorsinthefuture.Researchonresourcecompetition(Belletal.2015;Markmanetal.2009)isfocusedprimar-ilyontheaccesstoresourcesthatarevitaltoafirm’sstrategy.Indeed,Barney(1991)outlinedthatvaluable,inimitable,rareandnon-substitutableresourcesarelikelytobethemoststrate-gicforafirm.However,littleresearchintheFMRdomainhasexaminedtherolethatpreferredPeterM.Ralston,MatthewA.Schwieterman,andJohnE.Bell-9781839104503DownloadedfromPubFactoryat05/28/202209:11:05AMviaColumbiaUniversityLibrary

373Factormarketrivalry355resourcesplayinthedevelopmentofrivalryandresourcecompetition.Justassomeresourcesaremorevaluablethanothers,soafirmmayhavesuppliersthataremoredesirablethanothersforvariousreasons.ResearchersfocusingonFMRmaybeabletocontributebydelineatingthescopeandintensityofFMRactivitiesstemmingfromfirms’preferencesforspecificsuppliersorspecificresources.Moreover,thismaybeafruitfulresearchareaforscholarstoexploretherolethatconsumerbrandawarenessplaysinretailersdesiringaccesstoproductstosell.WhilemuchoftheFMRworklooksatthepossibilityofsubstitutes,inaretailenvironmenttheabilityofonegoodtosubstituteforanotherisheavilybasedonconsumers’willingnesstoconsidertheproductsassubstitutes.ThiswouldpossiblybeabridgebetweenFMRandthemarketingresearchfocusingoncustomermarketcompetition.Whileglobaleconomieshavecyclicalebbsandflowsovertimedirectlyaffectinglabourmarkets,thereappeartobecertainsupplychainpositionswhicharealwaysinneed.Occupationssuchastruckdrivers,pilots,certifiedmaintenancetechniciansandwarehouseworkershaverecentlyexperiencedsevereshortages.Theseshortagesincreasefirmcostsasorganizationsmustconsistentlyfindnewworkersorreplaceexistingones.Yes,therearealter-nativestohumanresourcessuchasimprovedefficiencies,taskreplacement/reduction,orevenautomation.However,thesealternativescanbeexpensive,andcertainrolesrequirespecialcertificationsthatcannotbereplaced.Instead,theresponsemaybeintenseFMRforthesepositions.WhilepreviousworkhasidentifiedtheFMMwhichresultsfrom‘feeling’theneedtocompeteforconstrainedworkers(Opengartetal.2018;Ralstonetal.2017),futureworkshouldconsiderwhichfactorscanbreakdownFMMandlessenthenegativeimpactofFMRactivities.Intermsoflabourshortages,perhapsidentifyingnon-traditionallabourpoolswouldbeonewaytolowercostsassociatedwithFMR.Non-traditionallabourpoolscouldincludedemographicsnottraditionallyrepresentedwithintheworkforce(thatis,bygenderorrace).Additionally,perhapstherearealternativeswhichexistforunderservedpopulationssuchasthosewithcriminalrecords,orhybridpart-timejobsharingforearlyretirees.AllofthisistosaythatFMRactivitiesmaydrivefirmactionandincreasecostsoverandabovelookingforothersourcesofworkerswhichcouldrepresentacriticalpartnershipbetweenSCMandhumanresourcemanagerswithinfirms.WhileindustriesthathavelabourneedsandassociatedFMRhasbeenpreviouslydiscussed,therearecertainvocationswhichrequireaperceivedhighleveloftalentassociatedwithasimultaneouscompetitivecomponent.FMRmayexacerbatethecompetitionforperceivedhigh-talentworkerswhohavelimitedsubstitutes.Talentmarketsforcorporateexecutivesorprofessionalathletesmayhaveadifferentcompetitivemarketplacefortheirservicesduetotherealpossibilitythathiringoneemployeemayserveasadetrimenttoacompetingfirm(thatis,supplychaininterdiction).Theissuehereisthatthefactormarketwillelicitinterestingbehavioursbetweenindustryplayers.Obviously,therecouldbecompetitivebiddingbetweenfirmsforanathleteorexecutive.However,anotherrealpossibilityistheperceptionofinterestbyonepartytopiquetheinterestofaseparateparty,ortoartificiallyinflatethepriceonepartyhastopaytoattainaresource.Ifthepricetoattainanassetishigherthanexpected,thefirmcannotspendthatmoneyelsewhere.Inthisregard,thestrategiccompetitionaspectofFMRcanbefurtherdeveloped.Finally,firmsmaycolludewithotherusersoftheconstrainedresourcetolimitcompetitionorsecureequitableaccesstotheresourceforallparties.ThiscollusiononthesupplysidesharessimilaritiestothemarketplaceforbearancethatChenandMiller(2012)describeforservicecompetitorswhichcompeteinmultiplemarkets.Duringfactormarketactivities,firmsPeterM.Ralston,MatthewA.Schwieterman,andJohnE.Bell-9781839104503DownloadedfromPubFactoryat05/28/202209:11:05AMviaColumbiaUniversityLibrary

374356Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable23.3FutureresearchtopicsOverarchingcategoryFMRresearchtopicsExampleresearchquestionsSupplychainstructureSupplychainsequenceofHowdosupplychainscopewithfactorsofproductionwhichareeitheractivities;temporalnatureofperishableorwhichcannotbeprocessedduetoaprocessingglut(forsupplychainactivitiesexample,foodinputsorcommodityrefining)?SupplychainExclusivitybetweensupplyDoexclusiverelationshipsdrivefactormarketrivalryoverandaboverelationshipschainmemberscompetingforfactorsinanopenmarket?Isexclusivityacatalystforcompetitorstodevelopsubstitutestoconstrainedfactors?SupplychainmergersandAremergersandacquisitionsacompetitiveweaponwithinSCM,oracquisitionsmoresoanactofsurvival?Doesfactoraccessimprovecompetitivepositioningordoesmoreaccesscontributetoalossofinnovation?ResourcelitigationSupplychainlegalbattlesDoesfactormarketrivalryspurlegalbattles?Inwhatwaydosupplychainlegalbattlesimpactuponcompetitivebehaviourwithinintensefactormarkets?ResourceavailabilityFactorubiquityWhatstepscanfirmstaketominimizetheuseofconstrainedfactorsinproduction?Whatroledoesplannedobsolescenceplayinfactormarketrivalry?Preferred,specificfactorsDoestheutilizationofspecifictypes(i.e.,brandorcomponentmanufacturer)offactorscontributetomoreintensefactormarketrivalry?Isthelock-infromspecificfactorsofproductionquantifiableandworthwhile?FactormarketcollusionWhatistheoptimallevelofcoordinationbetweenresourceuserstoensureaccesstoaconstrainedfactor?Doesfactormarketcollusionrepresentanindustry-levelinterdiction?HumanresourcesFactormarketextensionHowcanfactormarketmyopia(FMM)bebrokenthroughexpandingfactormarketpoolswhenconsideringconstrainedlabourmarkets?FactormarketperceptionWhatroledoessupplychaininterdictionplaywhencompetingforaperceivedhigh-talent,limitedresource?maycoordinatetheuseofandaccesstoresourcesinshortsupplyacrossresourceusers,thatcouldbemorerightlyconsideredcollusionwithpotentialopportunisticcharacteristics.WhathappensisthatfirmsfindawaytolessenintenseFMRactions.However,thisforbearancestillresultsinsomecosts.Whatistheappropriatebalanceforfirmswhenitcomestofactormarketcollusion,andwhatcharacteristicsofconstrainedresourcesarebettersuitedtoforbearance?Table23.3summarizesthegeneralresearchcategorieswhichunderscorethepresentedfutureresearchareas.Theoverarchingresearchtopicsaredisplayed,andexampleresearchquestionsareprovided.CONCLUSIONFMRactivitiesareanarearipeforresearchwithintheSCMdiscipline.WiththerealizationthatFMRlooksatsupply-sidecompetitionforconstrainedresources,thetheoryistrulyageneraltheoryofSCM.ThischapterservestodelineatethetheoreticalfoundationofFMRandexplainhowthetheoryappliestoSCM.VariablesspecifictoFMRaredefinedandpredictionsofthetheoryareprovided.Withtheunderstandingthatintensecompetitioncanexistforconstrainedresources,anumberoffutureresearchavenuesareprovidedanddiscussed.PeterM.Ralston,MatthewA.Schwieterman,andJohnE.Bell-9781839104503DownloadedfromPubFactoryat05/28/202209:11:05AMviaColumbiaUniversityLibrary

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37824.TheindustrialnetworkapproachandpurchasingandsupplymanagementresearchBjörnAxelsson,Lars-ErikGaddeandFinnWynstraTHEINDUSTRIALNETWORKAPPROACH:ORIGINANDEVOLUTIONTheindustrialnetworkapproachseekstoanalysetheinteractionbetweenactorsinbusinessnetworks.TheapproachwasinitiallydevelopedbyagroupofEuropeanresearchersinthe1970s.Infact,theindustrialnetworkapproachencompassestwocoremodels:theinteractionmodel,whichpertainstobilateralexchangeepisodesandlong-termrelationsbetweenfirms;andthenetworkmodel(oractivities‒resources‒actorsmodel),whichconsiderstherelationsbetweenasetofactors(threeormore)andtheirinterdependencies.Theemphasisoncollab-orationandtheinterdependencebetweendifferentbusinessrelationshipsmaynotseemverydistinctivetodayinthe2020s,butsome50yearsagothiswasasignificantdeviationfromthethen-currentmodelsofbusinessrelationsingeneral,andofprocurementandbusinessmarketinginparticular.Stilltoday,theindustrialnetworkapproach(INA)standsoutinthatitconsidersinteraction,andinterdependence,asagivenconditionintheoverwhelmingmajorityofbusinessexchanges.TheINAviewonbusinessmarketingandpurchasingoriginatesinaninternationalresearchprojectstartingin1976,oninternationalmarketingandpurchasingofindustrialgoods.ThisprojectinvolvedresearchersfromfiveEuropeancountrieswithambitionstoinvestigatethebusinessprocessesbetweenfirms,whichinthisparticularprojectinvolvedbuyingandsellingfirms.Theseresearchers–collectivelyreferredtoastheIndustrialMarketingandPurchasing(IMP)Group‒weredissatisfiedwiththedescriptions,conceptualizationsandanalysesofinterorganizationalrelationsinthemainstreamliterature.Contemporarypurchasingmodels,forinstance,consideredtheoccurrenceofcloserelationswithsupplierstobeamarketfailurebecausethesefeatureswouldimposeunwanteddependences(Westingetal.,1969).Incontrast,priorempiricalobservationsmadebythisgroupofresearcherspointedoutthecentralroleoflong-termbusinessrelationships;aphenomenonneglectedinestablishedframeworksatthetime.Theprojectmembersconcludedthatmorerealisticconceptualizationshadtobebasedonsystematicempiricaldata.Intheirjointproject,morethan1000face-to-faceinterviewswereconductedinSweden,theUnitedKingdom,France,Italyand(whatwasthen)WestGermany.Theinterviewscoveredaround800customer‒supplierrelationshipsinthefivecountries.Theempiricalresultsweresimilaracrossfirmsandcountries,andconfirmedthewidespreadexistenceoflong-term,closebuyer‒supplierrelations.Thesefindingsstronglycontrastedwiththemainstreamviewof(businessmarketingand)purchasingprocesses(Robinsonetal.,1967;Westingetal.,1969).Aftersixyears,theprojectwasreportedinajointpublicationeditedbyHåkansson(1982).Inthe‘Introduction’(p.1),theauthorsstartedbychallengingthecontemporaryperspectiveinseveralrespects.Theychallengedtheconcentrationoftheindustrialbuyerbehaviourliterature360BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

379Theindustrialnetworkapproachandpurchasingandsupplymanagementresearch361‘onanarrowanalysisofasinglediscretepurchase’,andtheviewofindustrialmarketing‘asthemanipulationofmarketingmixvariables’,aswellastheanalysisof‘eithertheprocessofindustrialpurchasingorofindustrialmarketing’.Instead,theyemphasizedtheimportanceoftherelationshipsbetweenbuyersandsellers,andtheinteractionbetweenthetwoparties‘whereeitherfirmmaybethemoreactivepart’.ThemaincontributionofthisfirststepinINAtheorydevelopmentwastheinteractionmodelportrayingtheinterplaybetweenbuyerandseller.Themodelanditsconstructsarefurtherdescribedinthefollowingtwosections.Thenextstepwasinitiatedinthesecondhalfofthe1980s,alsothroughthelaunchofamultinationalproject.IMP1wasfocusedoninteractionindyadicrelationships.Theanalysisoftheserelationshipsindicatedthattheywereconnectedto,andsignificantlyimpactedby,otherrelationships.Therefore,theenvironmentoftherelationshipintheinteractionmodelwasfarfromadiffuseoranonymouscontext,butfeaturedspecificotherfirmsandrelationships.Thus,thenewproject(IMP2)aimedatconceptualizingtheembeddednessoftheindividualrelationshipinitscontextualsettingofotherinterdependentrelationships.IMP2extendedthegeographicalcoveragebyalsoinvolvingresearchersfromtheUnitedStates,AustraliaandJapan.TheprojectisreportedinHåkanssonandSnehota(1995).Thestudyshowedthatunder-standingofbusinessinteractionrequiresthattheindividualrelationshipisseenasanelementembeddedinanetworkofotherrelationships.Assuch,theIMPdefinitionofnetworkscloselyfollowsthatbyCookandEmerson(1978,p.725):‘Anexchangenetworkisasetoftwoormoreconnectedexchangerelations…Twoexchangerelationsareconnectedtothedegreethatexchangeinonerelationiscontingentuponexchange(ornonexchange)intheotherrelation.’ThemaincontributionfromtheIMP2studyisamatrixschemefornetworkanalysisbuild-ingontheARAmodel(activities‒resources‒actors).Themodelanditsconstructsarefurtherdescribedinthesectiononcoreconstructs.InboththeIMP1andIMP2projects,theimpactofthenetworkisconsidered,butattherelationshiplevel.Theseconditionscalledforapublicationtakingthenetworklevelasthestartingpointforanalysis:Håkanssonetal.(2009a).Thisbookisnotbasedonaspecificresearchproject,butstillheavilygroundedinempirics.Firstly,theauthorsrelyontheirownfieldstudiesconductedformorethan40years.Secondly,theydrawonthenumerousdis-sertationsandpaperspresentedbyresearchersintheexpandingIMPcommunity.Again,thecentralroleofinteractionisemphasized,anditsfeaturesandeffectsareexploredinrelationtothethreeARAlayers.Inadditiontothespatialnetworkimpact,specificattentionisdirectedtodynamicconditions.Furthermore,theauthorsdiscusstheimplicationsformanagementandpublicpolicy.FROMRELATIONSHIPSTONETWORKS:THEINTERACTIONANDARAMODELSInthefollowingwedescribetheINA’stwocentralmodels.TheINAperspectiveonbusi-nessrelationshipsconstitutedawatershedbetweenestablishedconceptualizationsandtheobservationsofrealitymadebytheIMPpioneers.Asnoted,contemporaryeconomictheoryperceivedtheoccurrenceofcloserelationswithsupplierstobeamarketfailure,becausesuchfeaturesimposedunwanteddependencies.ThisviewofrelationshipswasprobablyoneofthemaintriggersoftheINAsinceitsearlyadvocateshadidentifiedtheexistenceoflong-termandcloserelationships,aswellasthebenefitstheyprovided(Håkanssonetal.,1977;Ford,BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

380362Handbookoftheoriesforpurchasing,supplychainandmanagementresearch1980).Therelationshipswithsupplierswereeconomicallysignificantforbuyingfirms,sincestudiesshowedthatalimitednumberofsuppliersaccountedforalargeportionoftheircosts(andcorrespondinglyfortheirincome).Moreover,supplierswereoftenimportantsourcesoftechnologyandknowledge,implyingthatsmallsupplierscouldalsobesignificantbusinesspartners.Forthesereasons,theINAperspectiveclaimsthatwhattakesplaceintherelation-shipsbetweencompaniesismoreimportantthanwhattakesplacewithintheindividualfirms.Theseconditionshavesupportedtheargumentthatafirm’sbusinessrelationshipsareitsmostvaluableresource,whichinturnmakestheinteractionwithinsuchrelationshighlyimportant(seeFordetal.,2003).TheInteractionModelFigure24.1portraystheoriginalinteractionmodelevolvingfromtheIMP1project.Interactionoccursonboththeorganizationallevelandtheindividuallevel.Theinteractionprocessesbuildontheaimsandexperiencesofthepartiesandisimpacteduponbyfeaturessuchastechnology,organizationalstructureandthestrategiesoftheparties.Interactioncontainstwoprocesses:short-termexchangeepisodes,andlong-termrelationshipsinvolvingadaptationsandthusinstitutionalizationoftheinteraction.Theprocesseswerefoundtobeaffectedbytheatmosphereoftheinteraction,whichcanbeeithercooperativeorconfrontativethroughtheexploitationofpower.Interactionisalsoaffectedbyvariousaspectsoftheenvironmentofthetwoparties,suchasinternationalizationandmarketstructure.Inthecomingdiscussionofcentralconstructs,wewillreturntoadaptations,closenessanddynamism.Source:BasedonHåkansson(1982).Figure24.1InteractionmodelBjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

381Theindustrialnetworkapproachandpurchasingandsupplymanagementresearch363Thesignificanceofinteractionhasbeenincreasinglyemphasizedovertime.InHåkansson(1982),interactionwasprimarilyconsideredaprocessongoingbetweenindividualsorbetweenorganizations,asillustratedinFigure24.1.Håkanssonetal.(2009a)extendedtheanalysisofinteractiontoinvolvethethreenetworklayers,thusexploringinteractioninrela-tiontoactivities,actorsandresources.Finally,evengreaterattentiontointeractionisprovidedbythesubtitleofthebookcelebrating40yearsofIMP(HåkanssonandSnehota,2017):MakingSenseoftheInteractiveBusinessWorld.TheARAModelTheinitialARAmodel(Håkansson,1987)portrayedthebusinessrealityasanetworkcontain-ingthreelayers.InrelationtotheterminologyofWacker(1998),thisnetworkwasdefinedbyitsongoingactivities,theresourcesexploitedintheundertakingofactivities,andtheactorscontrollingresourcesandconductingactivities.Inreality,thethreelayersarecompletelyintertwined,butcombinedtheyofferthreeseparatelensesonthenetwork,thusenablingtheholisticperspectiverequiredforanalysisofcomplexrealities.ThroughIMP2,theconceptualizationoftheINAwasfurtherdevelopedasameansforbetterunderstandingofinteractionanddyadicconstellations(seeFigure24.2).Oneextensionregardsthecontentofabusinessrelationshipthatisdefinedbythreecentralconstructs:thelinksbetweentheactivitiesofthetwoparties,thetiesbetweentheirrespectiveresources,andthebondsthatevolvebetweenthetwo.Activitiesarelinkedthroughcoordinativeefforts;resourcesbecometiedthroughthesuccessivecombiningandrecombiningoftheresourcesoftheparties.Finally,actorsarebondedthroughtheirjointcoordinationandcombining,aswellasthroughthepersonalconnectionsbetweenpeople.Thesecondextensionrelatestothefunctionofarelationship.Whatisongoinginabusinessrelationshipdoesnotonlyimpactuponthespecificdyad.Thereisalsoafunctionforthetwoindividualcompanies,aswellasforthelargersetting–thenetwork–wherethetwopartiesreside.Inthisway,thelinks,tiesandbondsintherelationshipimpactupontheactivity,resourceandactorfeaturesofthetwocompaniesandtheotherfirmsconnectedtothem.Centralconstructssubjecttofurtherdiscus-Source:BasedonHåkanssonandSnehota(1995,p.45).Figure24.2TheARAmodelBjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

382364Handbookoftheoriesforpurchasing,supplychainandmanagementresearchsionregardinterdependenciesbetweenactivities,heterogeneityofresources,andadaptationsamongactors.THECORECONSTRUCTSINTHEINAInthefollowing,wedescribethecoreconstructsofthetwoINAmodels:oneofthefourmainelementsofatheoryaccordingtoWacker(1998).TheconstructspresentedarethosemostcentralanddistinctiveforINA’sconceptualizationofinterorganizationalrelationshipsandnetworks:networkembeddedness,interdependencies,heterogeneityofresources,involve-mentandinterfaces(relatedtoclosenessintheinteractionmodel),adaptations,andnetworkdynamics.NetworkEmbeddednessFollowingtheARAmodel,businessrelationshipsareembeddedinnetworks,implyingthatwhathappensinonerelationshiptendstoaffectwhathappens,andwhatcanbedone,inotherrelationships.IntheARAterminologyonesignificantassumptionisthatthe‘total’networkofactivities,resourcesandactorsisboundless,sinceitisalwayspossibletoidentifyfurtherconnectionsinanydirection.Thisnetworkconstitutesacomplexsetting,alsoincluding‘tech-nological,logistical,andadministrativesystemsaswellaslegalstructures;itisamirrorandsourceofthemultipleinterdependenciesarisingbetweencompanieswithpermeableandfuzzyboundaries’(HåkanssonandSnehota,2017,p.11).Theseconditionsimposesevereanalyticalandmanagerialdifficulties.Anyanalysisofnetworkconditionsmustthereforebebasedonlimitationsofthetotalnetwork,suchassubnetworksrelatedtologistics,technology,industries,orthosedevelopedaroundsinglecompanies.AnimportantfeatureoftheINAisthattheresearchboundariesbecomesetasthestudyprogresses,basedontheevolvingfindings,whilemostothertheoriestendtorelyonpresetsystemboundaries.Moreover,sincethetotalnetworkisboundlessandchanging,itisunknowableforthoseinvolvedinmanagerialaction.Decisionmakersmustactontheirknowledgeofthelimitedpartofthenetworktheyconsiderrelevantfortheiractions,identifiedastheir‘networkpictures’(Fordetal.,2003)or‘networkhorizon’(HolmenandPedersen,2003).Forthisreview,IMPpublicationsrelatedtosuppliernetworksareofspecialinterest.GaddeandHåkansson(2001)explorethefeaturesofsupplynetworksregardingthethreenetworklayers,anddiscussstrategicissuesrelatedtooutsourcing,relationshipfeaturesandnetworkconditions.BocconcelliandHåkansson(2008)showhowanunprofitablecompanymadeasuccessfulturnaroundthroughtheactivationandtransformationofitssuppliernetwork.Finally,DuboisandFredriksson(2008)illustratethesignificantconnectionbetweentherela-tionshipandnetworklevelsthroughastudyoftriadicsourcing(onebuyerinrelationtotwosuppliers).InterdependenciesInterdependenceisacentralfeatureoftheactivitylayerbecausenoactivityisisolatedfromothers;itislinkedtoactivitiesundertakenpreviouslyandsimultaneously,aswellasthosethatBjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

383Theindustrialnetworkapproachandpurchasingandsupplymanagementresearch365willbeundertakenlater.Theseinterdependenciesoccurbetweenmanufacturing,logistics,andserviceactivitiesaswellasinrelationtodesignandresearchanddevelopment.Themyriadofinterdependentactivitiesmustbeintegratedwithinfirmstosecureefficientin-houseopera-tions.However,overtime,increasingoutsourcinghasmadeintegrationacrosstheboundariesoffirmsevenmoresignificantforperformanceimprovementsinsupplychainsandsupplynetworks.Theseeffortsrequireanalyticaltoolsforinvestigationofthepotentialeffectsofthecoordinationmechanismsappliedforintegrationofactivities.Dubois(1998)developedsuchtoolsregardingserialandparallelinterdependencies.Activitiesthatmustbeundertakeninaspecificorderareseriallyrelated.Therelevantmech-anismforcoordinationdependsonthestandardizationorcustomizationofwhatisexchangedbetweentheparties.Parallelinterdependenceoccursforactivitiesthatareundertakenatthesametimeandexploitthesameresources.Inthissituationthecentraltaskincoordinationistosecureeffectiveuseofresources.Thisframingwasfurtherdevelopedtoanalyseinterfirminterdependencieswithinandamongsupplychains(Duboisetal.,2004;HåkanssonandPersson,2004).AnoverviewoftheroleofinterdependenceinINAresearchispresentedinFreytagetal.(2017).HeterogeneityofResourcesOneofthecentralassumptionsintheINAisresourceheterogeneity,implyingthatthevalueofaresourceisdependentonitsconnectionstootherresources.Intoday’sinteractivebusinesslandscape,theeconomicfeatureofaresourceisnotagiven:itisdeterminedbytheeffectsofitstiestootherresources.Inthisway,thecombiningandrecombiningofresourcesarecentralissuesinsuppliernetworks(GaddeandHåkansson,2001).Baraldi(2008)showshowabuyingcompany(IKEA)isprovidedwithsubstantialbenefitsthroughthelong-termresourcecombin-ingwithitssuppliers.Theconditionsforefficientandeffectivecombiningofresourceschangeovertime,thusmakingrecombiningacrucialissue.HåkanssonandWaluszewski(2002)show,inanotherIKEAcase,thesignificanceofresourcerecombininginrelationtosupplierswhennetworkconditionschange.Thisbookalsopresentsthe‘fourresources’(4R)framework,usefulforanalysisofresourcedevelopment.Accordingtothisframework,theevolvementofaspecificresourceisdeterminedbyitsinterplaywithotherresourcesrepresentingfourcategories.Theframeworkdistinguishesbetweenphysicalandorganizationalresources.Thephysicalresourcesarerepresentedbytheproductsexchangedandthefacilitiesutilized(involving,forexample,productionresourcesandthetransportationinfrastructure).Theorganizationalresourcescontainthebusinessunitswheretheknowledgeandcapabilitiesoftheactorsreside,aswellasthebusinessrelationshipsprovidingaccesstoexternalresources.InvolvementandInterfaces‘Closeness’isoneoftheconceptsintheinteractionmodel.Thisrelativelybroadconceptwasfurtherrefinedby,forexample,GaddeandSnehota(2000)intheiranalysisofhowto‘makethemostofsupplierrelationships’.Theydistinguishedbetweenhighandlowinvolvementrelationshipsandtheirrespectivecontributionstorelationshipperformance.Araujoetal.(1999)presentedamorefine-tuneddistinctionbasedonthebuyingfirm’sresourceinter-faceswithsuppliers,andtheaccompanyingconsequencesforproductivityandinnovation.BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

384366Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFourinterfacecategorieswereidentified:fromstandardizedinterfaceswithoutadjustmentsbetweenresources,tointeractiveinterfacesbasedonintenseinteractionandcollaborationinvolvingmutualadjustmentsonthetwosidesofthedyad.In-betweenthetwowefindspeci-fiedinterfaceswherethebuyerprescribesthefeaturesofwhatisexchangedandhowitshouldbeproduced.Whentranslationinterfacesareathand,thebuyerdescribesthefeaturesofwhattoexchangeandleavesittothesuppliertodecidehowtocomplywiththeserequests.ThisframingwasfurtherextendedbyGaddeandWynstra(2017),whoanalysedthecon-sequencesofthevariousinterfacesinrelationtorationalizationanddevelopmenteffortsonthesupplysideofacompany.Basedonthisexplorationtheypresentstrategicalternativesfortheleveragingofthesetwostrategicrolesandtheinterfaces,aswellastheorganizingissuesrelatedtoeachtypeofinterface.AdaptationsIntegrationofactivities,combiningofresources,andinvolvementamongactorsareexamplesofadaptationsbetweenbusinesspartners.Adaptationsprovidebenefitsbyimprovingopera-tionalperformancebutarealsocostly.Therefore,thefinancialconsequencesofadaptationsinactivitylinks,resourcetiesandactorbondsneedtobescrutinizedbothbeforeandaftersuchinvestmentsareundertaken.Moreover,adaptationsimposedependenciesinrelationtobusinesspartners.Historically,firmswererecommendedtoavoidadaptationstoindividualsuppliers,becausesuchconditionswouldimplylock-ineffectsandmakeitdifficulttoexploitmarketforces.Intoday’sbusinesslandscape,however,firmsdeliberatelyentersituationsleadingtointer-dependencies.Theydosobecauseinordertosurviveandprogressintheinteractivebusinessworld,organizationscannotescapetheinterdependenciesaccompanyingadaptationsintermsofwell-functioningactivitylinks,resourcetiesandactorbonds.However,theseadaptationsinrelationtospecificbusinesspartnerswillconstraintheopportunitiesforprosperousengage-mentwithotherfirms,becausethesepotentialpartnershaveadaptedtheirresourcesandactivitiestotheircurrentbusinesspartners.Changingbusinessconditionsimpactupontheperceptionsandeffectsofinterdependencies.Inthesesituations,firmsmayconsidermodifyingtheiradaptations,sinceadaptationsareimportantmeansforhandlinginterdependencies.Butanyattempttoreducecertaininterde-pendenciesthroughchangesinthepatternofadaptationswillinduceotherformsofinterde-pendencies,whichinturnmustbehandled.NetworkDynamicsNetworkconditionsareincontinuousflux.Theyevolvesuccessivelythroughtheinteractionamongtheactorsintheirattemptstoimprovenetworkperformance.Intheseeffortstechno-logicaldevelopmentsrepresentsignificantenablersforreconfiguringactivitycoordinationandresourcecombining.Somewhatparadoxically,however,networksalsofeatureconsiderablestability.Modificationsandrenewalnormallytendtooccurwithinthebasicbuildingblocks,constitutedbytheinterdependenciesandadaptationswithinestablishedactivitypatterns,resourceconstellationsandwebsofactors.Theembeddednesswithinthisbroadsettingfavourschangesthatareinlinewithcontemporarynetworkstructuresandprocesses,whileconstrainingotherforcesformodification.BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

385Theindustrialnetworkapproachandpurchasingandsupplymanagementresearch367Thesameconditionsmakeitdifficultforindividualfirmsinisolationtochangethebasicstructure.Overtime,otherfirmsinthenetworkhavemadesubstantialinvestmentsinthecurrentsetting.Therefore,itisnotlikelythattheywouldbemotivatedtoengageinmodifi-cationsthatmightthreatentheirnetworkpositions.Rather,theycanbeexpectedtopreferthestatusquoandthuscounteractchangeinitiatives.Thismeansthatmajormodificationsrequiretheunifiedeffortsofseveralactorsininteraction,becausetheactionspaceofasinglefirmisseverelyconstrained.Forthesereasonsthereisanetworksayingthathasbecomeclassical:‘Ifthenetworkisagainstyou;youcandonothing.Butifthenetworkiswithyou;youcandoalmostanything.’THEDOMAINSANDUNITSOFANALYSISOFTHEINAThesecondelementofanytheory,accordingtoWacker(1998),isitsdomain.AboveweillustratedsomecentralconstructsusedinINAresearch.ThestartingpointforthisconceptualevolutionwasthattheIMPfoundersweredissatisfiedwiththeframingoftheprocessesinbusinessmarketingandpurchasing.Intheireffortstoimprovethissituationtheywereabletorelyonconstructsdevelopedwithinotherresearchdisciplines(forexample,sociologyandorganizationtheory).ItisbeyondthescopeofthischaptertoelaborateonthevarioustheoriesthattheINAhasdrawnon;forareviewwereferthereadertoEaston(1992).Forthisreason,theconceptsapplied–suchasrelationshipsandnetworks–arebroaderthanthoseestablishedbefore(forexample,marketingmixandmodelsoforganizationalbuyingbehaviour).Theseconditions,incombinationwiththegeneralityoftheARAmodel’sbasicconcepts,makeitpossibletousetheINAframeworksformanyresearchproblemsandinmanydifferentempiricalsettings.Whenissuesrelatedtoactivities,resourcesandactorsaresignificant,theINAprovidesarelevantalternative.ThisrelevanceisillustratedbythefactthatINAmodelshavebeenappliedtootherphenom-enathanbusinessmarketingandpurchasing.Intheinitiationphase,researchininternationalbusinessprovidedimportantinputtothedevelopmentoftheapproach,andovertime,contri-butionshavebeenmadetoresearchoninnovationandtechnologicaldevelopment(HåkanssonandWaluszewski,2002:Håkanssonetal.,2009b).Moreover,theINAmodelshavebeenusedforreinterpretationofprerequisitesandeffectsofpublicpolicy(GuerciniandTunisini,2017;HoholmandAraujo,2017).Finally,inrecentyears,enhancedattentionhasbeenpaidtoissuesdealingwithstart-upsandvariousformsofnewventures(seeBaraldietal.,2019).DomainsrelatedtopurchasingandsupplymanagementwheretheINAperspectivedoesnotreallyapplywouldinvolveatomisticmarketswithanonymoustradingpartners,suchaspurecommoditymarkets.ItwouldbeamisunderstandingtothinkthatthismeansthattheINAperspectiveappliesonlytotechnologicallycomplicatedgoodsandservices;eventhedevelop-mentandproductionofIKEA’sfamousLacktablecanbeeffectivelyunderstoodintermsofintegrationofactivities,combiningofresources,andinvolvementofdifferentbusinessactors(Baraldi,2008).BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

386368Handbookoftheoriesforpurchasing,supplychainandmanagementresearchGENERALDIFFUSIONOFTHEINAINPURCHASINGANDSUPPLYMANAGEMENTRESEARCHAsthenamealreadysuggests,IMPandtheINAhavebeenextensivelyusedinstudyingphe-nomenainthefieldofpurchasingandsupplymanagement(PSM),butbyarelativelysmallcommunity.Toillustratethis,wedrawonastudythatreviewedsome2522journalarticlesdealingwithPSM,fromtheperiod1995‒2014(Wynstraetal.,2019).Thesearticlesarepub-lishedinasetof18internationaljournalsacrossthemarketing,operationsmanagementandstrategy/organizationdisciplines,plusthetwospecialistPSMjournalsJournalofPurchasingandSupplyManagement(JPSM)andJournalofSupplyChainManagement.Ofthese2522publications,50articles(2percent)explicitlyapplytheindustrialnetworkapproach.Ofthese,42articlesarepublishedinIndustrialMarketingManagement(IMM)andJPSM.TheINAhasbeenparticularlypopularintheperiod2000‒2010;beforeandafterthisperiod(thatis,1995‒1999and2011‒2014),thePSMstudiesinoursetdidnotapplytheINA.TheremaybeseveralfactorsexplainingthissomewhatlimiteddiffusionoftheINAinPSMresearchpublishedin(top)journals.First,manyoftheoriginaloratleastearlyIMPcontributorswereinitiallyfocusingonpublishinginbooks,andinsomejournalsnotcoveredinthisdataset(suchastheJournalofBusiness-to-BusinessMarketingandJournalofBusinessResearch).Partofthisfocusmaybeexplainedbythefactthatmanyofthetopjournalsinmar-ketingandoperationsmanagement,especiallythosethathavetheirrootsinNorthAmerica,arenotanaturalhometothemainlyqualitative,in-depthstudiesthatIMPresearchwouldtypicallyinvolve.AnotherfactorexplainingthelimitedfocusontopjournalsmaybetheinstitutionalcontextintheacademicinstitutionsoftheearlyIMPcontributors.Inmanycases,theseuniversities(especiallyinScandinavia)didnotsteerresearcherssostronglytowardspublicationsintopjournals–forbetterorforworse.ThesecondplausiblereasonforthesomewhatlimiteddiffusionoftheINAistheconse-quenceofthefirst;sincerelativelyfewIMPstudieswerepublishedintopjournals,fewerpeopleoutsidetheIMPcommunity(betheyreadersorreviewers)havebecomefamiliarwithit,andthosethathaveseenitmaynothavedeemeditaveryproductiveavenueforgettingpublished.AthirdreasonmaybethatregardingWacker’sthirdandfourthelementsoftheory–specificrelationshipsbetweenconstructsandpredictions–INAresearchtendstobemoreambiguousthan,forinstance,transactioncosteconomics.OnecentralpostulateinINAtheoryisthatanyactionandanyoutcomeinanetworkishighlycontextspecific.Therefore,findingsandconclusionsgeneratedinonebusinessrelationornetworkshouldnotbegeneralizedtoanotheronewithoutcarefulconsideration.DespitethisapparentlimiteddiffusionoftheINAinPSMresearch,oneshouldnotdrawtheconclusionthattheimpactorsignificanceoftheindustrialnetworkapproachislimited.Justconsideringrelativequantitiesofjournalpublicationsisanarrowmetric,whichdisregardstheimpressiveseriesofbooksthathavebeenpublished,forinstance.Also,theimpact–implicitorexplicit–oftheINAonPSMresearchcannotbecompletelygaugedinthisway.Infact,Wynstra(2010)demonstratesthatarelativelyhighshare(10percent)ofthemost-citedarticlespublishedinJPSMbythenhadbeenauthoredbyresearchersassociatedwithIMP(Dubois,Gadde,Harrison,Håkansson,Wynstra).BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

387Theindustrialnetworkapproachandpurchasingandsupplymanagementresearch369APPLICATIONSOFTHEINAPERSPECTIVEWehaveidentifiedtenthemescentraltoPSMresearch,whichincludestudiesthathaveadoptedtheINA.Foreachofthechosenthemes,webrieflydescribethethemeandreviewsomeillustrativeexamplesofstudiesthathaveadoptedtheINA.InthisreviewofapplicationsoftheINAperspective,wedrawonthesetofarticlesdescribedabove(Wynstraetal.,2019),thereviewbyJohnsen(2018),andadditionalpublicationsfromotherjournalsandbooks.StrategicRoleofProcurementTheseminalarticlebyKraljic(1983)directedattentiontothestrategicroleofprocurement.Whilethecategorysourcingstrategiesfromthatarticlehavereceivedmostattention(seebelow),thearticlealsosuggestedthecontingenciesunderwhichorganizationsshouldadoptamorestrategicfocusonprocurement(‘supplymanagement’)andwhentheycouldcontinuetorelyonapredominantlyoperationalfocus(‘purchasing’).Atthesametime,IMPresearch-erspointedoutthestrategicimportanceofpurchasinginAxelssonandHåkansson(1984).Thisbookwasbasedonaninterviewstudyinvolvingabroadselectionofpurchasingmanagers,aimingatidentifyingtheir‘bestexamples’whereprocurementeffortsmadesignificantstrate-gicimpact.Theseillustrationswerethendiscussedaroundthreethemes,eachoneportrayingastrategicroleofprocurement:therationalizationrole,thedevelopmentrole,andthesupplynetworkdesignrole.WhilethefirsttworolesweretosomeextentcomparabletoKraljic’snotionsofpurchasingversussupplymanagement,respectively,thesupplynetworkrolehadnotexplicitlybeendefined.Moreover,AxelssonandHåkansson(1984)emphasizedthattherearetrade-offsinfulfillingthesedifferentroles.GaddeandHåkansson(2001)returnedtotheserolesandintegratedthemsystematicallyintheiranalysisoftheinterconnectionsbetweenpurchasing,ontheonehand,andthenetwork’sactivities,resourcesandactorsontheother.Theauthorsconcludedthatthestrategicroleofpurchasingismanifestedthroughthebuyingfirm’sapproachesandactionsinrelationtothreespecificareas:make-or-buydecisions,therelationshipswithindividualsuppliers,andthedesignoftheentiresupplierbase.SupplierRelationsEarlystudiesinbusinessmarketingadoptingtheINAstronglyemphasizedtheimportanceofbusinessrelationshipsandtheroleofinteractionbetweenbuyersandsellers.Severalsubse-quentstudiesfromthebuyingfirmperspectivewere‘mirrorimages’ofthosemadefromthesellingparty’sperspective(seeHåkansson,1982).Studyingthegeneralaswellasspecificaspectsofagreatnumberofinteractivesettingsdemonstrated,amongothers,howinteractiveprocessesdifferedforafirmsupplyingrawmaterialsorsemi-assemblyproductsrelativetocomponentsandproductionequipment.ThesestudieshavebeenextendedbyVanderValketal.(2009),forexample,whostudiedvariouskindsofservicesbasedonthesameidea(notably,howtheproductisusedbythebuyer:asaproducttoprocessfurther,asapartofabiggerproduct,oroperativelyasaworkingmethod).Otherstudiesfocusingonbusinessrelationshipshavelookedatthedurabilityofrelationships(Duboisetal.,2021)andreasonsforterminatingrelations(HalinenandTähtinen,2002).BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

388370Handbookoftheoriesforpurchasing,supplychainandmanagementresearchAsorganizationshaveseveralsupplierrelationships,thereisaninterestinhowtobestsegmentthem.EversincetheseminalarticlebyKraljic(1983),companieshavestruggledwithsortingsupplierrelationshipsintocategories.IMPresearchhaslookedintothisthemetoo.PedersenandDubois(2002)expressedcriticismofall-too-simpleclassifications,whichisobviousfromthetitleoftheirwork:‘Whyrelationshipsdonotfitintoportfoliomodels’.Theircritiqueistwofold.First,buyer‒supplierrelationsarenotjusttobeseenfromapowerbalanceperspective;interdependenceisthenaturalconsequenceofadaptationsandconcernsvirtuallyallrelationships.Second,specificbuyer‒supplierrelationsshouldnotbeseeninisolation.Groupingsuppliersbasedontheproductorservicedelivereddisregardsinterdependenciesandsynergieswithotherproductsandservices,andlimitstheviewpointofbuyingfirmstothecurrentexchange,withthedangerthattheoverallpotentialofthesupplierininnovationisoverlooked.PerssonandHåkansson(2007)alsochallengetheKraljicmatrix,andspecificallytherecommendedstrategiesthatareindicatedbasedonasupplier’spositioninthematrix.Theydemonstratethatineachofthefourmatrixquadrantsarelationship-orientedapproach–con-trarytotheconventionalview‒couldbeaneffectivechoice.Thisisnottosaythatcooper-ationisthesolewaytoleveragesupplierrelations.Theearlier-mentionedstudybyDuboisandFredriksson(2008)demonstrateshowcooperativeandcompetitivemeasurescouldgohand-in-hand.Forinstance,acompanycancapturethebenefitsoflong-termcooperationbyalternatingorshiftingvolumesbetweenparallelsuppliers.SupplierBaseConfigurationsThesupplier(supply)basehasbeenidentifiedasoneofthemoststrategicassetsofafirm(Fordetal.,2003).OnedistinctioninrelationtoothertheoriesistheexplicitviewoftheINAthatsuppliernetworksbecomeestablishedthroughevolutionaryprocessesthatarenotfullyundercontrolofthebuyingfirm.Otherapproachestendtoconsiderthesenetworksaspre-dominantlycreatedandmanagedbythebuyingfirm.WithintheIMPGroup,however,therearealsosomestudiesthatadoptsuchamorevoluntaristicperspective(MöllerandRajala,2007).Atthesametime,supplierbasesareoftencharacterizedbyahighdegreeofstability.Inalongitudinalstudy,buildingondatacoveringmorethan50years,itisdemonstratedhowthesupplierbaseofacompanyevolvesthroughentriesandexitsofsuppliers,aswellasmodifica-tionsoftheirrelativepositions(Duboisetal.,2021).OtherstudiesillustratingthefeaturesanddynamicsofsupplierbasesincludethepreviouslymentionedpapersbyAraujoetal.(1999),Baraldi(2008),BocconcelliandHåkansson(2008)andPerssonandHåkansson(2007).OneofthecentralINAconstructsisembeddedness,implyingthatwhattakesplaceinonerelationshipimpactson–andisimpacteduponby–whatisongoinginthesurroundingnetwork.Theobviousimplicationisthatactivitiesdirectedtowardsonebusinesspartneralsoneedtobringotherrelationshipsintothepicture.Numerousstudiesmakeclearthatfirmsdotakespecificotherrelationshipsintoconsiderationwhendecidingandactinginrelationtoafocusedcounterpart(BlankenburgandJohanson,1992).Followingthisnotionofembedded-ness,theINAhastraditionallyavoidedthetermsupply‘chains’,buthasconsistentlyreferredtosuppliernetworks(seeGaddeandHåkansson,2001).Relationswithandbetweensupplierscanbeinterconnectedinmultipleways;notjustthosebetweenthedifferenttiersinasupplychainforaspecificcomponent.BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

389Theindustrialnetworkapproachandpurchasingandsupplymanagementresearch371OrganizingProcurementHistorically,PSMorganizingfocusedonintra-organizationalissuessuchasthechoicebetweencentralizationanddecentralization,theorganizingofthepurchasingdepartmentanditsconnectionstoothercorporatefunctions.Overtime,outsourcing,specialization,andtheneedforsupplierresourcesrequiredincreasingattentiontoorganizingacrosstheboundariesoffirms.FromtheINAperspectivethisexternalorganizingwasaprimaryfocusfromtheverybeginning,sincetheearlystudiesindicatedthatbusinessmarketingandpurchasingtoalargeextentcouldbecharacterizedasorganizationalissuesinrelationtoimportantbusinesspartners.Externalorganizingissignificantforthefeaturesoftheexchangeprocessesinarela-tionship.Theoutcomesofeffortstomobilizeandmotivatesuppliersarecontingentontheorganizationalarrangementsappliedbetweenthefirms.Moreover,thecontentofarela-tionship,intermsofactivitylinking,resourcecombiningandactorbonding,areallfeaturesdeterminedbytheformsoforganizingacrossthebordersoffirms.Thefourtypesofinterfacesinbuyer‒supplierrelationshipsdiscussedinprevioussectionsrelyondifferentorganizationalconstellations(Araujoetal.,1999;GaddeandWynstra,2017).Moreover,thebasicconditionsinthesupplierbaseregarding,forexample,collaborationbetweenthevarioussuppliersaregeneratedthroughtheorganizingformsestablished.Themostcrucialissueintheorganizingatthesupplysideofcompaniesarethelinkagesbetweeninternalandexternalorganizing(GaddeandHåkansson,2001).DuboisandWynstra(2005)developedaframeworkforanalysisoftheconnectionbetweenthetwo.Theinternaldimensioncharacterizestherelationshipbetweenpurchasingandothercompanydepartmentsregardingtheinternaldecision-makingprocesses.Fortheexternaldimensiontheauthorsdistinguishbetweendifferentlevelsofmutualadjustmentsbetweenbuyerandsupplier,frommarket-basedtransactionstointensecollaboration.HesselandGadde(2013)alsodevelopedaframeworkforanalysisofinternal‒externallinkages.Inthiscasetheinterplaybetweeninternalorganizing,relationshiporganizing,andsupplierbaseorganizingisrelatedtoeachofthethreeARAdimensions.OffshoringandInternationalSourcingThereareratherfewINAstudiesspecificallyaddressinginternationalprocurement.Manyofthestudiesaddressingothertopics,however,naturallydealwithbuyingandsellingfirmslocatedindifferentcountries(Håkansson,1982;HåkanssonandSnehota,1995).Thus,theinternationalaspecthasinmanystudiesbeentreatedasacontextualfactor.Still,somestudiesspecificallyhighlighttheinternationaldimension.Hallén(1982)investigatedtheextenttowhichinternationalpurchasinginindustrialfirmsisinfluencednotonlybythemarketcondi-tions,butalsobytheattitudestowardbuyingfromabroadandthefirm’scompetenceininter-nationaltransactions.OtherstudiesincludeSalmiandSharafutdinova(2008)andAnderssonandSalmi(2001).Agndal(2006)addressedinternationalsourcing,primarilyrelatedtosmallandmedium-sizedfirms,focusingonissuessuchastheroleofpersonalrelationshipsasvenuesintonewmarkets,andthedegreeofrationalplanningrelativetoseeminglyserendipi-touseventsinandaroundrelationshipsareaddressed.BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

390372Handbookoftheoriesforpurchasing,supplychainandmanagementresearchServiceProcurementProcuringbusiness-to-businessserviceshasovertimeattractedmoreattentionbyIMP-orientedresearchers.AxelssonandWynstra(2002)nuancethetraditionallyperceivedspecificsofserviceprocurementbyconnectingINAmodelstotheoriesofservicemanagementandmarketing.TheINAandinparticulartheservice-dominantlogic(SDL)havequitealotincommon.Oneelementistheemphasisonco-creationofsolutionsbythebuyerandseller,aswellasbyotheractors.Anotheristheemphasisonrelationshipsasvaluableassetsenablingfirmstoco-producesolutions.ThespecificcontributionfromtheINAencompassestheconceptstosystematicallydescribeandanalyseindividualrelationshipsaswellasbroaderbusinessnetworks(orecosystems)(Ford,2011).Mosttraditionalprocurementliteraturetreatsserviceprocurementasindirectprocurement:itemsthatdonotenterthebuyingfirm’sfinalcustomerofferings.Toaddressthisshortcoming,theaforementionedworkbyVanderValketal.(2009)distinguishesbetweenprocurementofso-calledconsumptionandinstrumentalservices(indirect),versussemi-manufacturedandcomponentservices(direct),andrelatedinteractionpatterns.Anothermajorareaisprocurementofsolutionsandoutcome(performance)-basedprocure-ment.TheINAperspectivehasemphasizedtwoaspectshere.Oneisthenewrelationshipchal-lengesthattendtofollowfromsolutionprocurement:abroadersetofsuppliersareinvolved,higherdegreesofresponsibilityaredelegatedto(some)suppliers,andthecollaborationofprocurementwithsalesandmarketingisintensified(Anderssonetal.,2018).Theotheraspectisthebusinessnetwork(orecosystem)andthecomplexitiesinmanoeuvringthereinwhenbuildingasystemofcooperatingsupplierstoenablethesolutionofferings(SpringandAraujo,2009).LogisticsandDistributionChannelsRegardingdistributionchannelresearch,Alderson(1957)arguedthattheactivitiesindistri-butionarerelatedinan‘ecologicalnetwork’.Thisholisticperspectivewaslaterunderminedbytheevolvingproducer-orientedchannelmanagementapproach.Overtime,however,changesinthebusinessrealitycalledforalternativemodelsofdistributionconstellations,andmadeINAtheoryarelevantframing,aspointedoutby,forexample,GaddeandFord(2008).Specificapplicationareasregard,forinstance,foodsupply,recyclingandrecoveryinwastehandling,supplytoconstructionsites,aswellasdistributionsystemsformobilephonesandpersonalcomputers.Thebusinessrealityoflogisticsanddistributionchannelshasbecomemorecomplex,increasinglycharacterizedbysubstantialinterdependencies.Forthisreason,theholisticfeaturesofINAtheoryproviderelevantframeworksforanalysis.Jahreetal.(2006)isoneexampleofcomprehensivecasestudiesoflogisticsissues.ThebookisbasedonamajorNorwegianresearchprojectwherethefourresources(4R)frameworkisapplied.Therele-vanceoftheINAisalsoacknowledgedoutsidetheIMPGroupforresearchdealingwithlogis-ticsserviceproviders,sincethemodelsofferinsightsregardingthedynamicsofoutsourcing.Forexample,Marasco(2008,p.16)claimsthattheINArepresents‘arobuststructurethatenablesacomprehensiveunderstandingofTPLrelationships’.BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

391Theindustrialnetworkapproachandpurchasingandsupplymanagementresearch373CollaborativeInnovationCollaborativeinnovationhasbeenahallmarkofIMPresearchfromthebeginning.Oneimpor-tantcontributionisajointpublicationbasedonstudiesinthemiddleofthe1980s(Håkansson,1987).Chaptersinthebookaredevotedtoprocessandproductdevelopment,aswellastothesignificanceofsupplierrelationshipsandtotheroleofpersonalnetworksamongtechnicians.Later,HåkanssonandEriksson(1993)adoptedtheinteractionapproachtoidentifyandanalysefourkeyprocessesinmanagingsupplierinvolvementinproductdevelopment:pri-oritizing,mobilizing,coordinating,andtimingofactivitiesandresources.ThisclassificationhassubsequentlybeenadaptedandrefinedbyWynstraetal.(1999)andVanEchteltetal.(2008)toidentifysetsofspecificactivitiesthatare,ontheonehand,relatedtoshort-term,project-basedcollaborativeinnovationforspecificproductsandservices;andontheotherhand,tolong-termtechnologydevelopment.IntheseandotherIMP-relatedstudiesonbuyer‒suppliercollaborationininnovation,itisnoteworthythatthesestudiestypicallyconsidermultiplecyclesortimehorizonsofcollabo-rationforms.Thiscanberelatedbacktotheemphasisoftheoriginalinteractionmodelthatconsidersbothindividual,short-termexchangeepisodes,andthemorelong-termrelationshipdevelopmentprocess.PublicSectorProcurementPublicprocurementisasignificantpartofeconomicactivityinsociety.IMPresearchershavelookedintothisfieldfromavarietyofangles.AgeneralthemeinIMPstudiesofpublicprocurementistheconsequencesforgoodandbad‒butmostofallbad‒ofthedominantmarketview.Thiscriticismisfrequentlyfollowedbyrequestsforamodernizedlegalstructureforpublicprocurementwhichwouldallowforbringinginmoreofarelationship-basedworkmode(orgovernancemode).AxelssonandTorvatn(2017)demonstratehowthetheoreticalpointsofdeparturefrommicroeconomictheoryhavebeentranslatedintopoliciesandpracticesinpublicprocurement.TheyconfrontthesepracticestothefivebasicgovernancemodesidentifiedbyGereffietal.(2005)tofindoutwhether–andtowhatextent–thepoliciesandpracticesareinlinewiththesedifferentgovernancemodes.Indoingsotheypointtoeffortsinpoliciesandregulationsto‘repair’shortcomingsduetothepointsofdeparturebyadding‘exceptions’and‘specialcases’tothedominant(versionof)marketgovernance.Inafollow-upstudy,HåkanssonandAxelsson(2020)lookintopublicsectoroutsourcingfromtwoempiricalcases.Theyutilizethefourtypesofbuyer‒sellerinterfacesfromAraujoetal.(1999)aswellasageneralmodelofwhentooutsourceornot.Thesetwotoolsareusedtosystematicallyidentifywhenoutsourcinginthepublicsectorcouldbeconsideredarelativelystraightforwardoption,andwhenitwouldbemorechallenging.OtherstudiesofpublicprocurementapplyingtheINAincludestudiessuchasWaluszewskietal.(2019).ResearchMethodsOnafinalnote,severalIMPscholarshavesubstantiallycontributedtothedebateonresearchmethods.Someofthesecontributionshavedealtwithresearchmethodsregardinginteror-ganizationalrelationsandnetworksingeneral(HalinenandTörnroos,2005),whilesomeBjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

392374Handbookoftheoriesforpurchasing,supplychainandmanagementresearchhavefocusedonmethodsforPSMresearchinparticular(DuboisandAraujo,2007).Thepublicationsusuallydealwiththequalitiesandrequirementsofqualitativeresearchandlongi-tudinalfieldwork,whilesomearticlesspecificallyaddresstheso-calledabductiveapproachtoresearch(DuboisandGadde,2002).Suchanabductiveapproach,or‘systematiccombining’,relieson‘acontinuousmovementbetweenanempiricalworldandamodelworld’(DuboisandGadde,2002,p.554).Suchcontinuousiterationsbetweentheoryandobservationwouldmaximallyleveragethequalitiesofcaseresearch,whereasreceivedwisdomtypicallyrelatescaseresearchtoapredominantlyexploratoryorinductiveapproach.CONCLUSIONTheindustrialnetworkapproach,andtheinteractionandactors‒resources‒activitiesmodelsthatitincorporates,havebeenappliedinnumerousstudiesinPSM.Infact,onecouldarguethattheINAisoneofthefewtheoreticalperspectivesthatissospecificallyrootedinobser-vationsonbuyer‒supplierrelations.Atthesametime,adistinguishingfeatureisthattheINAhasbeenusedtostudyboththesupplysideandthebuysideofbuyer‒supplierrelations,andofteninamoreholisticfashionthanmostothertheories.Asthediscussionofthecentralconceptshasillustrated,theINAisdistinctfromotherperspectivesthatdealwithinterorganizationalrelationsinthatitprovidesaconceptualizationofwhatisthesubstanceofrelations(activitylinks,actorbonds,resourceties)thatisdeeplyrootedintheprimaryprocessesofdevelopment,productionandexchangeofgoodsandser-vices.Otherapproaches,suchassocialexchangetheory(Blau,1964;ThibautandKelly,1959)andtherelationalview(DyerandSingh,1998)focusmoreonthegovernanceofrelationsthroughnorms(equity,reciprocity)andatmosphere(trust,commitment).Theindustrialnetworkapproachisalsoinotherrespectsanatypicaltheory.Firstofall,thisapproachhasbeenusedtostudydifferentphenomenawherefirms(andotherorganizationalactors)interact,eitherbilaterallyorinnetworksettings.Second,theapproachhasbeendevel-opedbyagroupofresearchers.Itisnotuncommonforatheoreticalperspectivetobeinitiatedand/orpropagatedbyateamofresearchers,butinthecaseoftheIndustrialMarketingandPurchasing(IMP)Group,thecollectivenatureoftheeffortsisremarkable.TheIMPGrouphasnotonlyconductedlarge-scalefieldstudiestogetherandpublishedmanybooksasacollective,buthasalsoorganizedanannualconference(since1984)andmanyresearchmanuscriptwork-shopsinconnectionwithitsdedicatedjournal,theIMPJournal(since2019partoftheJournalofBusinessandIndustrialMarketing).TheINAanditsspecificmodels(theinteractionmodelandtheARAmodel)havebeenappliedinamultitudeofprocurementcontexts.Ithasenabledsystematicdescriptionsandanalysesand,asaresult,hasenabledresearcherstoidentifypatternsofbehaviouraswellasprovidinginsightfullessonslearned.Still,ithasbeencriticizedfornotbeingveryconcreteinguidingmanagersintheircreationofactionplansandeffectingstrategies.ThiscriticismhasbeencounteredbyIMPresearcherswhohavearguedagainsttheoftensparsertheoreticalmodelsthataremoreambitiousinofferingprescriptiveguidance.TheIMPphilosophyempha-sizesthecontextualdependencyofprocurementandsupplierrelationsinbusinessmarketsand,thus,theimportanceofperformingathoroughdescriptionandanalysisbeforemovingtowardsprescription.BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

393Theindustrialnetworkapproachandpurchasingandsupplymanagementresearch375REFERENCESAgndal,H.(2006),‘Thepurchasingmarketentryprocess‒Astudyof10Swedishindustrialsmallandmedium-sizedenterprises’,JournalofPurchasingandSupplyManagement,12(4),182‒196.Alderson,W.(1957),MarketingBehaviorandExecutiveAction,Homewood,IL:RichardD.Irwin.Andersson,P.,B.AxelssonandC.Rosenqvist(2018),OrganizingMarketingandSales:MasteringContemporaryB2BChallenges,Bingley:EmeraldPublishing.Andersson,H.andA.Salmi(2001),‘Canyoubuyabusinessrelationship?Ontheimportanceofcus-tomerandsupplierrelationshipsinacquisitions’,IndustrialMarketingManagement,30(7),575–586.Araujo,L.,A.DuboisandL-E.Gadde(1999).‘Managinginterfaceswithsuppliers’,IndustrialMarketingManagement,28(5),497–506.Axelsson,B.andH.Håkansson(1984),Inköpförkonkurrenskraft,Lund,SE:Studentlitteratur.Axelsson,B.andT.Torvatn(2017),‘Publicpurchasinginaninteractiveworld’,inHåkansson,H.andI.Snehota(eds),NoBusinessisanIsland:MakingSenseoftheInteractiveBusinessWorld,Bingley:EmeraldInsight,pp.173–194.Axelsson,B.andF.Wynstra(2002).BuyingBusinessServices,Chichester:JohnWiley&Sons.Baraldi,E.(2008),‘Strategyinindustrialnetworks:ExperiencesfromIKEA’,CaliforniaManagementReview,50(4),99–126.Baraldi,E.,M.IngemanssonHavenvid,Å.LinnéandC.Öberg(2019),‘Start-upsandnetworks:Interactiveperspectivesandaresearchagenda’,IndustrialMarketingManagement,80,58–67.Blankenburg,D.andJ.Johanson(1992),‘Managingnetworkconnectionsininternationalbusiness’,ScandinavianInternationalBusinessReview,1(1),5–19.Blau,P.(1964),ExchangeandPowerinSocialLife,NewYork:Wiley.Bocconcelli,R.andH.Håkansson(2008),‘Externalinteractionasameansofmakingchangeinacompany:Theroleofpurchasinginamajorturn-aroundforDucati’,IMPJournal,2(2),25–27.Cook,K.S.andR.M.Emerson(1978).‘Power,equityandcommitmentinexchangenetworks’,AmericanSociologicalReview,43,721–739.Dubois,A.(1998),OrganizingIndustrialActivitiesacrossFirmBoundaries,London:Routledge.Dubois,A.andL.Araujo(2007),‘Caseresearchinpurchasingandsupplymanagement:Opportunitiesandchallenges’,JournalofPurchasingandSupplyManagement,13(3),170–181.Dubois,A.andP.Fredriksson(2008),‘Cooperatingandcompetinginsupplynetworks:Makingsenseofatriadicsourcingstrategy’,JournalofPurchasingandSupplyManagement,14(3),170–179.Dubois,A.andL.-E.Gadde(2002),‘Systematiccombining:Anabductiveapproachtocaseresearch’,JournalofBusinessResearch,55(7),553–560.Dubois,A.,L-E.GaddeandL-G.Mattsson(2021),‘Purchasingbehaviorandsupplierbaseevolution–Alongitudinalcasestudy’,JournalofBusinessandIndustrialMarketing,36(5),689–705.Dubois,A.,K.HulthénandA-C.Pedersen(2004),‘Supplychainsandinterdependence:Atheoreticalanalysis’,JournalofPurchasingandSupplyManagement,10(1),3–9.Dubois,A.andF.Wynstra(2005),‘Organizingthepurchasingfunctionasaninterfacebetweeninter-nalandexternalnetworks’,inF.Wynstra,K.DittrichandF.Jaspers(eds),DealingwithDualities.Proceedingsofthe21IMPConference,Rotterdam:ErasmusUniversity.Dyer,J.H.andH.Singh(1998),‘Therelationalview:Cooperativestrategyandsourcesofinterorganiza-tionalcompetitiveadvantage’,AcademyofManagementReview,23(4),660–679.Easton,G.(1992).‘IndustrialNetworks:AReview’,inAxelsson,B.andG.Easton(eds.),IndustrialNetworks:ANewViewofReality.London:Routledge,pp.1–27.Ford,D.(1980),‘Developmentofbuyer–sellerrelationshipsinindustrialmarkets’,EuropeanJournalofMarketing,14(5‒6),339–353.Ford,D.(2011),‘IMPandservice-dominantlogic:Divergence,convergenceanddevelopment’,IndustrialMarketingManagement,40(2),231–239.Ford,D.,L-E.Gadde.,H.HåkanssonandI.Snehota(2003),ManagingBusinessRelationships,Chichester:Wiley.Freytag,P.,L-E.GaddeandD.Harrison(2017),‘Interdependencies–blessingsandcurses’,inH.HåkanssonandI.Snehota(eds),NoBusinessisanIsland.MakingSenseoftheInteractiveBusinessWorld,Bingley:EmeraldPublishing,pp.235–252.BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

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395Theindustrialnetworkapproachandpurchasingandsupplymanagementresearch377Johnsen,T.E.(2018),‘Purchasingandsupplymanagementinanindustrialmarketingperspective’,IndustrialMarketingManagement,69,91–97.Kraljic,P.(1983),‘Purchasingmustbecomesupplymanagement’,HarvardBusinessReview,61(5),109–117.Marasco,A.(2008),‘Third-partylogistics:Aliteraturereview’,InternationalJournalofProductionEconomics,113(1),127–147.Möller,K.andA.Rajala(2007),‘Riseofstrategicnets–Newmodesofvaluecreation’,IndustrialMarketingManagement,36(7),895–908.Pedersen,A-C.andA.Dubois(2002),‘Whyrelationshipsdonotfitintopurchasingportfoliomodels–Acomparisonbetweentheportfolioandindustrialnetworkapproaches’,EuropeanJournalofPurchasingandSupplyManagement,8,35–42.Persson,G.andH.Håkansson(2007),‘Suppliersegmentationwhensupplierrelationshipsmatter’,IMPJournal,1(3),26–41.Robinson,P.J.,Faris,Ch.W.andWind,Y.(1967).IndustrialBuyingandCreativeMarketing.Boston,MA:Allyn&Bacon.Salmi,A.andE.Sharafutdinova(2008),‘Cultureanddesigninemergingmarkets:ThecaseofmobilephonesinRussia’,JournalofBusinessandIndustrialMarketing,23(6),384–394.Spring,M.andL.Araujo(2009),‘Service,servicesandproducts:Rethinkingoperationsstrategy’,InternationalJournalofOperationsandProductionManagement,29(5),444–467.Thibaut,J.W.andH.H.Kelley(1959),TheSocialPsychologyofGroups,NewYork:Wiley.VanderValk,W.,F.WynstraandB.Axelsson(2009),‘Effectivebuyer–sellerinteractionpatternsinongoingserviceexchange’,InternationalJournalofOperationsandProductionManagement,29(8),807–833.VanEchtelt,F.E.A.,F.Wynstra,A.J.vanWeeleandG.Duysters(2008),‘Managingsupplierinvolvementinnewproductdevelopment:Amultiple-casestudy’,JournalofProductInnovationManagement,25(2),180–201.Wacker,J.G.(1998),‘Adefinitionoftheory:Researchguidelinesfordifferenttheory-buildingresearchmethodsinoperationsmanagement’,JournalofOperationsManagement,16(4),361–385.Waluszewski,A.,H.HåkanssonandI.Snehota(2019),‘Thepublic–privatepartnership(PPP)disasterofanewhospital–Expectedpoliticalandexistingbusinessinteractionpatterns’,JournalofBusinessandIndustrialMarketing,34(5),1119–1130.Westing.J.,Fine,I.andZens,G.(1969)PurchasingManagement:MaterialsinMotion.NewYork:JohnWiley&Sons.Wynstra,F.(2010),‘Whatdidwedo,whodiditanddiditmatter?Areviewoffifteenvolumesofthe(European)JournalofPurchasingandSupplyManagement’,JournalofPurchasingandSupplyManagement,16(4),279–292.Wynstra,F.,R.SuurmondandF.Nullmeier(2019),‘Purchasingandsupplymanagementasamultidis-ciplinaryresearchfield:Unityindiversity?’,JournalofPurchasingandSupplyManagement,25(5),100578.Wynstra,J.Y.F.,A.J.vanWeeleandB.Axelsson(1999),‘Purchasinginvolvementinproductdevelop-ment:Aframework’,EuropeanJournalofPurchasingandSupplyManagement,5(3–4),129–141.BjörnAxelsson,Lars-ErikGadde,andFinnWynstra-9781839104503DownloadedfromPubFactoryat05/28/202209:11:08AMviaColumbiaUniversityLibrary

39625.DynamiccapabilitiestheoryAnnaLand,TimGruchmann,ErikSiemsandPhilipBeske-JanssenINTRODUCTIONOrganizationsfacecontinuouschallengesassociatedwithdisturbingfamiliarpracticesbyreplacingthemwithnewones(Fallon-ByrneandHarney,2017).Thus,theemergenceofdynamiccapabilitiestheoryisconsideredanimportantstepinframingandconceptualizingorganizationalchangeprocessesbybuildinguponconceptssuchasorganizationallearningandknowledgemanagement(Easterby-Smithetal.,2009).IntroducedintheseminalpaperbyTeeceetal.(1997),thebodyofliteratureondynamiccapabilitieshasgrownrapidlyinthelasttwodecades,leadingtoanintensivelystudiedandcomplexmanagementtheory(Barreto,2010),alsoconceptualizedandappliedinsupplychainmanagement(SCM)researchtoday.Furthermore,dynamiccapabilitiestheoryhasbeenextendedforvariousindustrycontexts,suchastheautomotive,foodandlogisticsindustries(forexample,Beskeetal.,2014;Landetal.,2015;GruchmannandSeuring,2018).Theconceptofdynamiccapabilitieswasderivedfromthetransformationoftheresource-basedview(RBV)andthenaturalresource-based-view(NRBV)andproposedformoredynamicsettingsandappliedtomorecomplexsystemssuchassupplychains(Beske,2012).The(N)RBVconsidersfirmstoconsistofabundleofresources,whichifrare,valuable,hardtoimitateandnon-substitutable,canleadtoalong-termcompetitiveadvantage,assumingthatthefirm’senvironmentstaysrelativelyunchanged(Barney,1991).However,mostfirmsdonotoperateinsuchstableenvironmentsandneedtoadapttochanges.Thecoreunderlyingphenomenontobestudiedthroughdynamiccapabilitiestheoryisthustheinteractionbetweentheresourcebaseofacompanyanditscapabilitiestoextendandmodifyexistingresourcesorcreatenewones(Helfatetal.,2007).DefinedbyTeeceetal.(1997,p.516)as‘thefirm’sabilitytointegrate,build,andreconfigureinternalandexternalcompetencestoaddressrapidlychangingenvironments’,dynamiccapabilitiesprovidearelativelynewlenstostudystrategicrenewal(Kindströmetal.,2013).Thischapterpresentsanoverviewofdynamiccapabilitiestheory,sheddinglightonitsoriginsandevolutionintheSCMcontext.Keyvariablesfordynamiccapabilitiestheory,suchastheirnature,role,context,building,outcomeandheterogeneity,areintroduced(Teeceetal.,1997).ThechapteralsofocusesonthreeofthemostrelevantresearchtopicsinSCMandhowdynamiccapabilitiesareemployedinthesecontexts.Theseliewithinthedomainsofsupplychainresilience(BrussetandTeller,2017),businessmodels(Teece,2018)andsustainablesupplychainmanagement(SSCM)(Beske,2012).Relationshipsbetweenkeyvariablesarediscussed,andtheoreticalpredictionsforfutureapplicationsaremade.AparticularfocusisonthetheoreticalapplicationsforSSCM,assustainabilityhasbecomeabusinessimperative.WepositthatkeySSCMpractices,suchasorientation,continuity,collaboration,riskmanagementandproactivity,mightbemoresuccessfullyimplementedthroughdynamiccapabilitiesrelated378AnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

397Dynamiccapabilitiestheory379toknowledgemanagement,partnerdevelopment,co-evolvement,supplychainreconceptual-izationandreflexivecontrol.DYNAMICCAPABILITIESMICROFOUNDATIONSANDKEYSTRUCTURALDIMENSIONSBasedonTeece’s(2007)theoreticalunderpinnings,dynamiccapabilitiescanbeaggregatedintothreedistinctanalyticalactivities:(1)sensingopportunitiesandthreats(forexample,fromchangedconsumptionpatternsortechnologicalinnovations);(2)shaping/seizingopportuni-ties(forexample,throughthedesignofnewsustainablebusinessmodels);and(3)maintainingcompetitivenessbythereconfigurationandtransformationoftheresourcebase.Labelledas‘microfoundations’,thesecorporate-levelactivitiesbuildtheorganizationalbasisofdynamiccapabilitiestheory.SensingOpportunitiesandThreatsEventhoughsensingfornewopportunities(andthreats)meanshavingaccesstoknowledge,italsoembracestheabilitytorecognize,senseandshapethedevelopmentofnewopportunities(KιrcιandSeifert,2015).Henceitis,ononehand,aprocessofunderstandingtherelationshipbetweentheusers’needsandexistingaswellaspotentialsolutions,whichareidentifiedordetectedwithinacontinuousprocessofscanningthenarrowandbroadenvironment(HelfatandPeteraf,2015;Teece,2018).Ontheotherhand,sensingnewopportunitiesisrelatedtodirect(researchanddevelopment,R&D)resourcesandspecificprocessessuchaschangingthecustomers’behaviour(Teece,2007).Shaping/SeizingOpportunitiesAccordingtoTeece(2007),thetraditionalelementsofbusinessmodelssuchastangibleassetownership,costcontrolandinventoryoptimizationsarenotsufficientforlong-termcompeti-tiveperformance.Thus,seizingopportunitiesthroughnovelsolutions(products,processesorservices)canrequiretheadaptationoftheunderlyingbusinessmodel.Despitepurefinancialinvestmentsintherightphysicalassetsandtechnologies,organizationaladaptationofroutinesisrequiredtoexploittheidentifiedchances(HelfatandPeteraf,2009).Instayingcompetitive,theabilitytorecognizeandtosteeressentialresourcesandcompetences,so-called‘chokepoints’,alongthevaluechainisthusacriticalstrategicelement(Teece,2007).MaintainingCompetitivenessbyReconfigurationandTransformationTransformationprocesses,inturn,embracecapabilitiestoorchestrateexistingresources(tan-gibleandintangibleassets)andorganizationalroutinestowardsnewpatternsand,hopefully,asuperiorresourceconfiguration(Teece,2018).Therefore,thecompanyactivelyandinten-tionallyworksforthemodificationoftheresourcebasetogainandretainahighereconomicvaluethanthecompetitors(HelfatandPeteraf,2009).AnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

398380Handbookoftheoriesforpurchasing,supplychainandmanagementresearchKeyStructuralDimensionsComplementedbythedynamiccapabilitiesmicrofoundations,Teeceetal.(1997,p.516)definedynamiccapabilitiesas‘thefirm’sabilitytointegrate,build,andreconfigureinternalandexternalcompetencestoaddressrapidlychangingenvironments’.Todate,however,severalauthorshaveofferedalternativedefinitionsandconceptualizations(Barreto,2010).BasedonTeeceetal.’s(1997)mainstructuraldimensionsofdynamiccapabilities‒namely,nature,role,context,building,outcomeandheterogeneity‒thealternativeperspectivesofdynamiccapabilitiesintheliteratureareintroducedinTable25.1.ThesestructuraldimensionsfromGruchmannandSeuring(2018)arepresentedas‘Element1‒Variables’inFigure25.1.Elements2‒4arepresentedinthefollowingsections.Theunitofanalysisistheorganization,asdynamiccapabilitiescanbeuniformacrossthefirm;however,theymightalsodifferbetweenfunctionsdependingonthecapabilitiesbeingreconfigured(PavlouandSawy,2011).Figure25.1OverviewofdynamiccapabilitiestheoryelementsDYNAMICCAPABILITIESINTHERESILIENCEDOMAINResilienceTheconceptofresilienceemergedfromecologyintheearly1970s(Holling,1973)andhassinceevolvedacrossmanydisciplines(ManfieldandNewey,2018).InHolling’s(1973)studyfocusedonecologicalstability,resiliencewasproposedastheabilityofasystemtomaintainandadaptitsessentialstructure,functionandrelationshipsinthefaceofdisturbanceorchange.Inthecontextoforganizations,Lutharetal.(2000)havedefinedorganizationalresilienceasthecapabilitytoresistandrecoverfromshocksordisastersthatcouldaffectanorganizationAnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

399Dynamiccapabilitiestheory381SupportingreferencesEisenhardtandMartin,2000;Helfatetal.,2007;Makadok,2001;Teeceetal.,1997;Winter,2003;Zahraetal.,2006Easterby-Smithetal.,2009;Teece,2018;WangandAhmed,2007;Winter,2003Barreto,2010;EisenhardtandMartin,2000;Zahraetal.,2006Easterby-Smithetal.,2009;Makadok,2001;NeweyandZahra,2009;Winter,2003Dynamiccapabilities:structuraldimensionsExplanationSeveralauthorsfollowedTeeceetal.’s(1997)argumentation,describingthenatureofdynamiccapabilitiesasability(i.e.,capacity)orprocess(i.e.,routine)tocreate,extendandreconfigurethefirm’sresourcebase.Others,suchasMakadok(2001),seedynamiccapabilitiesratherasaspecialtypeofresourceresponsiblefortheimprovementoftheproductivityofotherresources.Accordingly,resourcesdonotbythemselvesleadtoanimprovedoutcome,sincetheperformanceisdependentonhowtheyareleveraged.AccordingtoEasterby-Smithetal.(2009),dynamiccapabilitiescantakeondifferentrolesinthefirm,suchaschangingresourceallocationsandorganizationalprocesses,knowledgedevelopmentandtransfer,aswellasdecisionmaking.Inthisline,someauthorshaveintroducedacertainhierarchyofcapabilities.Forinstance,WangandAhmed(2007)describeasimilarhierarchicalorderdistinguishingbetweenzero-order,first-order,second-andthird-ordercapabilities.Similarly,Winter(2003)distinguishesbetweenordinarycapabilitiesallowingafirmtorunitsbusinessintheshorttermwhichcanbeseenmoreas‘administrative’routinesandoperations,substantivecapabilitiestosolveproblems,anddynamiccapabilitiestochangeordinarycapabilities.AccordingtoEisenhardtandMartin(2000),dynamiccapabilitiesvarydependingonthecontext,particularlydependingonthedegreeofmarketdynamics.Here,someresearchersseedynamiccapabilitiesasbeingexclusivelyvaluableinrapidlychangingorunpredictablemarketenvironments,whileothersacknowledgetheirrelevanceinbothstableanddynamicmarketenvironments.EisenhardtandMartin(2000)suggestanalyticalroutinesrelyingonexistingknowledgeinrathermoderatelydynamicmarketswithpredictablechanges,whileexperientialroutinesrelyingonsituation-specificornewknowledgearemoreappropriateinhigh-velocitymarketswithnon-linearchanges.AccordingtoMakadok(2001),dynamiccapabilitiescreationanddevelopmentcanbedistinguished.Consideringthecreationofdynamiccapabilities,manyauthorsfollowanevolutionaryeconomicsperspectiveemphasizinglearningmechanismssuchasstructuringR&D,informationtechnologysupport,aswellasproblem-solvingandknowledge-sharingprocesses.Additionally,topmanagementcanguidethebuildingandcreationofdynamiccapabilities.Consideringthedevelopmentofdynamiccapabilities,existingoperationalcapabilitiescanbeshapedtoobtainmorematuredynamiccapabilities.Table25.1StructuraldimensionsNatureRoleContextBuildingAnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

400382Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSupportingreferencesBarreto,2010;EisenhardtandMartin,2000;Helfatetal.,2007;Makadok,2001;Teeceetal.,1997;ZolloandWinter,2002Barreto,2010;Easterby-Smithetal.,2009;EisenhardtandMartin,2000;Makadok,2001;Teeceetal.,1997ExplanationInlinewithTeeceetal.(1997),manyauthorsassumeadirectrelationshipbetweendynamiccapabilitiesandcompanyperformance,explainingbusinesssuccessparticularlythroughachievingcompetitiveadvantages.Incontrast,otherresearchersquestionsuchadirectrelationship,stressingthatcompanyperformancedependsonthespecificresourceconfiguration.Nevertheless,thecreationofanewresourcebasemightaffectintermediateoutcomesoncompanyperformance,suchasrelatedandunrelateddiversification.AccordingtoBarreto(2010),therearegenerallytwoperspectivesinrespectofthedegreeofheterogeneity.Ontheonehand,itisassumedthatdynamiccapabilitiesareessentiallycompany-specificandunique.Ontheotherhand,someauthorsassumethatdynamiccapabilitieshaveatleastafewcommonalitiesacrosscompanies.Mostoftheauthorsarescepticalaboutthesecommonalities,arguingthatdynamiccapabilitiesaremorethanjustbestpractices.AdaptedfromGruchmannandSeuring(2018,p.1261).StructuraldimensionsOutcomeHeterogeneitySource:AnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

401Dynamiccapabilitiestheory383orsystemeitherinternallyorexternally.ItshouldbenotedthattheconcepthasbeenportrayedquitedifferentlyacrossvariousstudiesLinnenluecke(2017).BasedontheliteraturereviewofMaetal.(2018)thatanalysedtheconceptualsimilaritiesanddifferencesoforganizationalresilienceacrossstreams,acommonunderstandingaboutorganizationalresilienceshouldincludethat:(1)‘organizationalresilienceisacapabilitytocopewithcrisisunderdiscontin-uousandemergentenvironment’;(2)it‘emphasizesonsurvival,adaptability,theabilitytobounceback,andimprovementunderdisruptivesituations’;and(3)it‘isamulti-levelconceptandisrelatedtoorganizationalresources,routines,andprocesses’(p.255).Maetal.(2018)explicitlydefineorganizationalresilienceas‘amulti-level,dynamiccapability’(p.255).Othershavearguedforsupplychainresilience,whichmaybeanadditionalleveladdedtoMaetal.’s(2018)propositions.PonomarovandHolcomb(2009)andPonisandKoronis(2012)dedicatetheirentirestudiestodefiningsupplychainresilience.ResilienceinSupplyChainManagementTheconceptofsupplychainresilienceemergedaroundtheearly2000s(Jüttneretal.,2003).Sincethen,supplychainresiliencehasreceivedgreatattentionfrombothpractitionersandscholarsbecauseofpromisingapproachestocopewithdisruptions,causedbyexternalevents(forexample,pandemicdiseases,naturaldisasters)orinternalevents(forexample,humanerrorormachinefailure)(Maetal.,2018).PonomarovandHolcombdefinesupplychainresil-ienceas‘theadaptivecapabilityofthesupplychaintoprepareforunexpectedevents,respondtodisruptions,andrecoverfromthembymaintainingcontinuityofoperationsatthedesiredlevelofconnectednessandcontroloverstructureandfunction’(PonomarovandHolcomb,2009,p.131).Therefore,contrastingwithordinarysupplychains,moreresilientsupplychainscontainthecontinualreadinesstobepreparedforunanticipatedeventsandhavetheresourcestorespondtothem,duetopurposefullymanaged,agileandflexibleprocesses,alsoconsideredadaptivecapabilities(PonomarovandHolcomb,2009).Tobuildsupplychainresilience,ChristopherandPeck(2004)proposefourcoreelements:(1)apurposefulsupplychaindesign(thatis,re-engineering);(2)ahighdegreeofcollabo-rationbetweenthesupplychainmemberstodetectandtreatrisks;(3)anagilesupplychainnetworktorespondquicklytoachangingenvironment;and(4)riskmanagementawarenessintheentireorganization.Withinthisapproach,attributessuchasvisibility,agility,availa-bility,efficiency,flexibility,redundancyandvelocitywereconsideredassecondaryfactors.However,otherstudieshaveidentifiedthatthosesecondaryfactorsarecriticalforbuildingsupplychainresilienceandshouldbeclassifiedashigher-ordercapabilities,alsoknownasdynamiccapabilities,ratherthanlower-levelcapabilities(Hendryetal.,2019;Mwangola,2018).Therefore,wearguethatanalysingsupplychainresiliencethroughthelensofthedynamiccapabilitiestheoryprovidesfruitfulinsights.ResilienceasaDynamicCapabilityinSupplyChainManagementThereareparticularparallelsbetweendynamiccapabilitiestheoryandtheresilienceapproach.Forexample,thelatterassumesthatthepossessionofadaptivecapabilities,whichenableanorganizationtopreparefor,tocounterandtorecuperatefromdisruptions,canleadtoresilienceandhenceacompetitiveadvantage(Hendryetal.,2019;PonisandKoronis,2012).Similarly,dynamiccapabilitiesareconcernedwiththecontinuousprocessofsensingthreatsAnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

402384Handbookoftheoriesforpurchasing,supplychainandmanagementresearchandopportunitiesandexploitingthemwithareconfigurationoftheexistingresourcesorthecreationofnewones.WhileBrussetandTeller(2017)statedthatresilienceisanoperationalcapabilitythanadynamiccapability,Eltantawy(2016)framedresilienceasahigher-level,multifaceted,dynamiccapability.Infact,multiplestudiesindicatethattheconceptofresilienceincludesvariouscapabilitiesanddimensions.Forexample,Mwangola(2018)hasproposedagilityandvisibilityastwodimensionsofresilience.Furthermore,theempiricalstudybyChowdhuryandQuaddus(2017)showedthatresiliencecouldbegroupedinto:(1)proactivecapabilities,suchasflex-ibility,visibility,redundancy,integration,financialstrengthorefficiency;and(2)reactivecapabilities,suchassupplychainresponse(thatis,mitigatingdisruptionsasfastaspossiblewhileseekinglowimpact)orrecovery(thatis,minimizingrecoverytime,cost,disruptionabsorptionandimpact).BrussetandTeller(2017)confirmedthat‘integrationandflexibilitycapabilities’haveapositiveimpactonsupplychainresilience.Dabhilkaretal.(2016)takethesetwoclassificationsastepfurtherbypositingsupply-sideresilienceasfourdynamiccapabilities:proactive-internal,proactive-external,reactive-internalandreactive-external.However,GolgeciandPonomarov(2013)positsupplychainresilienceasa‘crucial,respon-sivecapability’(p.606)and,therefore,morereactivethanproactive.Nevertheless,wewouldarguethatmorerecentliteraturerecognizesboththeproactiveandreactiveroutinesofsupplychainresilience,andadaptDabhilkaretal.’s(2016)tabletoshowexamplesofdynamicresil-iencecapabilitiesfromupdatedsources(seeTable25.2).Resiliencecapabilitiesareconsideredtobebundlesofpractices.SimilartoDabhilkaretal.’s(2016)findings,Table25.2revealsthatmostoftherecentpapersonsupplychainresil-iencebelongtomorethanonepracticebundlecategory.Itisalsonoteworthythatmanystudiesapplysupplychainresiliencedynamiccapabilitiesasthedependentvariable(forexample,Jiangetal.,2019;GolgeciandPonomarov,2013),whileothersviewitasaprecursororindependentvariableforotherconstructs,suchasweightedperformance(Birkieetal.,2017;Mandaletal.,2017)andsupplymanagementsustainabilityperformance(Eltantawy,2016).DYNAMICCAPABILITIESINTHEBUSINESSMODELSDOMAINBusinessmodelshavebeenextensivelydiscussedanddefinedintheliterature(Zottetal.,2011).Linkedtothestrategyandinnovationliterature,thebusinessmodelconceptdescribesthewaysinwhichabusiness‘creates,delivers,andcapturesvalue’(OsterwalderandPigneur,2009,p.14).Theelementsofbusinessmodeldesigngenerallyincludefeaturesembeddedintheproduct/service,thatis,determinationofthebenefittothecustomerfromconsuming/usingtheproduct/service,identificationoftargetedmarketsegments,andconfirmationoftherevenuestreamsanddesignofthemechanismstocapturevalue(Teece,2018).Businessmodelinnovationisakeyactivitytoinnovatevaluecreation,deliveryandcapturemechanismsinordertostaycompetitive(Baden-FullerandMorgan,2010;Teece,2009).Relevantdynamiccapabilitiesshouldcreate,refineandtransformthebusinessmodelsleadingtonewcustomerofferingsandrevenuestreams(BockenandGeradts,2019;Teece,2007).Whilelower-leveldynamiccapabilitiesasrepeatableactionsallowtheoperationalizationofthecurrentbusinessmodel(Winter,2003),higher-levelcapabilitiesenablecompaniestoadjust,recombineandcreateordinarycapabilities(Teece,2018).Althoughthelinkbetweendynamiccapabilitiestosense,seizeandtransformbusinessstrategyandrelatedresourcesclearlypointstobusinessAnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

403Dynamiccapabilitiestheory385XXX(2017)Mandaletal.XXXXX(2013)GolgeciandPonomarovXXSuand(2016)LindermanXXXXX(2017)ChowdhuryandQuaddusXXXXXX(2018)Maetal.XXXXXSourceBrussetandTeller(2017)XXXX(2018)MwangolaXXXXXXXXXX(2017)Birkieetal.XXXXX(2017)Souzaetal.XXXX(2019)Hendryetal.XXXEltantawy(2016)ExamplesofproactiveandreactiveresiliencecapabilitiesfromtheliteratureTable25.2ResilienceroutinesProactivecapabilityroutinesInternalTrained/experiencedemployeesLearningfrompreviousdisruptionsandnearmissesEstablishedrecoveryprocessExternalAlternativesourcingbasesScanningenvironmentfordetectionofsymptomsofdisruptionCustomer‒supplierlong-termrelationshipcooperationReactivecapabilityroutinesInternalTaskforceforrecoveryClearidentificationofresponsibilityCoordinationwithinafirmSupportfromtopmanagementAnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

404386Handbookoftheoriesforpurchasing,supplychainandmanagementresearchXX(2017)Mandaletal.X(2013)GolgeciandPonomarovXSuand(2016)LindermanXX(2017)ChowdhuryandQuaddusX(2018)Maetal.XXSourceBrussetandTeller(2017)XX(2018)MwangolaXX(2017)Birkieetal.X(2017)Souzaetal.XX(2019)Hendryetal.XEltantawy(2016)AdaptedfromDabhilkaretal.(2016).ResilienceroutinesExternalCoordinationamongfirmsInformationdisseminationtorelevantorganizationsSource:AnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

405Dynamiccapabilitiestheory387modelinnovation,thebusinessmodelliteratureonlyrecentlystartedtoaddressthequestiononhoworganizationaldesignsandbusinessmodelsaffectdynamiccapabilities,andviceversa(FjeldstadandSnow,2018;Teece,2018).Asorganizational(co-)evolutionbuildsoncom-ponentssuchasstrategy,structures,processes,incentivesandpeople(BockenandGeradts,2019),dynamiccapabilitiestheoryusesoverlappingconstructssuchasroutines,capabilitiesandresources(Barreto,2010;EisenhardtandMartin,2000;Teeceetal.,1997).Toillustratesweetspotsbetweenbusinessmodelinnovationanddynamiccapabilities,thissectionelab-oratesonorganizationallearningandknowledgemanagementaswellas(open)innovationcapabilitiesfrombothperspectives.ImpactofBusinessModelDesignonDynamicCapabilities’DevelopmentandViceVersaOrganizationaldesignisfoundtobeanantecedentfordynamiccapabilitiesbuilding,andviceversa(Teece,2018;Zahraetal.,2006;ZolloandWinter,2002).Forinstance,Zahraetal.(2006)proposedalinkbetweenorganizationalage,knowledgeanddynamiccapabilities,pointingtoknowledgemanagementasanimportantfeatureofmatureorganizations.Inturn,ZolloandWinter(2002)studiedhowdynamiccapabilitiescontributetotheco-evolutionoforganizationallearningmechanisms.Morerecently,researchershaveclaimedthatchangeandinnovationrequirementsconcerningthedevelopmentofanorganizationencompassnotonlymanagerialcapabilitiesbutalsoindividualandcollective(learning)capabilities.Forinstance,BockenandGeradts(2019)empiricallyfoundthedevelopmentofindividualcapa-bilitiesthroughtraininganddevelopmentprogrammesasoperationaldriversforsustainablebusinessmodels.Fallon-ByrneandHarney(2017)conceptualizedlearningopportunitiesasanelementoftheorganizationalinnovationstrategytofosteraninnovationclimateandrelateddynamiccapabilitiesbuilding.Accordingly,organizationalstructuresenablinginnovation‒forexample,throughincentives‒canbeseenasantecedentsforcapabilitydevelopmentwithinhumanresourceswhichmobilizenecessaryforcesforbusinessmodeltransformation(BockenandGeradts,2019).Generally,thefirm’sdynamiccapabilitieshelptoleveragetheprofitabilityofabusinessmodeldesign,whilealackofdynamiccapabilitieslimitsthefeasibilityofparticularstrategies(Teece,2018).Accordingly,companieshavetodevelophigher-levelcapabilitiesbeyondoper-ationalroutineswhichhelptointegrate,buildandreconfigureinternalcompetences(Teeceetal.,1997;Teece,2007).Forinstance,capabilitiesthatfostermanagerialdecisionmakingunderuncertaintyareseenasamongthesehigher-ordercapabilitieswhichguidethereconfigurationofbusinessmodelstobettersuitachangingbusinessenvironmentand,atthesametime,tosupporttherealizationofacertaincorporatestrategy(Teece,2018).Takingthetheoreticalstanceofsensingandseizing,thelearningfunctionofanorganizationsupportsthesuccessfulincorporationofnewtechnologiesintothebusinessmodel;forexample,usingartificialintelli-gencealgorithmsinplatformbusinessmodelsofseafreightbrokers(Gruchmannetal.,2020).Takingthetheoreticalstanceoftransforminganorganization’soveralldesignandstructure,so-calledstrongorhigher-ordercapabilitiessupportthefreeingupofresourceswhichcanbedevotedtodevelopingfuturebusinessmodels(Teece,2018).AnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

406388Handbookoftheoriesforpurchasing,supplychainandmanagementresearchDynamicCapabilitiesforMarketandSupplyChainTransformationsTakinganevolutionaryeconomicsperspectiveand,thus,thetheoreticalstanceoftransforming,theprocessesofvarying,selectingandretainingbusinessmodelsthroughdynamiccapabili-ties,mayalsoinducemarkettransformation(Schalteggeretal.,2016).Accordingly,dynamiccapabilitiesalsohavetotacklemesoandmacrofactorsinsupplychainsandentireindustries(atleastindirectly),asmostofthefactorscombinedintothescenarioslieoutsidethecontroloftheorganizationitself.Thus,mesoandmacrofactorsnotonlydescribethecurrenttrendsfromaneconomicortechnologicalpointofview,butalsocoversocialandenvironmentalaspects,whichmustbeincorporatedincurrentbusinessmodels.Hence,dynamiccapabilitiessupportpotentialpathwaysforthediffusionofbusinessesmodelsintheindustrypromotedbyretentionprocessesandstrategiesofgrowth,replication,mimicryandmergence(Schalteggeretal.,2016).Inordertogrowquicklyand,thereby,captureasufficientshareoftheavailableprofits,pioneerswithnewandinnovativebusinessmodelshavetobefastlearnersaccompa-niedbymonitoringcapabilities,asimitationbyothersmightoccur(Teece,2018).Therefore,pioneeringnewbusinessmodelsthroughstart-upinitiativesisjustonepossibleoption.Inparticular,mimicrystrategiesofcopyingbusinessmodelelementsofnichebusinessesandincorporatingtheminamodifiedwayintoamass-marketplayer’sbusinessmodelsareoftenapplied.Forthelogisticsindustry,forinstance,start-upbusinesseswithacitylogisticsfocusprovidethepotentialforreplicationandmimicryastheyallowforalternativetransportationmodessuchascargobikesorpublictransportation.Accordingly,pioneershavetocoupletheirbusinessmodelswithstrategiesandcapabilitiesthatmakeimitationdifficultsuchasthroughnew(digital)technologiesaswellasconsumerempowerment(Gruchmannetal.,2018).Moregenerally,companiesmayusestrategicmanagementtoenhancetheirinnovationpotentialfor(sustainable)transformationsoftheirbusinessmodel(Kindströmetal.,2013).Inthisline,competitiveadvantageislinkedwithinternalandexternalinnovationprocesses,whiledynamiccapabilitiescanhaveasignificanteffectontheinnovationperformance(LeeandYoo,2019).Moreover,openinnovationcapabilitiesallowcompaniestoovercomeinternalbarriersandquicklyrespondtoexternalchangesbyabsorbingexternalknowledge(Chesbrough,2003).Therefore,knowledgemanagementcapabilitiestransformtheinfor-mationgainedfromtheoutsidebyfusingitwithexisting,internalknowledge.Bycollectinginformationonmarketandtechnologicalchanges,openinnovationcapabilitiesenhancetheevolutionaryfitnesstotheenvironment,utilizingexistingresourcesasnewresources(PavlouandElSawy,2011).DYNAMICCAPABILITIESINTHESSCMDOMAINSincesocialandenvironmentalissueshavebecomeamajorconcerntothepublic,companiesfacethechallengetointegratesustainabilityintotheirsupplychains(Busseetal.,2017);hencetheinterestofbothpractitionersandscholarsinSSCMhasincreased(TouboulicandWalker,2015).Eventhoughtherehavealreadybeenanswerstothecallsforstrengtheningtherobustnessofdevelopedframeworksandforpromotingthebuildingofmorecomprehensivetheoryin(S)SCM,theneedfortheoretical,groundedresearchinSSCMisstillnotsaturated(TouboulicandWalker,2015).AnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

407Dynamiccapabilitiestheory389SeuringandMüller(2008,p.1700)defineSSCMas‘themanagementofmaterial,infor-mationandcapitalflowsaswellascooperationamongcompaniesalongthesupplychainwhiletakinggoalsfromallthreedimensionsofsustainabledevelopment,thatis,economic,environmentalandsocial,intoaccountwhicharederivedfromcustomerandstakeholderrequirements’.Thisdefinitiontakesuptheestablishedviewofasupplychainaslinkingseveralpartiesthroughupstreamanddownstreammaterial,financialandinformationflows.Moreover,thethreedimensionsofsustainabilityareincluded,aswellasboththemarketper-spective,throughcustomerrequirements,andstakeholdertheory.Theseadditionshaveseveralconsequences.Firstofall,addingthesustainabilityrequirementsofvariousstakeholdersleadstomuchgreateruncertainties.Additionally,stakeholdersinterestedinsustainabilityaremorelikelytopenalizeacompanywhosesustainabilityclaimsarenotfulfilled,thanthestakeholderbaseofmoreconventionalcompanieswheresustainabilityinitiativesareoflowerpriority.Furthermore,therequirementsofstakeholdersaretime-sensitiveandcanshiftdynamicallyinunpredictabledirections,potentiallyleadingtohighlydynamicmarketsforwhichdynamiccapabilitieshavebeenproposed(EisenhardtandMartin,2000).Finally,bothSCMandSSCMarepronetothedynamicsofbusinessenvironmentsinaglobalizedworldwithcomplexlogis-ticsnetworksandglobalcompetition(CarterandRogers,2008;SeuringandMüller,2008),whichcanleadtonon-transparentbusinessenvironmentswherechangemaycomesuddenlyandunpredictably.Thisformsaclearlink,firstly,betweenthedynamicbusinessenvironmentsofsustainablesupplychainsanddynamiccapabilitiestomaintainorachievecompetitivenessinsuchenvironmentsanddynamicmarkets;andsecondly,tosupplychainresilience,asdiscussedearlierinthischapter,asSSCMhasalsobeendiscussedasastrategyformanagingsupplychainrisk(GoudaandSaranga,2018).Anotherlinkagebetweenbothperspectives‒dynamiccapabilitiesandSSCM‒liesintheperceptionofperformance.Theassessmentof‘performance’indynamiccapabilitiestheoryhasbeenlinkedtotheperceivedvalueagoodorserviceofferstocustomersand,therefore,goesbeyondaone-dimensionalfinancialperformanceassessment(Easterby-Smithetal.,2009;Helfatetal.,2007;Kumaretal.,2018).Similarly,ascanbededucedfromtheSSCMdefinition,performanceinSSCMisassessedagainstthethreedimensionsofsustainability,alsogoingbeyondtheeconomicperspectiveandstakeholderrequirements.Finally,dynamiccapabilitiesandSSCMpracticesalikeareemployedbycompaniestopurposefullyinfluenceandchangetheirbusinessenvironmentstomatchtheirownbusinessmodelsandstrategies(forexample,DefeeandFugate,2010;EisenhardtandMartin,2000;Winter,2003).Dynamiccapabilitiesareusedtochangetheresourcecombinations,whileSSCMisusedtodevelopsustainablesuppliers,products,ortocreateawarenessofsustainability.KeyDynamicCapabilitiesforSustainableSupplyChainManagementWhiledynamiccapabilitiesmaybebasedonwidespreadroutines,thespecificdesignandimplementationoftheseroutinescanbeverydifferentinvariouscompaniesorsupplychainsettingsbasedon,forinstance,employeebehaviour,managementstylesorcorporateculture.Inthefollowing,wewilldescribecoredynamiccapabilitieswhichcanbeobservedintheSSCMdomain.Knowledgeandinformationplayapivotalroleintoday’sbusinessenvironments(Handokoetal.,2018).Thiscanbeintheformofspecificpatents,knowledgeaboutspecificmaterialswithsustainablequalitiesorproductionprocesses,orevenspecificlocalcircumstances.AnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

408390Handbookoftheoriesforpurchasing,supplychainandmanagementresearchKnowledgemanagementintheformofadynamiccapabilityallowscompaniestoaccess,understand,integrateorevenacquirerelevantknowledgeandinformation.Accordingly,inthesupplychaindomain,DefeeandFugate(2010,p.188)defineitas‘acapabilityheldbytwoormorepartiesthatfostersanunderstandingofthecurrentknowledgeresourcespossessedbyeachparty’.Byevaluatingthecurrentknowledgebaseandpotentiallyreconfiguringit,suchacapabilityisalsoofgreatimportancetoshapefutureresourceconfigurationsortohelpintransformingthecurrentones.Supplychainpartnerdevelopment,inturn,isofhighvaluetobeabletosteercurrentrou-tinestowardsnewpatterns,andthusamorecompetitiveresourceconfiguration,thatis,trans-formingtheresourcebase(Teece,2018).Thisiscritical,asmanynowarguethatcompetitionisnolongerbetweencompaniesbutratherbetweensupplynetworks.Hence,developingthepartnersinasupplychaincanhaveahighimpact,especiallyinasustainabilitysettingwheremoresustainablepracticesneedtobecontinuouslydevelopedandimplementedthroughoutthesupplynetworkinordertoreachahigheroverallsustainabilityperformance(Liuetal.,2018).Thiscapabilityisalsoemployedtoreachhighersupplychainresilience.Suchacapa-bilityinvolvessensingandseizingopportunitiesandthreatsintheformofunderstandingandevaluationofcurrentabilitiesofsupplychainpartners,andmeanstopotentiallydevelopthemfurtherforimprovedsustainabilityperformance(PagellandWu,2009)andresilience.Hence,suchadynamiccapabilityiscloselylinkedtotheknowledgemanagementcapability.Co-evolutionallowsthedevelopmentandimplementationofnewcapabilitiesandbusi-nesspractices(DefeeandFugate,2010).EisenhardtandMartin(2000,p.1107)describeco-evolutionas‘theroutinesbywhichmanagersreconnectwebsofcollaborationsamongvariouspartsofthefirmtogeneratenewandsynergisticresourcecombinationsamongbusi-nesses’.ThesameholdstrueintheSSCMdomainwhentransformingthecurrentresourcebase,orevenshapingitbyaddingnewpatterns.Areflexivesupplychaincontrolcapabilityencompassesinformationgathering,evaluationandsharingand,therefore,isagainrelatedtoknowledgemanagement.However,thiscapabil-itycontinuouslyevaluatesthesystem’sfunctionalityinrelationtothesupplychain’srequire-mentsintheformofamanagementaccountingsystemwhichgoesbeyondpurelyfinancialdata(Beske,2012).Suchacapabilitycanthusbeunderstoodtohelpsensethreatsandalso,toalimitedaccount,senseopportunities.Supplychainreconceptualizationisusedtoshapethesupplychain(SC)by,forexample,includingnewactorswhohavebecomevaluablefortheSCduetodynamicallychangingcircumstances.Thesenewactorscanbepartnersfromrelatedindustries,orevencompletelynewpartnerspreviouslyoutsideofthescopeofthesupplynetworksuchasnon-governmentalorganizationsorotherstakeholders(Busseetal.,2017;Liuetal.,2018).Whenrealizingnewbusinessmodels,suchacapabilityisalsoofhighimportance,asthiswillpotentiallyrequiretheinclusionofnewanddifferentpartnersintheSC(Beskeetal.,2014).Implementingsuchcapabilitiescanalso,ofcourse,leadtothedevelopmentofnewcapa-bilities.Specifically,onepurposeoftheco-evolvingdynamiccapabilityisthedesignandimplementationofnewcapabilities.Thisparticulartopicwillbefurtherdiscussedinthefollowingsection.AnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

409Dynamiccapabilitiestheory391RELATIONSHIPSANDPREDICTIONSInordertoprovideanoverviewoftherelationshipsbetweenthekeyvariablesanddomainsofdynamiccapabilities,Table25.3ispresented.Onenotablecommonalityamongalldomainsistheemphasisontheknowledgemanagementcapability,thedevelopmentofwhichhasinherentimpactsonotherroutinesandcapabilities,suchastrainingandretainingexperiencedemployees,developinglong-termrelationshipsandcooperationwithpartners,andco-evolvingtobuildanddevelopfurthercapabilities.Theoutcomeslinkedtofirms’abilitiestoreconfigureandadapttheirresourcebaseasthebusinessenvironmentchangeshasdirecteffectsontheircompetitiveadvantageinthetraditionalsenseoffinancialperformance,butalsointermsofsocialandenvironmentalperformance.BasedontherelationshipsshowninTable25.3,somepredictionscanbeestablishedfordynamiccapabilitiestheoryinthewidersupplychaincontext.Futurethreatsduetopandem-ics,economiccrisesornaturaldisastersforsupplychainsseeminevitable.Forexample,globalsupplydisruptionscausedbyCOVID-19haveraisedawarenessofsupplychainvulnerabili-ties.Asaresult,thedebatearoundachievingmoreresilientsupplychainshasreceivedincreas-ingattentionnotonlyfromacademics(forexample,evidentbythenumberofcallsforpapersonthetopic)butalsofrompoliticians,practitionersandthemedia.Becausestudieshaveindicatedthatcertaindynamiccapabilitiesaretheprerequisitesforsupplychainresilienceasanoutcome,itcanbeassumedthatscholarsandmanagersareinterestedinmoreresearchonhowthosecanbecreatedorfurtherdevelopedtobuildamoreresilientsupplychain.Insteadofdevelopingmoreconceptualframeworks,alongitudinalresearchdesignwithempiricaldatashouldbefavoured,toshedlightontheunderlyingdevelopmentaswellastransformationprocessesandthe(business)context(Mandaletal.,2017).Furthermore,futureresearchshouldanalysehowdynamiccapabilities,whichbuildresilience,canbestrengthenedinthelongterm.Theidentificationofspecificcapabilitiestofacilitateandaccelerateorganizationallearningforeitheravoidingdisruptionsorbeingabletorespondfastercanbetargetedbyfuturestudies(BrussetandTeller,2017).Whilesomestudiesindicatethatsupplychainresiliencemighthaveapositiveimpactonafirm’scompetitiveadvantage(Hendryetal.,2019;PonomarovandHolcomb,2009),furtherresearchshouldexploretherelationshipbetweenresilienceandthe(sustainable)performanceofacompanybytakingintoaccountthemitigatingeffectofdynamiccapabilities(Mwangola,2018).Inthesustainablesupplychaincontext,futuredynamiccapabilitiesresearchshouldfosterthemoreprofoundimplementationofsustainabilityinsupplychains.Astheworldiscurrentlyexperiencingaclimatecatastrophewithgreaterimpactandhigherfrequencyofnaturaldisas-ters,suchadevelopmentshouldbeahighpriority.Todate,atrulysustainablesupplychainhardlyexists(Montabonetal.,2016;PagellandShevchenko,2014).Researchshouldidentifydynamiccapabilitieswhichcanhelptospreadsustainabilityintothewidersupplynetwork,andthosethatproactivelyshapethebusinessenvironment,identifynon-compliantsuppliersorsuchdynamiccapabilitieswhichenhanceresilienceinmorefragilesupplychainswithasustainabilityfocus.Anotherpathforfuturesustainabledevelopmentliesinthecirculareconomy,wherethelinearproductionsystemofcurrentsupplychainsistransformedtoacircularone.Thewholeconceptofcircularity,whilenotnew,hasonlyrecentlyreceivedattentionbyagreaternumberofresearchersandpractitioners.Accordingly,fewestablishedroutinesandstandardsexistanddevelopmentsinthemarketareverydynamic.Additionally,verylittleresearchindynamicAnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

410392Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSSCMDynamiccapabilitieshavebeendiscussedasinternal,firm-focusedcapabilitiesformanagingthesupplychain,aswellassupplychain-widedynamiccapabilitiestogaincompetitiveadvantagethroughandforthesupplychainasawhole(DefeeandFugate,2010).DynamiccapabilitiesinSSCMareusedtoembedsustainabilityintothesupplychain;forhighersustainabilityperformanceandalsoforriskmanagementpurposes(Reuteretal.,2010).Theyareemployedtostrategicallyselectanddevelopsuppliers,thatis,to(re)configurethesupplybase(Beskeetal.,2014).Dynamiccapabilitiesareemployedindynamicmarkets,butalsowithamoregeneralscope,tobeabletodeveloptimelyresponsestochangesinthebusinessenvironmentandembeddedintheoverallcontextofthesupplychain(KιrcιandSeifert,2015).FirmsthatadoptSSCMpracticesreapthebenefits,asthishelpsthembuildsustainabilityintheirsupplychains:‘SSCMpracticesaretheplatformfordevelopingdynamiccapabilitieswhichdirectlyinfluencethefirm’sperformance’(Mathivathanametal.,2017,p.638).AsproposedbyReuteretal.(2010,p.54),‘thecontentofsustainableglobalsuppliermanagementprocessesisdependentonpreviouspathsofsustainablecapabilitybuildingwithintheorganizations’.BusinessmodelsBusinessmodelinnovationisachievedthroughvaluecreation,deliveryandcapturetostaycompetitiveovertime(BockenandGeradts,2019);whiledynamiccapabilitiesrefineandtransformbusinessmodels,leadingtonewcustomerofferingsandrevenuestreams(Teece,2007,2009).Lower-leveldynamiccapabilitiesasrepeatableactionsallowtheoperationofthecurrentbusinessmodel(Winter,2003);whilehigher-levelcapabilitiesenablecompaniestoadjust,recombineandcreateordinarycapabilitiesandrelatedresourcesleadingtobusinessmodelinnovation(Teece,2018).Dynamiccapabilitiesdonotjustreactonavolatileenvironment,butmayalsoinducemarkettransformationandtheevolutionofbusinessmodels(Teece,2018).Organizationaldesignisfoundtobeanantecedentfordynamiccapabilitiesbuilding(forexample,businessmodelinnovationfacilitatedthroughlearningincentives)(BockenandGeradts,2019;Teece,2018).Businessmodelinnovationrequirementsencompassnotonlymanagerialcapabilities,butalsoindividualandcollective(learning)capabilities(Zahraetal.,2006;ZolloandWinter,2002)ResilienceDynamiccapabilitiesenablethecontinualreadinesstobepreparedforunanticipatedeventsandhavingtheresourcestorespondtoandrecuperatefromthem(ChowdhuryandQuaddus,2017;PonomarovandHolcomb,2009).Somecapabilities,suchasflexibilityorredundancy,areseenasmorereactiveandallowrecoveryfromathreatordisruption(Hendryetal.,2019).Forexample,buildingvisibilityordevelopingsupplychainpartnersareconsideredtobemoreproactivecapabilities,andenabletheavoidanceofdisruptionsbeforehand(Dabhilkaretal.,2016;Souzaetal.,2017).Thehighertheexpectedimpactcausedbydisruption,thehigheristheneedforadaptivecapabilitiestobereadytorespondandrecoverfromsuchdisruption(Mwangola,2018;PonomarovandHolcomb,2009).Supply-sideresiliencecanbeclusteredintoacombinationoffourdifferentdynamiccapabilitiesspecifications:proactive-internal,proactive-external,reactive-internal,andreactive-external(Dabhilkaretal.,2016;Hendryetal.,2019;Souzaetal.,2017).RelationshipsbetweenkeyvariablesanddomainsDomainsTable25.3KeyvariablesNatureRoleContextBuildingAnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

411Dynamiccapabilitiestheory393SSCMTheextentofrisk,uncertaintyanddynamismofthebusinessenvironmentismoreintensewithSSCMthantheconventionalSCM.Hence,buildingdynamiccapabilitiesiscriticalinordertoachievesustainableperformanceacrossthetriplebottomline(Kumaretal.,2018).Dynamiccapabilitiesareaprimesourceforsustainedcompetitiveadvantage,andserveasantecedentsgainedbyimplementingSSCMpractices(Beske,2012;Mathivathananetal.,2017).Eventhoughdynamiccapabilitiesmightbeobservabletoanextent,andonlyidiosyncraticinspecificdetails,theyareoftenrelationship-specificandsociallycomplex.Assuch,theyaredeeplyembeddedintheindividualorganizationalandsupplychaincontextandcanbeheterogeneous(Beskeetal.,2014;Reuteretal.,2010).BusinessmodelsCompetitiveadvantageislinkedwithinternalandexternalinnovationprocesses;whiledynamiccapabilitiescanhaveasignificanteffectontheinnovationperformance(Teeceetal.,1997).Openinnovationcapabilitiesenhancetheevolutionaryfitnesstotheenvironment,utilizingexistingresourcesasnewresources(LeeandYoo,2019;PavlouandElSawy,2011).AsarguedbyJacobidesandWinter(2012,p.1376),‘businessmodels,inprinciple,areimitable;onceestablished,theycanbeemulated,withnosuchsetupcosts,byothers’.However,heterogeneityanddistinctionmaycomeintheformofa‘superiorskillorknowledgeorsimplyanabilitytoimplementthebusinessmodel’(p.1376).ResilienceThereisasignificantlypositivecorrelationbetweenresiliencecapabilitiesandperformancerecoveryafterdisruption(Birkieetal.,2017;Dabhilkaretal.,2016).Holling(1973)concludeshisseminalworkbystatingthatamanagementapproachbasedonresilience‘wouldemphasizetheneedtokeepoptionsopen,theneedtovieweventsinaregionalratherthanalocalcontext,andtheneedtoemphasizeheterogeneity’(p.21).Randomeventsovertimecausingsupplychaindisruptionswillbeunexpected,theimpactoneachfirmandsupplychainwillvary,andtheresilienceresourcesandcapabilitieswillbeheterogeneousamongfirmsandsupplychains.DomainsKeyvariablesOutcomeHeterogeneityAnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

412394Handbookoftheoriesforpurchasing,supplychainandmanagementresearchcapabilitiesforcirculareconomyhasbeenpublishedtodate(forexample,Khanetal.,2020).Buildingcircularsupplynetworksfromthegrounduprequiresdynamicengagementwithsup-pliers,competitorsorevennewpartners.Especiallyinthebeginning,circularsupplychainswillneedtobeabletodynamicallyadapttopossiblyunforeseenchanges,forexampleduetolackofexperience.Inevitably,thiswillalsoinfluencethebusinessmodelsofcompanies.Withregardtobusinessmodelresearch,onlyaminorityofsustainablebusinessmodelsreachinternationalbenchmarksofmultinationalenterprises,sincemostofthemstilloperateinanicheandoftenlackintegratedbusinessdesignscombinedwithapproachesforbuildingdynamiccapabilities.Forinstance,necessarylogisticscapabilitiescanhelplocalfoodnet-workstoachieveahighersustainabilityperformancebyleveragingthecompanies’embeddedsustainabilitypotentialsintheircorebusiness(Gruchmannetal.,2019).Whilethefoodsectorshowsahighpotentialforespeciallyregionalpatternsofproductionandconsumption,resil-iencecanbefurtherbuiltbyco-evolutionandpartnerdevelopmentcapabilitiestoallowforintegratedandconsolidatedservicesontheoperationallevelsofthesupplychain.Howsuchpotentialscanbetransferredintootherbranches(materialandchemicalindustry,fashion,electronicsector,andsoon)isamatterforfurtherresearch.However,itcanbepredictedthatco-evolutionandpartnerdevelopmentcapabilitiesforsustainabilitymightalsoenableahigherresilienceinotherindustrysectors.Moreover,digitaltechnologiesofferthepossibilitytomovefromconventionalassetown-ershiptoproduct-as-a-servicemodels(PorterandHeppelmann,2015).Thisdevelopmentcanalreadybeseeninlogisticsbusinessmodels,inwhichtheownershipofphysicalassets,suchaswarehousesortrucks,islessimportantforofferingtransportationservicestothecustomer(Gruchmannetal.,2020).Configuringadvancedservicesbasedondigitalplatformscanprovidesignificantopportunitiesforvaluecreationcapabilitydevelopmentaccordingly(Paridaetal.,2019).Havingdevelopedrelatedorganizationallearningandknowledgeman-agementcapabilitiestousesuchtechnologies,digitalbusinessmodelsdrivecollaborativevaluecreation,wherevalueiscreatedbeyondcompanyboundariesandacrossnetworksandsupplychains(Gruchmannetal.,2020).Here,itcanbepredictedthatdynamiccapabilitiestowardsdigitaltechnologiesmightenablecross-companysupplychainoptimizationinvariousindustrysectors.CONCLUSIONInthischapterweprovideabriefintroductiontodynamiccapabilitiestheory.WefocusonthreedistinctivedomainsintherealmofSCM,namely:(1)supplychainresilience;(2)busi-nessmodels;and(3)sustainabilityinsupplychains.ForeachofthedomainswehighlighttheirrelationshipswithkeystructuralvariablesaccordingtoTeeceetal.(1997).Eachofthesedomainshasverystronglinkagestothetheoryofdynamiccapabilities.Themainconnectionliesnaturallyinthedynamicchangesthatthedomainsallencompass,anditsstrategicimportanceforacompetitiveadvantage.Intermsofsupplychainresilience,itisthesuddenandpossiblyentirelyunforeseensupplychaindisruptionwhichneedstobemitigatedandeventuallyrectified.Implementingdynamiccapabilitiestosensethreats,especially,isofhighimportanceinthisregardandcanbeconsideredahigher-ordercapability(Eltantawy,2016).Forbusinessmodels,dynamiccapabilitiesareimplementedtocreate,refineandeventransformthebusinessmodels(BockenandGeradts,2019),ortoeventransformthemarketAnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

413Dynamiccapabilitiestheory395(Schalteggeretal.,2016).Forthethirddomain,SSCM,relateddynamiccapabilitiescan,forexample,comeintheformofaddingnewresources;thatis,reconfiguringthesupplychainbychangingordevelopingthesupplychainpartners(KιrcιandSeifert,2015).Butitcanalsobebasedoncapabilitieswhichleverageandreconfigurethecurrentresourcebase,forexample,bydevelopingpartnersintobetter-fittingones.Animportantcommonfactorforallthreedomainsliesinthemanagementofknowledge.Usingknowledgemanagementcapabilities,forexample,tocreatetransparencythroughoutthesupplychainisaninvaluablewaytohelpsensethreatsandtocoordinateacrossfirmbounda-ries,whichisofhighimportanceforsupplychainresilience.Knowledgemanagementhasalsobeendiscussedasanimportantcapability,especiallyformatureorganizationsdynamicallyadoptingtheirbusinessmodels.AccordingtoBockenandGeradts(2019),thedevelopmentofindividualcapabilitiesthroughtraininganddevelopmentareimportantfordevelopingnewbusinessmodels,especiallywithasustainabilityfocus.Generally,knowledgemanagementandlearningcanbeviewedashavinghighimportanceforsensingandseizingopportunitiesbydevelopingneworadaptingexistingbusinessmodels(Teece,2018);forexample,whenimple-mentingnewtechnologies(Gruchmannetal.,2020).ThesameholdstrueforSSCM,wherethesharingofknowledgeandinformationisofgreatimportancewhendevelopingpartners,findingnewpartners,andsensingandseizingopportunitiesfornewpracticesortechnologies.Additionally,suchknowledgemanagementcapabilitieshelptodevelopnewbusinessmodelsfortheoverallsupplychaintohelpcatertotheneedsofthesupplychainpartnersandtheirstakeholders.Generally,theSSCMdomaincanalsobeseenasalinkforallthreedomainsdiscussedhere.Sustainablesupplychainsareevenmorepronetosuddensupplychaindisruptionsduetohighdemandsrelatedtosustainability,andduetothesmallersupplierandcustomerbasecomparedwithconventionalsupplychains.Therefore,supplychainresilienceanditsrelateddynamiccapabilitiesareofhighimportanceinthisdomainaswell.Additionally,involvingsupplychainpartnersgloballywhendevelopingbusinessmodelsalsohelpsinsensingglobalthreatsandopportunitiesaswellasseizingopportunities.Thischaptercanonlyshowaverybriefglimpseofwhatdynamiccapabilitiestheoryhastooffer.Clearly,withtherapidlyacceleratingchangeanddynamicsofglobalmarkets,largelydrivenbytechnologicaladvances,andwiththeclimatecatastropheleadingtohigherfre-quencyofnaturaldisasterswithpotentialhighimpactsonsupplychains,dynamiccapabilitytheorywillbeofhighrelevanceinthefuture.MuchhasbeenachievedsinceWinterwrotein2003aboutthe‘themysteryandconfusionsurroundingtheconceptofdynamiccapabilities’(Winter,2003,p.994).Nevertheless,aswehaveshownindetailabove,futureresearchisstillverymuchrequired,graduallyshiftingfromtheconceptualworktoempiricalstudiesinvesti-gatingthevalidityofthetheory;forexample,throughlongitudinalresearch.REFERENCESBaden-Fuller,C.andM.S.Morgan(2010),‘Businessmodelsasmodels’,LongRangePlanning,43(2‒3),156–171.Barney,J.(1991),‘Firmresourcesandsustainedcompetitiveadvantage’,JournalofManagement,17(1),99–120.Barreto,I.(2010),‘Dynamiccapabilities:areviewofpastresearchandanagendaforthefuture’,JournalofManagement,36(1),256–280.AnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

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415Dynamiccapabilitiestheory397Helfat,C.E.,Finkelstein,S.,Mitchell,W.,Peteraf,M.A.,Singh,H.,etal.(2007),DynamicCapabilities:UnderstandingStrategicChangeinOrganizations,Malden,MA:BlackwellPublishing.Helfat,C.E.andM.A.Peteraf(2009),‘Understandingdynamiccapabilities:progressalongadevelop-mentalpath’,StrategicOrganization,7(1),91–102.Helfat,C.E.andM.A.Peteraf(2015),‘Managerialcognitivecapabilitiesandthemicrofoundationsofdynamiccapabilities’,StrategicManagementJournal,36(6),831–850.Hendry,L.C.,Stevenson,M.,MacBryde,J.,Ball,P.,Sayed,M.,andL.Liu(2019),‘Localfoodsupplychainresiliencetoconstitutionalchange:theBrexiteffect’,InternationalJournalofOperationsandProductionManagement,39(3),429–453.Holling,C.S.(1973),‘Resilienceandstabilityofecologicalsystems’,AnnualReviewofEcologyandSystematics,4,1–23.Jacobides,M.G.andS.G.Winter(2012),‘Capabilities:structure,agency,andevolution’,OrganizationScience,23(5),1365–1381.Jiang,Y.,Ritchie,B.,andM.Verreynne(2019),‘Buildingtourismorganizationalresiliencetocrisesanddisasters:adynamiccapabilitiesview’,InternationalJournalofTourismResearch,21,882–900.Jüttner,U.,Peck,H.,andM.Christopher(2003),‘Supplychainriskmanagement:outlininganagendaforfutureresearch’,InternationalJournalofLogisticsResearchandApplications,6(4),197–210.Khan,O.,Daddi,T.,andF.Iraldo(2020),‘Microfoundationsofdynamiccapabilities:Insightsfromcirculareconomybusinesscases’,BusinessStrategyandtheEnvironment,29,1479–1493.Kindström,D.,Kowalkowski,C.,andE.Sandberg(2013),‘Enablingserviceinnovation:adynamiccapabilitiesapproach’,JournalofBusinessResearch,66(8),1063–1073.Kιrcι,M.andR.Seifert(2015),‘Dynamiccapabilitiesinsustainablesupplychainmanagement:atheo-reticalframework’,SupplyChainForum:AnInternationalJournal,16(4),2–15.Kumar,G.,Subramanian,N.,andR.A.Arputham(2018),‘Missinglinkbetweensustainabilitycollab-orativestrategyandsupplychainperformance:roleofdynamiccapability’,InternationalJournalofProductionEconomics,203,96–109.Land,A.,Nielsen,H.,Seuring,S.,andD.M.Neutzling(2015),SustainableSupplyChainManagementPracticesandDynamicCapabilitiesintheAutomotiveIndustry,BriarcliffManor,NY:AcademyofManagement.Lee,K.andJ.Yoo(2019),‘Howdoesopeninnovationleadcompetitiveadvantage?Adynamiccapabil-ityviewperspective’,PloSone,14(11),e0223405.Linnenluecke,M.K.(2017),‘Resilienceinbusinessandmanagementresearch:areviewofinfluentialpublicationsandaresearchagenda’,InternationalJournalofManagementReviews,19(1),4–30.Liu,L.,Zhang,M.,Hendry,L.C.,Bu,M.,andS.Wang(2018),‘Supplierdevelopmentpracticesforsustainability:amulti‐stakeholderperspective’,BusinessStrategyandtheEnvironment,27,100–116.Luthar,S.S.,Cicchetti,D.,andB.Becker(2000),‘Theconstructofresilience:acriticalevaluationandguidelinesforfuturework’,ChildDevelopment,71(3),543–562.Ma,Z.,Xiao,L.,andJ.Yin(2018),‘Towardadynamicmodeloforganizationalresilience’,NankaiBusinessReviewInternational,9(3),246–263.Makadok,R.(2001),‘Towardasynthesisoftheresource‐basedanddynamic‐capabilityviewsofrentcreation’,StrategicManagementJournal,22,387–401.Mandal,S.,Bhattacharya,S.,Korasiga,V.,andR.Sarathy(2017),‘Thedominantinfluenceoflogisticscapabilitiesonintegration’,InternationalJournalofDisasterResilienceintheBuiltEnvironment,8(4),357–374.Manfield,R.andL.Newey(2018),‘Resilienceasanentrepreneurialcapability:integratinginsightsfromacross‐disciplinarycomparison’,InternationalJournalofEntrepreneurialBehaviorandResearch,24(7),1155–1180.Mathivathanan,D.,Govindan,K.,andA.N.Haq(2017),‘Exploringtheimpactofdynamiccapabilitiesonsustainablesupplychainfirm’sperformanceusingGrey-AnalyticalHierarchyProcess’,JournalofCleanerProduction,147,637–653.Montabon,F.,Pagell,M.,andZ.Wu(2016),‘Makingsustainabilitysustainable’,JournalofSupplyChainManagement,52(2),11–27.Mwangola,W.(2018),‘Conceptualizingsupplychainresilience:analternativedynamiccapabilitiesperspective’,AmericanJournalofManagement,18(4),76–88.AnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

416398Handbookoftheoriesforpurchasing,supplychainandmanagementresearchNewey,L.andS.Zahra(2009),‘Theevolvingfirm:howdynamicandoperatingcapabilitiesinteracttoenableentrepreneurship’,BritishJournalofManagement,20,81–100.Osterwalder,A.andY.Pigneur(2009),BusinessModelGeneration:AHandbookforVisionaries,GameChangers,andChallengers,Amsterdam:ModdermanDrukwerk.Pagell,M.andA.Shevchenko(2014),‘Whyresearchinsustainablesupplychainmanagementshouldhavenofuture’,JournalofSupplyChainManagement,50(1),44–55.Pagell,M.andZ.Wu(2009),‘Buildingamorecompletetheoryofsustainablesupplychainmanagementusingcasestudiesof10exemplars’,JournalofSupplyChainManagement,45,37–56.Parida,V.,Sjödin,D.,andW.Reim(2019),‘Reviewingliteratureondigitalization,businessmodelinnovation,andsustainableindustry:pastachievementsandfuturepromises’,Sustainability,11,391.Pavlou,P.A.andO.A.ElSawy(2011),‘Understandingtheelusiveblackboxofdynamiccapabilities’,DecisionSciences,42(1),239–273.Ponis,S.T.andE.Koronis(2012),‘Supplychainresilience:definitionofconceptanditsformativeelements’,JournalofAppliedBusinessResearch,28(5),921–930.Ponomarov,S.Y.andM.C.Holcomb(2009),‘Understandingtheconceptofsupplychainresilience’,InternationalJournalofLogisticsManagement,20(1),124–143.Porter,M.E.andJ.E.Heppelmann(2015),‘Howsmart,connectedproductsaretransformingcompanies’,HarvardBusinessReview,93(10),96–114.Reuter,C.,Foerstl,K.,Hartmann,E.,andC.Blome(2010),‘Sustainableglobalsuppliermanagement:theroleofdynamiccapabilitiesinachievingcompetitiveadvantage’,JournalofSupplyChainManagement,46(2),45–63.Schaltegger,S.,Lüdeke-Freund,F.,andE.G.Hansen(2016),‘Businessmodelsforsustainabil-ity:aco-evolutionaryanalysisofsustainableentrepreneurship,innovation,andtransformation’,OrganizationandEnvironment,29(3),264–289.Seuring,S.andM.Müller(2008),‘Fromaliteraturereviewtoaconceptualframeworkforsustainablesupplychainmanagement’,JournalofCleanerProduction,16,1699–1710.Souza,A.,Alves,M.,Macini,N.,Cezarino,L.,andL.Liboni(2017),‘Resilienceforsustainabilityasaneco-capability’,InternationalJournalofClimateChangeStrategiesandManagement,9(5),581–599.Su,H.andK.Linderman(2016),‘Anempiricalinvestigationinsustaininghigh-qualityperformance’,DecisionSciences,47(5),787–819.Teece,D.J.(2007),‘Explicatingdynamiccapabilities:thenatureandmicrofoundationsof(sustainable)enterpriseperformance’,StrategicManagementJournal,28(13),1319–1350.Teece,D.J.(2009),DynamicCapabilitiesandStrategicManagement:OrganizingforInnovationandGrowth,NewYork:OxfordUniversityPressonDemand.Teece,D.J.(2018),‘Businessmodelsanddynamiccapabilities’,LongRangePlanning,51(1),40–49.Teece,D.J.,Pisano,G.,andA.Shuen(1997),‘Dynamiccapabilitiesandstrategicmanagement’,StrategicManagementJournal,18(7),509–533.Touboulic,A.andH.Walker(2015),‘Theoriesinsustainablesupplychainmanagement:astructuredliteraturereview’,InternationalJournalofPhysicalDistributionandLogisticsManagement,45(1‒2),16–42.Wang,C.andP.Ahmed(2007),‘Dynamiccapabilities:areviewandresearchagenda’.InternationalJournalofManagementReviews,9,31–51.Winter,S.(2003),‘Understandingdynamiccapabilities’,StrategicManagementJournal,10,991–995.Zahra,S.,Sapienza,H.,andP.Davidsson(2006),‘Entrepreneurshipanddynamiccapabilities:areview,modelandresearchagenda’,JournalofManagementStudies,43,917–955.Zollo,M.andS.Winter(2002),‘Deliberatelearningandtheevolutionofdynamiccapabilities’,OrganizationScience,13,339–351.Zott,C.,Amit,R.,andL.Massa(2011),‘Thebusinessmodel:recentdevelopmentsandfutureresearch’,JournalofManagement,37,1019–1104.AnnaLand,TimGruchmann,ErikSiems,andPhilipBeske-Janssen-9781839104503DownloadedfromPubFactoryat05/28/202209:11:11AMviaColumbiaUniversityLibrary

41726.SupplychainsascomplexadaptivesystemsAnuragTewariandRichardWildingINTRODUCTIONContemporarysupplychainresearchershavebecomeincreasinglyinterestedinconceptualis-ingsupplychainnetworksascomplexsystems(Choietal.,2001;Nairetal.,2009;NairandReed-Tsochas,2019;Pathaketal.,2007;Suranaetal.,2005).Theirinterestspansfromthefactthattraditionallysupplychainsareviewedasalinearstructureofsimplisticorganisations.Thislineartree-likestructureisassumedtohavesequentiallyorganisedtransactionsleadingtosuccessivevaluecreation(MabertandVenkataramanan,1998),anassumptionthatmightnotbeconsistentwithreality.Inreality,supplynetworksareanensembleofanintercon-nectednetworkofmultipleorganisations,spanningseveralscalesandwithanoverwhelmingnumberofinteractionsandinterdependenciesofdecisionsandprocesses(Suranaetal.,2005).Furthermore,organisationsofthiscomplexsupplynetworkconstantlyformadaptivestrate-giesandprocessesasaresponsetochangesencounteredinthestrategyofothernetworkenti-ties/firmsortheglobalenvironment(NairandReed-Tsochas,2019).Asaresult,thenetworkevolvesandself-organises,producingcomplexdynamical,disorderlyandnon-linearbehav-ioursthatarehardtoexplainusingconventionalsupplychainwisdom(Pathaketal.,2007).Thecomplexsupplychainbehavioursencounteredinrealityarecomparabletothenon-lineardynamicalsystembehaviourscommonlyobservedinmanynaturalandartificialcomplexsystemssuchastheecosystems,immunesystems,communicationnetworks,infra-structurenetworks,theinternet,stockmarketsandtheglobaleconomy(AmaralandOttino,2004;CohenandAxelrod,1984;Holland,2006).Modellingthesesystembehavioursorgeneratingpredictivecapabilitiesforsuchsystemshasprovedchallenging,asthesesystemsareimpermeabletoconventionalreductionistapproaches.Underthenameof‘complexityscience’,agrowingfieldofinterdisciplinarystudiesrepresentsaclusterofideasthatprovidesconcepts,principlesandtoolstointerrogatesuchsystems(Newman,2011).ProminentcomplexityresearchersHolland(1995)andKauffman(1993)arguethatsomecharacteristicsarecommontoallcomplexsystems.Thesecharacteristicsare:(1)ahighdegreeofinterconnectednessandinterdependencyamongcomponents;(2)theexistenceoffeedbackloopsamongsubsystems;(3)inherentdifficultyinthestudyofthesesystemsinisolation;(4)thepresenceofemergentbehaviourswherethesystem’soutcomesmanifestoutofsmall-scaleinteractionsamongitssubsystems;(5)non-linearanddynamicalresponsestominorper-turbations;(6)sensitivitytoinitialconditions;and(7)aseeminglyunpredictableresponse(Holland,1995;Kauffman,1993;Vargaetal.,2009).Thesesystemsareoftenarguedtobeattheedgeofchaos,self-organising,andcoevolutionary(Vargaetal.,2009).Aparticularcaseofsuchsystemsisthosethathaveanadditionalcharacteristicofbeingdominatedbyagentoragency-relatedinteractions.Thesecomplexsystemswithamultitudeofheterogeneousinter-actingagentsorentitiesarecategorisedascomplexadaptivesystems(CASs)andarestudiedusingthecomplexadaptivesystemstheory.399AnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

418400Handbookoftheoriesforpurchasing,supplychainandmanagementresearchACASviewofcomplexityismostsuitedtoinvestigateandcomparetheactionsandinteractionsofagents,individualgroups,species,ortheformulationofresponsestrategiesagainsttheircompetitorsandenvironment(Gell-Mann,2002;Holland,2006;Newman,2011).TheCASperspectiveisparticularlyusefultoexplainagentadaption,self-organisation,coevolutionandsystem-levelemergence.InCASs,thediversityofagentsandaseeminglysimplelookingsetoflocalisedrulesoftheirengagementcanresultincomplicatedstructuresandpatterns(Levin,1998).Inthewiderdomainofsocialandnaturalscience,theCASviewhasbeenusedtoexplainself-organisedcoevolutionofmanypeculiarstochasticmicroeventsconcerningagentssuchasmolecules,genes,neurons,particles,organisationsorindividuals,intoemergentstructures(McKelvey,1999).Sincesupplychainnetworksaresystemswithadiversearrayoforganisationsandhumanagentsinvolvedinamultitudeofdynamicalandparallelinteractions,aCASviewisparticularlyrelevantfordecipheringthecomplexnatureofthesupplychainnetworks.Thetheoreticalunderpinningforthisapproachisthatsystemscom-prisingofadiverseandindependentsetofagentswilldemonstratenon-linearandcomplexsystembehaviourgeneratedbottom-upfromamultitudeofinteractionshappeningamongagentsandbetweenagentsandenvironment.KEYVARIABLESANDDEFINITIONSComplexAdaptiveSystemsCASsareaclassofcomplexsystemsdominatedbyadiversepopulationofinterconnectedandadaptiveagents.Theactionsandinteractionsoftheseagentscausenon-linear,emergent,anddynamicalsystembehaviours.CASscanexist,farfromequilibrium,inanunstableanddynamicenvironmentthroughadaptation,self-organisationandcoevolution.Theterm‘adap-tation’comesfromevolutionarybiology.Evolutionarybiologyarguesthateveryspecieshasasurvivalmechanismofrespondingtochangesinitsenvironment,ortothechangesinthenatureofthreatsfacedbythespecies.Adaptationisthatresponse.Fromasystemperspective,adaptationreferstoasystem’sabilitytoprogressivelymodifyorimprovethefitnessorsurvivabilityofitsagentsthroughtheformulationofsuccessstrategiestotacklethreatsandthedynamismoftheenvironmentitoperateswithin.Definingadaptationinorganisations,Levinthalwrites,‘Adaptationisinterpretedheretomeanachangeinsig-nificantattributeoftheorganisation’(Levinthal,1997,p.934).Inresponsetoenvironmentalsignalsandotheragents’behaviour,everyindividualagentofaCASflexiblyandproactivelyseekstocontinuallyreviseitsbehaviours,actionsandstrategies,andcontinuouslyimproveitssurvivalorfitnessagainstpredefinedorganisationalorsystemobjectives.Itisakindofevolu-tionaryprocessinwhichasystemfeedsbackintoitselftheoutcomesofitsadoptedstrategiesandlearnsfromthem.Thesystemworksonasimplesetofrulesorschemastoimplementthislearningandreviseitsfuturecourseofaction.Thesystemchangesintroducedthroughadaptationcontinuallycreateneweropportunitiesandnovelfuturestatesandcoursesforthesystem.Thus,aCAScanexhibitsystem-wideemergentpatternswithoutbeingexternallyimposedonthesystem.TypicalcharacteristicsofaCASarethreefold.First,itisanestedsystemofalargenumberofadiversesetofagents(Holland,2006).Here‘nested’impliesthatitisasystemofsystemswhereasetoflooselycoupledagentswithahighdegreeofconnectednessandevolvingAnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

419Supplychainsascomplexadaptivesystems401patternofnon-linearinteractionsareembeddedinalargersystem(Punzoetal.,2020).TheseagentsofaCASseektomaximisetheirfitnessthroughevolutionaryandself-organisingbehaviour(Dooley,1996;Gell-Mann,1994;Newman,2011).Second,tobeabletorespondtotheirenvironment,tovariousstimuliandenvironmentalconditions,theseagentsdevelopfluidmentalmodels,schemasorrules(Dooley,1996;Gell-Mann,1994,2002).Third,theagentdiversityisaresultofcontinuousadaptation,whichneverletsthesystemstabilise;instead,ittakesthesystemtowardsperpetualnovelty.Inotherwords,thesesystemsexhibitevolutionarycharacteristics(Holland,2006).Thekeyobjectiveofanagentwithinacomplexsystemistomaximiseitsfitness,andthefitnessfunctionofanagentinacomplexaggregateisdeterminedbymanyglobalandlocalfactors,includingthementalmodelsorschemasmaintainedbyeachindividualagent.Oftensynonymouslyusedbycomplexityresearchers,theterms‘schemas’,‘mentalmodels’,‘agentinternalmechanisms’and‘mindframes’conveythesamemeaninginthefieldofcomplexityscience.Thesearethelowestfundamentalunitsthatinfluenceanagent’sinteractionsandinturnprovideemergentandself-organisingcapabilitiestothesystematamacrolevel.ThebasicunitofaCASisitsagents.Agentsareadiversesetofsemi-autonomousunitsengagedinactionsandinteractionswitheachother,systemcomponentsandtheenvironment.Fromasupplychainperspective,agentscouldbetakenasindividualfirmsthatarenestedinalargernetworkorsystemofproduct,informationandfinancialflow(Pathaketal.,2007).Theobjectiveoftheseagentsistomaximisetheirfitnessbyevolvingovertime,usingadaptivestrategies.Whentheseagentsencounterstimulifromtheenvironmentandotheragents,theseagentsrespondtothesestimuliaccordingtoasetofinternalmodels/schemasorrules.Theseinternalmodelshelptheagentstointerpretrealityandtheirsurroundings.Thus,onecouldinferthatthefitnessoftheagentisacomplexaggregateofmanyfactors,bothlocalandglobal.EmergenceandSelf-OrganisationAnimportantphenomenonofaCASis‘emergence’.Goldsteinpresentedaglossaryoftermswhereheconceptualisedemergencetobe:‘aprocess...wherebynewemergentstructures,patterns,andpropertiesarisewithoutbeingexternallyimposedonthesystem’(Goldstein,inZimmermanetal.,1998,p.270).Emergenceasaconcepthasalonghistoryinnaturalsciencesandecosystemsresearch.Inrecenttimes,complexsciencehascontributedthemosttothephenomenonofemergence,withmanyvaluablecontributionslookingatitfromvariousperspectives.Emergencefromacomplexityperspectivehasbeenstudiedinnaturalsciences(Bak,1996;Kauffman,1993;NicolisandPrigogine,1989),inorganisations(MaguireandMcKelvey,2002;McKelvey,1999,2002;Stacey,1996)andalsointhesphereofsocialinquiries(Buckley,1998;Eveetal.,1997;GoldspinkandKay,2003).Emergenceisnotanewabstractiontoorganisationalresearchers.Ithasbeenstudiedatvariouslevels(LichtensteinandPlowman,2009).Plowmanetal.(2007)conductedastudyabouttheamplificationofsmalleffectsintoemergentstructuresatanorganisationallevel.Intheirinvestigationofareligiousorganisation,Plowmanetal.(2007)foundthatsmallchangesledtotheemergenceofradicalchangesatthesystemlevel.Lichtenstein(2000)usesaCASframeworktostudyandcompareself-organisedemergenceattwofirms.Chilesetal.(2004)usethedissipativestructure’smodeltoarguetheemergenceofcollectiveorganisations.TheAnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

420402Handbookoftheoriesforpurchasing,supplychainandmanagementresearchauthorsusealongitudinalcasestudytocollectivelystudytheemergentdynamicsofamusicaltheatreandthecollectivecommunityandotherassociatedorganisations.TheCASviewpositsthatadaptationdrivenbylocalrulesandschemasleadstothecreationoforderduetoemergentsystembehaviours.However,thesystemcouldattainorderthroughanotherCASphenomenonofself-organisation.Self-organisationisanexhibitedsystembehaviourinwhichasystemnaturallyevolvesoremergestoanewstatewithoutinterferenceorinfluenceofanyoutsideforceoragent(Bak,1996).Self-organisationisastructuralrearrangementthatoccurswhenasystemisinafarfromequilibriumconditionorisinastateofhighentropy.Duringthisprocessofself-organisation,thesystemmovestoorattainsastructurethatallowsthesystemtofunctioninfarfromequi-libriumconditionsinamuchmoreenergy-efficientmanner.Outsidestimulioragentsdonotenforcethesestructuralorsystemchanges;rather,theyemergefromwithinthesystem.Sincetheorderemergesfromwithinthesystem,theprocessofself-organisationissuggestedtobe‘orderforfree’(Kauffman,1993).Self-organisationinaCAShasbeensuggestedtorelyuponfeedbackloopsorinformationflowsamongsystemagentsandallinterconnectedsystemcomponents.Theprocessofself-organisationinnaturalsystemsisoftenobservedoveraverylongdurationorinterval.Incomplexsystemstheory,self-organisationhasbeenlinkedtofourmechanismsormodels:ruggedlandscape,synergetics,multiplebasindynamicsandthesandpile.However,theKauffman(1993)ruggedlandscapemechanismismostsuitedtoexplainself-organisationinsupplychainnetworksfromasupplychainstandpoint.Rugged/FitnessLandscapeTherugged/fitnesslandscapemodelofself-organisationwastheorisedinecosystemresearchbyKauffmanandcolleagues(Kauffman,1993;KauffmanandJohnsen,1991;KauffmanandLevin,1987)toexplainthecomplexadaptivebehavioursofspecies.Discussingatheoreticalscenarioaboutsomesortofcataclysmdestroyingthehabitatandavailablefoodsourceofanecologicalniche,Kauffman(1993)arguesthatanyspeciesadaptedtolivinginthisgiveneco-logicalnichemustfindanewecologicalniche,habitatandfoodsource.Asurvivalresponsetothiswouldbethatthespecieswoulddisperseoutintoasurroundingruggedlandscapetolookforothernichesthatmaysupportsurvival.Someofthenewlyaccruednicheswillworkwell,asthespecieslocatedinthosenichessharetraitsrequiredtosurvivethere.Kauffman(1993)arguesthatdifferentlocallystablenichesandecosystemsarefitnesspeaksrequiringvaryingdegreesandnatureofadaptation.Thismodelhasfounditsusefulnessinarguinghowadiversepopulationofpeoplemightendupclusteringinsomemeaningfulgroupings(TrofimovaandMitin,2002).Generalisingtheruggedlandscapemodel,onecanviewlandscapebeinganalogoustoamountainrangewithpeaksandvalleys,wherepeaksrepresentmultiple,low-entropy,optimalstatesfortheobjectiveorperformancefunctionofthesystem(Kauffman,1993).Bydrawingthisparallelbetweentheruggedpeaksofamountainrangeandthealternativeperformancepeak/levelsavailabletoasystem,Kauffman(1993)succeedsinarguingagainsttheDarwinianlogicofselection.Kauffman(1993)positsthat,dependinguponthesystem’songoingenergyorfitnesslevel,thesystemwillmovefromonepeakofperformancetoanotherwithoutadheringtotheDarwinianlogicofselection.DarwinianevolutionisreplacedbyanAnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

421Supplychainsascomplexadaptivesystems403adaptivesearchthatmaylandthesysteminoneofthemultiplesuboptimalpeaksavailableduetotheruggednessofthelandscape.Theruggednessofthelandscapeorthenumberofavailablefitnesspeaksislinkedtothesys-tem’scomplexity.Ononeendofthespectrum,wecouldhavealesscomplexsystem,havinggentlyrollinghillsoffitnesspeaks;andontheoppositeendofthespectrum,therecouldbeasystemwithajaggedlandscapeofmultiplesuboptimalpeaks.Kauffman(1993)presentedacoevolutionarycellularautomatamodel,the‘NKCmodel’,tocalculatethefitnessandpeaksofacomplexadaptivelandscape.Inthemodel,Nrepresentsthenumberofdiversevariationsinthepopulationofagents.Krepresentsthenumberofinterconnectionsperelement,andCisthenumberofagentsexternaltothesystem.Inthemodel,Kindicatestheruggednessandfitnessoftheavailablepeakstothesystem.WhenK=0,itsignifiesasmoothlandscapewithasinglepeak,whileforK=N–1,theland-scapeiscompletelyruggedwithanexponentiallyhighnumberofpeaks.AtK=0,itisarguedthattheagentsarenotdependentoneachother,ortheirindividualtraitsdonotplayaroleintheirsurvivability.However,asKincreases,theinterdependenceandnatureofconnectionsamongagentsputaconstraintonthesystem,andmultiplesuboptimalsystemstates,analoguestofitnesspeaks,arecreated.Themodelisessentialasitdivertsattentionfromindividualagenttraitstoacombinedfitnessfunctionofthespecies.Thesearchforfitnessfunctionisdrivenbytheexistingagentdiversityofthespeciesandtheinteractionsthespecieshaswithitsenvironment.TheNKCmodelsucceedsindemonstratingthatwhenanorganisationpursueslocalorincrementalperspectives,thiscouldbehighlydisadvantageousinaruggedlandscapeorcomplexscenarios.Duetotheexistenceofmultiplefitnesspeaks,theorganisationcangettrappedinalocalperformancepeakandloseoutonfitterandmorebeneficialpossibilitiesthatmayexistelsewhereinhigherperformancepeaks(AllenandVarga,2006).Insimplewords,globaloptimaareeasiertoachievewhentheorganisationsaresimplesystemswithlessercomplexity.However,astheorganisationalsystemgrowsincomplexityandthereisanincreaseininterdependenceamongsystemagentsandcomponents,globaloptimabecomeanelusivereality(Choietal.,2001).Fromasupplychainperspective,thefitnesslandscapeviewcompelssupplychainresearch-erstoacknowledgetheimpactofdistributeddecisionmakingonthecomplexityofthesystemanditspotentialtoachieveglobaloptima.Sincedistributeddecisionmakingcanbelinkedtothenumberandnatureofinteractionsandinterconnectionsamongsystemcomponentsandsystemagents,itwouldimpactuponthesystem’scomplexity.Choietal.(2001)arguethatinasupplychaincontext,theruggednessofthelandscapecouldbereducedbylimitingtheinteractionsamongsystemprocesses,componentsandagents.Forexample,ifanorganisationchosetomodulariseitsdesignormanufacturingbycombiningparts,activitiesandprocesses,theorganisationwouldreducethesystemcomplexityandthenumberofsystemintercon-nections.ThiswillreducetheKvalueandthusreducethenumberofpeaksintheruggedlandscapeofthesystem.CoevolutionCoevolutionisaphenomenonwhereinteractionsbetweentwodiversesetsofpopulationorspeciesbringaboutareciprocalevolutionarychangeineachother(Eaton,2008).CASsareknowntodemonstratecoevolutionarycharacteristics.ItisoftenarguedthatorderinaCASemergesfromthecoevolutionaryinteractionsamongheterogeneousagentsandbetweenAnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

422404Handbookoftheoriesforpurchasing,supplychainandmanagementresearchagentsandtheenvironment.Forexample,inthefitnesslandscapemodel,settlingdownofasystemintosuboptimalpeaksrepresentsneworderemergingfromreciprocatoryinteractionsamongagentsandtheenvironment.Duringthisprocessofordercreation,speciescansimulta-neouslyreacttoandinfluencetheirenvironment(Kauffman,1993).Thus,onemayinferthatCASsarecoevolutionary,wheresystementitiesandtheenvironmentareboundtogetherinamutuallyconstitutingrelationshipofchange.CoevolutioninCASsrepresentstherecursiveandself-constitutingnatureofinfluencebetweenheterogeneousagentsandtheenvironment.Discussingcoevolutionfromasupplychainperspective,Choietal.(2001)explainthatwhentheentitiesofaCASrespondtothechangesintheenvironment,thisinteractionmayresultintheentitieschanging,whichinturnwillalsobringaboutchangesintheenvironment.CoevolutionisanessentialphenomenonofCASsandcanbeusedtoexplainnon-linear,path-dependentandevolutionarysystemchanges.Theagent,environmentandsystempropertiesofaCASarecondensedintoavisualrep-resentation(Figure26.1).ThevisualmodelemphasisesthataCASshouldbeapproachedusingthefollowing:(1)thecharacteristicofagentsorentitiesthatconstitutetheCAS;(2)thenatureofcouplingorinterconnectednessamongtheseagents;(3)theenvironmentinwhichtheseagentsareembedded;and(4)thesystempropertiesorphenomenathatareacharacteris-ticoftheCAS.Thearrowsamongtheagents,environmentandagentcouplingsymbolisetherecursive,self-constitutingandcoevolutionarydynamismamongthesesystemconstituents.Figure26.1Agents,environmentandsystempropertiesofacomplexadaptivesystemAnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

423Supplychainsascomplexadaptivesystems405SupplyChainNetworksasCASsDefiningaCASinasupplychaincontext,Pathaketal.(2007)positthatitisa:‘systemofinterconnectedautonomousfirmsthatmakechoicestosurviveand,asacollective,thesystemevolvesandself-organisesovertime’(Pathaketal.,2007,p.562).ThisdefinitionhelpstoconnectsupplynetworkontologytotheontologicalassumptionsofCASs.Furthermore,theorisingasupplychainnetworkasaninterorganisationalnetworksystemofbuyers,suppliers,retailers,logisticsproviders,financialinstitutions,governmentalorganisations,andadiversearrayofhumanactorswithinthesesubsystems,makesthesupplychainnetworkanidealcandidateforbeingaCAS.LikeanyotherCAS,supplychainnetworksalsodemonstratedynamism,wherethenetworktopologycontinuestoevolveinanon-linearandheterogeneousfashion(Pathaketal.,2007;Vargaetal.,2009).LikeotherCASs,thesupplychainnetworkalsoexhibitsparallelism,mod-ularity,adaptationandself-organisation(Choietal.,2001;NilssonandDarley,2006;Pathaketal.,2007;Suranaetal.,2005).NilssonandDarley(2006)arguethatthecomplexityinasupplychainnetworkarisesoutoftheagent’sinteractioninthenetwork.Theauthorsviewtheseinteractionsasreactive,andalsoasoftenleadingtodeliberatelyproactivebehaviouraffectingotherentitiesorsubsystemsinthenetworkenvironment,givingrisetothecomplexbehaviourofthenetwork.Suranaetal.(2005)attributethecomplexityinthesupplychainnetworktothevastspanofasupplynetworkoverseveraltiers,withbi-levelhierarchyandheterogeneityinthenetwork.Suranaetal.(2005)furthersuggestthatnon-linearnetworkbehaviouremergesfromthecomplexnatureofinteractionsbetweenvarioussupplychainagentssuchascustomers,supplychainexecu-tivesortruckdrivers.Suranaetal.(2005)recognisethattheseagentsareautonomousindi-vidualswiththeirindividualtargetsandgoals,yetonaspectsofcollectiveperformancegoalstheseagentsactinahighlyinterdependentmanner,resultinginacoevolutionarybehaviour.Theystate:‘atpresent,networksarelargelycontrolledbyhumans,thecomplexity,diversityandgeographicdistributionofthenetworksmakeitnecessaryfornetworkstomaintainthem-selvesinasortofevolutionarysense’(Suranaetal.,2005,p.4243)Supplychainnetworks’emergentandself-organisingbehaviourresultfromthemicrointeractionsamongsupplychainnetworkagents(Choietal.,2001).Theoutcomesoftheseinteractionsarecontingentupontheagents’internalmodelsorschemas,thedimensionalityofagentbehaviours,theself-organisingandemergentpropertiesoftheirrelationships,andtheconnectivityamongagents.Choietal.(2001)viewagentschemasasnorms,beliefsandvalues,whiledimensionalityisthedegreeoffreedomorkindsofbehavioursthatanagentcandemonstrate.Theauthorsarguethatthesebehaviours,oragentdimensionality,couldbealteredbysystemaspectssuchasmanagerialinterventions,ruleregulationsorinstitutionalpressure.SchemasinaCASanditsStatusinSupplyChainResearchHolland(1993)arguesthatalessobvious,butessential,aspectofaCASisthesetofinternalrulesormodelsthatanagentusestopredicttheoutcomesoftheiractions.Drivenbylocalandglobalstimuli,theagentsdevelop,updateandmodifytheserules,alsoreferredtoasagentschemas,tointerpretrealityorrespondtostimuli(Dooley,1996;Gell-Mann,1994).Inasupplychaincontext,Choietal.(2001)werethefirsttopointoutthataggregationofseveralAnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

424406Handbookoftheoriesforpurchasing,supplychainandmanagementresearchsuchnon-linearagentschemasandmentalmodelscanaggregateintointernalmechanismsleadingtocomplexsupplychainbehaviours.Mentalmodelsofagentshavebeenstudiedinthecontextofcooperationandopportunismamongnetworkfirms(Nairetal.,2009);inthecontextofinternaldecisionmakingandsupplychainresilience(Dattaetal.,2007);andforevolutionaryaspectsofsupplychains(Vargaetal.,2009).DOMAINWHERETHETHEORYAPPLIESToModelNetwork-LevelDynamismandInterdependenciesThefunctioningofeveryindividualfirmorentitywithinasupplychainisultimatelydepend-entuponthematerial,informationandfinancialflowsthattranspireinthenetwork.Asupplychainfirm’sabilitytocompete,coordinateandsurviveinitssupplychainecosystemwilldependuponthenatureandstructureofitsembeddednessinthenetwork,andtheoverallcomplexityofthenetwork.CAStheoryisanappropriatetheoreticalfoundationtostudyfirms’embeddednessandnetwork-levelinterdependencies.Nairetal.(2009)usedaCASviewtomodelhowanindividualfirm’sexitstrategycouldinfluencenetworklevelbehaviours.TheunderlyingassumptionthatnecessitatedtheuseoftheCASviewwasthatindividualbehav-ioursattheagentlevelcouldmanifestinnetwork-leveloutcomes;oronecouldsaythattherearenetwork-levelinterdependenciesthatshapecooperation,coordinationanddefectionstrate-giesofindividualactorsinaCAS.Similarly,toaccountforanestedsystem’sviewinthestudyofsustainablesupplychainpracticesintheaerospacesector,Vargaetal.(2009)proposedtoexaminesupplychainsusingaCASperspective.AnotherstudybyDhanorkaretal.(2019)alsocommitstoaCASviewtomodelthedynamism,uncertaintiesandinterdependenciesthatshapethefunctioningofonlinematerialandwasteexchanges.ItisworthmentioningthattheCASperspectiveisrestrictedtointerorganisationalnetworks,withindividualfirmsactingasthenetworkagents/nodes.However,theCASviewcouldbeextendedtoanintrafirmnetwork,withpeopleorbusinessfunctions/unitsactingasnodes/agentsofthenetwork.Forexample,NilssonandDarley(2006)usedaCASperspectivetostudyfirm-leveltacticalandoperationaldecisionmakinginthemanufacturingandlogisticsenvironment.Theauthorsconsidereddifferentorganisationalfunctions,suchassales,opera-tionsplanning,warehouseandcapacitatedmachines,astheCASnetworkagents,alongwiththeorganisation’scustomers.ToStudyAdaptationAgentadaptationisafundamentaltenetofaCAS.SupplychainresearchershaveeffectivelyusedaCASperspectivetostudyandmodeladaptiveagentbehavioursinasupplynetwork.Ithasbeenarguedthatsupplychainandlogisticsystemsadapt,reconfigureorevolvetotheirenvironmentandtoothersignalsoriginatingfromagentinteractions.Theadaptivebehaviourisdemonstratedinreconfigurationoralterationofnetworkstructure,operationalprocesses,orbyashiftinagentstrategiesorbehaviours(Wycisketal.,2008).Tostudytheadaptiveresponseoffirmsagainsthostilebuyer/customerbehaviours,Giannoccaroetal.(2018)haveusedKauffman’s(1993)NKfitnesslandscapeframework.NKmodelsaremathematicalmodelsbaseduponKauffman's(1993)fitnesslandscapeview,whereAnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

425Supplychainsascomplexadaptivesystems407Nrepresentsthenumberofdiversevariationsinthepopulationofagents,andKrepresentsthenumberofinterconnectionsperelement.Inthisstudy,agentsseektofollowanadaptivestrategytodiscoverfitness/performancepeaksthatmaymaximisetheirpayoffs.Thisadaptivestrategyisinresponsetoprescriptiverecommendationsorchangesinstockingdecisionsadvocatedbytheirbuyerfirms.HOWHASTHISTHEORYBEENUSED?TheCASviewonthesupplychainnetworkshasbeenprogressivelyusedtomodeladaptation,non-linearityanddynamism.Dhanorkaretal.(2019)usedaCASperspectivetostudybuyer‒suppliertransactionsatanode,dyadandnetworklevel.Thestudyfocusesonhownode-levelbuyerstrategiesandtheeffectofdyadic-levelbuyer‒supplieraffinitiescouldinfluencenetwork-levelcompetitiveeffects.NilssonandDarley(2006)adoptaCASviewtoimprovetacticalandoperationaldecisionmakinginthemanufacturingandlogisticsscenario.Giannoccaroetal.(2018)employedaCAS-drivenNKsimulationtoinvestigatetherela-tionshipbetweentheperformanceofasupplychainnetworkandthedegreeofcontrolexertedbyindividualagentsontheirconnections.Espinosaetal.(2019)adoptedCAStheorytostudytheprocessofproductreturns.Thestudyresearchedtheimpactofreturnshandlingemployeebehavioursontheoveralladaptabilityofthereversesupplychain.UsingaCAS,thestudywasabletoarguethatfirmswithautonomousdecisionmakingagentscanadaptbetterinhandlingtheprocessofproductreturns.Day(2014)usedaCASlenstostudydisasterreliefsupplychains.TheCASframeworkhelpedDaytofocusonunderstandinghowthecollectiveresilienceofadisasterreliefoperationemergesinanon-linearanddynamicmannerduetotheexogenousenvironmentalfactorsandaggregationofinteractionsamongmultiplestakeholdersassociatedwiththedisasterreliefsupplychain.Johnsenetal.(2019)usetwocasestudiesfromtheoffshorewindpowerindustrytoexploresupplynetworkstrategiesnecessarytomanagenetworkcomplexity.Inthisstudy,aCASviewpointisusedtoconceptualiseandmodelnetworkcomplexity.Houetal.(2018)modelledtheinfluenceoftrustonshapingthesupplynetwork’sresiliencetorandomandtargeteddisruption.ThestudyusedtheCASviewtotheoriseinterdepend-entandagentinteractions.TheCASviewwasadoptedbyStatsenkoetal.(2018)tocreateaframeworkforgoverningregionalsupplychainnetworksandforimprovingtheresilienceandadaptabilityoftheseindustrialregions.Nairetal.(2016)developatheoryusingtheCASperspectivetoexplaintheemergenceandproliferationofenvironmentalinnovations.Intheirstudyofadaptivestrategiesagainstdisruptions,Zhaoetal.(2019)visualisesupplychainfirmstobeaCASwherethesefirmsadaptandrestructureifthesystemexperiencesadisruption.OUTLOOKONFUTURERESEARCHOPPORTUNITIESTheuseofCAStheoryinsupplychainsisstillatanearlystageofmaturity.Keyvariables,methodologiesandconceptsfromthewiderdomainofCASsneedfurtherrefinementtoestab-lishtheircomparablesupplychaincounterparts.TheCASviewisanappropriatetheoreticalfoundationforevaluatingcascadingoutcomesorphenomenalinkedtoagentadaptation.However,alimitednumberofstudieshaveinves-AnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

426408Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtigatedsuchnetwork-levelcascadingprocessesordiscussedsupplychainphenomenalinkedtoagentadaptation.Thereareopportunitiestoinvestigatehowlocalinteractions,drivenbyasimplesetofrules,couldalternetworkproperties.Suchstudiescanlayafoundationforexpandingourunderstandingofsupplychainresilience.Thecomplexityperspectivehasbeeneffectivelyusedtostudyresilienceinmanyengineeringandinfrastructuresystems,suchastransportnetworks,aerospacesystemsandcomplexengineeringsystems(Punzoetal.,2020).Inthesestudies,networkpropertiessuchasconnectedness,relationalinterdependenciesandagents’adaptivesearchforfitnesspeakshavebeenhighlightedasthedeterminantsofsystems’resilience.OurunderstandingofsupplychainresiliencecanberefinedusingtheseCASstudiesfromotherdomains.TheCASviewcouldbeusefulforestablishingindirectcausalitieslinkedtosupplychainperformance.Forinstance,localperformanceimprovingstrategies,suchasfinancialchoices,cooperativeorcompetingstrategies,exercisingpowerorpressuretactics,structuralchoices,andsoon,adoptedatanagentlevel,couldhavefar-reachingconsequencesfornetworkper-formance.Fromaconventionalstandpoint,theseagentstrategiesmightnotseemapparentcandidatesforevaluation;however,whenaggregatedovertheentirenetworkusingaCASperspective,theseagentstrategiesmayprovetoexertadominantcausalinfluenceonseveraldimensionsofnetworkperformance.Forexample,normsandtrustacrossanetworkareoftenshapedbyanaggregationofbuyer‒supplierrelationshipsacrossthenetwork.TheCASviewhelpstoexplainhowlocalinteractionsandbehavioursatonenetworklocationwouldimpactuponthewhole,suchashowapartinfluencesthewhole.Thesearchforlocaladaptivestrate-giesatanagent/individuallevelcouldinformtheemergenceofcollectivepatternsatanetworklevel.Anothervitalareaforfuturesupplychainresearchistoexpandourunderstandingofentropyinasupplynetworkcontext.Entropyisanimportantconceptofcomplexityresearchthatfindsitsorigininthesecondlawofthermodynamics.Insimpleterms,entropyconveysdisorder,randomnessanduncertaintyinasystem,andtheentropyofasystemcannotdecrease;asystemwillcontinuetobecomeprogressivelydisorderly.However,thisdoesnotrestrictlocalisedorderfromemergingthroughself-organisation.Inhistheoryof‘dissipatingstructures’,Prigogine(1955)arguesthatemergentlocalisedself-organisation,orbreakingandreappearingoflocalisedsystemstructures,canspeeduptheentropyproduction.Supposethisassertioniscombinedwiththeargumentthatattheedgeofchaos,therateofentropyproductionisincreased(Latoraetal.,2000).Inthatcase,itcanhaveinterestingimplicationsforsupplychains.Insupplychains,theconceptofentropytakesaninformation-theoreticviewthatinformationismeasurableandagoodproxyfordefiningthesystem’scomplexity.Themoreinformationthatisneededtodefineasystem,thegreaterisitscomplexity.Leaningonthisview,onecansaythatforopensystems,suchassupplychains,energyentersthesystematlowentropyandisdissipatedthroughself-organisation.Asaresult,thesystemcanattainorderatalocallevel,andinformationquantityinthesupplychainmightbeisomorphictonegativeentropy.REFERENCESAllen,P.M.,andVarga,L.(2006).Aco-evolutionarycomplexsystemsperspectiveoninformationsystems.JournalofInformationTechnology,21(4),229–238.https://doi.org/10.1057/palgrave.jit.2000075.AnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

427Supplychainsascomplexadaptivesystems409Amaral,L.a.N.,andOttino,J.M.(2004).Complexnetworks.EuropeanPhysicalJournalB‒CondensedMatter,38(2),147–162.https://doi.org/10.1140/epjb/e2004-00110-5.Bak,P.(1996).HowNatureWorks:TheScienceofSelf-OrganizedCriticalit.NewYork:Copernicus.Buckley,W.F.(1998).Society‒AComplexAdaptiveSystem:EssaysinSocialTheory.Amsterdam:Gordon&Breach.Chiles,T.H.,Meyer,A.D.,andHench,T.J.(2004).Organizationalemergence:Theoriginandtransfor-mationofBransonMissouri’smusicaltheatres.OrganizationScience,15(5),499–519.https://doi.org/10.1287/orsc.Choi,T.Y.,Dooley,K.J.,andRungtusanatham,M.(2001).Supplynetworksandcomplexadaptivesystems:controlversusemergence.JournalofOperationsManagement,19(3),351–366.https://doi.org/10.1016/S0272-6963(00)00068-1Cohen,M.D.,andAxelrod,R.(1984).Copingwithcomplexity:Theadaptivevalueofchangingutility.AmericanEconomicReview,74(1),30–42.Datta,P.P.,Christopher,M.,andAllen,P.(2007).Agent-basedmodellingofcomplexproduction/distri-butionsystemstoimproveresilience.InternationalJournalofLogisticsResearchandApplications,10(3),187–203.https://doi.org/10.1080/13675560701467144.Day,J.M.(2014).Fosteringemergentresilience:Thecomplexadaptivesupplynetworkofdisasterrelief.InternationalJournalofProductionResearch,52(7),1970–1988.Dhanorkar,S.,Kim,Y.,andLinderman,K.(2019).Anempiricalinvestigationoftransactiondynam-icsinonlinesurplusnetworks:Acomplexadaptivesystemperspective.JournalofOperationsManagement,65(2),160–189.https://doi.org/10.1002/joom.1006.Dooley,K.(1996).Anominaldefinitionofcomplexadaptivesystems.ChaosNetwork,8(1),2–3.Eaton,C.D.(2008).CoevolutionaryResearch.InS.E.JørgensenandB.D.Fath(eds),EncyclopediaofEcology(pp.659–663).Elsevier.https://doi.org/10.1016/B978-008045405-4.00777-1.Espinosa,J.A.,Davis,D.,Stock,J.,andMonahan,L.(2019).Exploringtheprocessingofproductreturnsfromacomplexadaptivesystemperspective.InternationalJournalofLogisticsManagement,30(3),699–722.https://doi.org/10.1108/IJLM-08-2018-0216.Eve,R.A.,Horsfall,S.,andLee,M.E.(1997).Chaos,Complexity,andSociology:Myths,Models,andTheories.ThousandOaks,CA:SAGE.Gell-Mann,M.(1994).TheQuarkandtheJaguar.NewYork:W.H.Freeman&Company.Gell-Mann,M.(2002).Whatiscomplexity?InA.Q.CurzioandM.Fortis(eds),ComplexityandIndustrialClusters(pp.13–24).Heidelberg:Physica-Verlag.Giannoccaro,I.,Nair,A.,andChoi,T.(2018).Theimpactofcontrolandcomplexityonsupplynetworkperformance:AnempiricallyinformedinvestigationusingNKsimulationanalysis.DecisionSciences,49(4),625–659.https://doi.org/10.1111/deci.12293.Goldspink,C.,andKay,R.(2003).Organizationsasself-organizingandsustainingsystems:Acomplexandautopoieticsystemsperspective.InternationalJournalofGeneralSystems,32(5),459–474.https://doi.org/10.1080/0308107031000135017.Holland,J.H.(1993).Echoingemergence:Objectives,roughdefinitions,andspeculationsforecho-classmodels.No.1993-04–023.SantaFeinstitute,SantaFe,NM.Holland,J.H.(1995).HiddenOrder:HowAdaptationBuildsComplexity.NewYork:AddisonWesleyPublishingCompany.Holland,J.H.(2006).Studyingcomplexadaptivesystems.JournalofSystemsScienceandComplexity,(November),1–8.Hou,Y.,Wang,X.,Wu,Y.,andHe,P.(2018).Howdoesthetrustaffectthetopologyofsupplychainnetworkanditsresilience?Anagent-basedapproach.TransportationResearchPartE:LogisticsandTransportationReview,116(July),229–241.https://doi.org/10.1016/j.tre.2018.07.001.Johnsen,T.E.,Mikkelsen,O.S.,andWong,C.Y.(2019).Strategiesforcomplexsupplynetworks:Findingsfromtheoffshorewindpowerindustry.SupplyChainManagement,24(6),872–886.https://doi.org/10.1108/SCM-11-2018-0410.Kauffman,S.A.(1993).TheOriginsofOrder:Self-OrganizationandSelectioninEvolution.NewYork:OxfordUniversityPress.Kauffman,S.A.,andJohnsen,S.(1991).Coevolutiontotheedgeofchaos:Coupledfitnesslandscapes,poisedstates,andcoevolutionaryavalanches.JournalofTheoreticalBiology,149(4),467–505.https://doi.org/10.1016/S0022-5193(05)80094-3.AnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

428410Handbookoftheoriesforpurchasing,supplychainandmanagementresearchKauffman,S.A.,andLevin,S.(1987).Towardsageneraltheoryofadaptivewalksonruggedlandscapes.JournalofTheoreticalBiology,128(1),11–45.Latora,V.,Baranger,M.,Rapisarda,A.,andTsallis,C.(2000).Therateofentropyincreaseattheedgeofchaos.PhysicsLetters,SectionA:General,AtomicandSolidStatePhysics,273(1–2),97–103.https://doi.org/10.1016/S0375-9601(00)00484-9.Levin,S.a.(1998).Ecosystemsandthebiosphereascomplexadaptivesystems.Ecosystems,1(5),431–436.https://doi.org/10.1007/s100219900037.Levinthal,D.(1997).Adaptationonruggedlandscapes.ManagementScience,43(7),934–950.https://doi.org/10.1287/mnsc.43.7.934.Lichtenstein,B.B.(2000).Self-organizedtransitions:Apatternamidthechaosoftransformativechange.AcademyofManagementPerspectives,14(4),128–141.https://doi.org/10.5465/ame.2000.3979821.Lichtenstein,B.B.,andPlowman,D.A.(2009).Theleadershipofemergence:Acomplexsystemsleader-shiptheoryofemergenceatsuccessiveorganizationallevels.LeadershipQuarterly,20(4),617–630.https://doi.org/10.1016/j.leaqua.2009.04.006.Mabert,V.A.,andVenkataramanan,M.A.(1998).Specialresearchfocusonsupplychainlinkages:Challengesfordesignandmanagementinthe21stcentury.DecisionSciences,29(3),537–552.https://doi.org/10.1111/j.1540-5915.1998.tb01353.x.Maguire,S.,andMcKelvey,B.(2002).Complexityandmanagement:Movingfromfadtofirmfounda-tions.Emergence,1(2),1–19.https://doi.org/10.1207/s15327000em0102_3.McKelvey,B.(1999).Self-organization,complexitycatastrophe,andmicrostatemodelsattheedgeofchaos.InJ.A.C.BaumandB.McKelvey(eds),VariationsinOrganizationScience.InHonorofDonaldT.Campbell(pp.279–307).ThousandOaks,CA:SAGE.McKelvey,B.(2002).Emergentorderinfirms:Complexitysciencevs.theentanglementtrap.ComplexSystemsandEvolutionaryPerspectivesofOrganizations:ApplicationsofComplexityTheorytoOrganizations,1,1–15.Nair,A.,Narasimhan,R.,andChoi,T.Y.(2009).Supplynetworksasacomplexadaptivesystem:Towardsimulation-basedtheorybuildingonevolutionarydecisionmaking.DecisionSciences,40(4),783–815.https://doi.org/10.1111/j.1540-5915.2009.00251.x.Nair,A.,andReed-Tsochas,F.(2019).Revisitingthecomplexadaptivesystemsparadigm:Leadingperspectivesforresearchingoperationsandsupplychainmanagementissues.JournalofOperationsManagement,65(2),80–92.https://doi.org/10.1002/joom.1022.Nair,A.,Yan,T.,Ro,Y.K.,Oke,A.,Chiles,T.H.,andLee,S.Y.(2016).Howenvironmentalinnova-tionsemergeandproliferateinsupplynetworks:Acomplexadaptivesystemsperspective.JournalofSupplyChainManagement,52(2),66–86.https://doi.org/10.1111/jscm.12102.Newman,M.E.J.(2011).Complexsystems:Asurvey.AmericanJournalofPhysics,79(8),800.https://doi.org/10.1119/1.3590372.Nicolis,G.,andPrigogine,I.(1989).ExploringComplexity:AnIntroduction.NewYork:Freeman.Nilsson,F.,andDarley,V.(2006).Oncomplexadaptivesystemsandagent-basedmodellingforimprov-ingdecision-makinginmanufacturingandlogisticssettings:Experiencesfromapackagingcompany.InternationalJournalofOperationsandProductionManagement,26(12),1351–1373.https://doi.org/10.1108/01443570610710588.Pathak,S.D.,Day,J.M.,Nair,A.,Sawaya,W.J.,andKristal,M.M.(2007).Complexityandadaptivityinsupplynetworks:Buildingsupplynetworktheoryusingacomplexadaptivesystemsperspective.DecisionSciences,38(4),547–580.https://doi.org/10.1111/j.1540-5915.2007.00170.x.Plowman,D.A.,Baker,L.T.,Beck,T.E.,Kulkarni,M.,Solansky,S.T.,andTravis,D.V.(2007).Radicalchangeaccidentally:Theemergenceandamplificationofsmallchange.AcademyofManagementJournal,50(3),515–543.https://doi.org/10.5465/AMJ.2007.25525647.Prigogine,I.(1955).AnIntroductiontoThermodynamicsofIrreversibleProcesses.Springfield,IL:Thomas.Punzo,G.,Tewari,A.,Butans,E.,Vasile,M.,Purvis,A.,etal.(2020).Engineeringresilientcomplexsystems:Thenecessaryshifttowardcomplexityscience.IEEESystemsJournal,14(3),3865–3874.https://doi.org/10.1109/JSYST.2019.2958829.Stacey,R.D.(1996).ComplexityandCreativityinOrganizations.SanFrancisco,CA:Berrett-KoehlerPublishers.AnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

429Supplychainsascomplexadaptivesystems411Statsenko,L.,Gorod,A.,andIreland,V.(2018).Acomplexadaptivesystemsgovernanceframeworkforregionalsupplynetworks.SupplyChainManagement,23(4),293–312.https://doi.org/10.1108/SCM-08-2017-0279.Surana,A.,Kumara,S.,Greaves,M.,andRaghavan,U.N.(2005).Supply-chainnetworks:Acomplexadaptivesystemsperspective.InternationalJournalofProductionResearch,43(20),4235–4265.https://doi.org/10.1080/00207540500142274.Trofimova,I.,andMitin,N.(2002).Self-organizationandresourceexchangeinEVSmodeling.NonlinearDynamics,PsychologyandLifeSciences,6,351–362.Varga,L.,Allen,P.M.,Strathern,M.,Rose-Anderssen,C.,Baldwin,J.S.,andRidgway,K.(2009).Sustainablesupplynetworks:Acomplexsystemsperspective.Emergence:ComplexityandOrganization,11(3),16–36.Wycisk,C.,McKelvey,B.,andHülsmann,M.(2008).‘Smartparts’supplynetworksascomplexadap-tivesystems:Analysisandimplications.InternationalJournalofPhysicalDistributionandLogisticsManagement,38(2),108–125.https://doi.org/10.1108/09600030810861198.Zhao,K.,Zuo,Z.,andBlackhurst,J.V.(2019).Modellingsupplychainadaptationfordisruptions:Anempiricallygroundedcomplexadaptivesystemsapproach.JournalofOperationsManagement,65(2),190–212.https://doi.org/10.1002/joom.1009.Zimmerman,B.,Lindberg,C.,andPlsek,P.(1998).Edgeware.Irving,TX:VHA.AnuragTewariandRichardWilding-9781839104503DownloadedfromPubFactoryat05/28/202209:11:13AMviaColumbiaUniversityLibrary

43027.Clustertheoryandpurchasingscience:geographicalproximityasastrategicdecisionfactorinsourcingHolgerSchieleHISTORY:INDUCTIVETHEORYCONSTRUCTIONBASEDONALONGTRADITION‘Clusters’refertoregional-sectoralagglomerationsoffirmsandinstitutions,thatis,localisedsupplychainsgeneratingaspecificproductanditscomponents,whichtheyoffertoeco-nomicactorslocatedoutsidethatagglomeration.TheslowdownofgrowthininternationaltradeinthelastdecadeandeventssuchastheCovid-19crisisexposingthevulnerabilityofglobalsupplychainshavere-emphasisedthediscussiononlocationalchoicesinsupplierselection.However,clustertheoryandtheclusterphenomenonareolderthanthat.Numerousclustersgivestructuretoeconomicactivities;notonlyfamousonessuchasSiliconValleyorHollywood,butalsoplentymorespecialisedclusterssuchasgolfequipmentinCarlsbad(California);lightaircraftinWichitaandpharmaceuticalsinPennsylvania(UnitedStates);tuftedcarpetsinnorthernBelgium;theseedvalleyinHoorn(Netherlands);orkitchenfurni-tureinEasternWestfaliaandcutleryinSolingen(Germany);andmanyothers(Porter,1998a;Schiele,2003).TheChineseeconomyisstronglycharacterisedbyextremeformsofclusters,one-producttowns,whoseimplementationmayofferanexplanationforthesuccessfulindus-trialisationofthecountry(Barbierietal.,2019).Clustertheory,discussinglocalisedsupplychains,alsoleadstoaseriesofimplicationsforpurchasingscienceandpractice.Twoconstitutionalelementsarecentraltotheclustertheory:(1)beingaphenomenonatthemesolevelofanalysis;and(2)havingageographicalcomponent.Wecandistinguishbetweenmicro,mesoandmacrolevel.Themicrolevelreferstoindividualactors(persons,singlefirms),whilethemacrolevelreferstoallactors(typicallyofanation).Themesolevelisinbetween,referringtogroupsofactorswhichconsistofsmallerunits(inthiscasethefirms),whichformaninterconnectedgroup(thecluster)andarenestedinalargerunit(theeconomy).Theanalysisofindustriesandtheirdynamicsisameso-analyticalapproach.Clustertheorydiffersfromclassicalindustrialeconomicsapproachesinthatitaddsasecondanalyticallens,theproximity(geographicaland,infunctionofthat,culturalandorganisationalproximityamongorganisations).Theregionalagglomerationofeconomicactivitieshasbeenobservedforalongtime.Severaldifferenttheorystreamshavetriedtomakesenseoutofthephenomenon,mainlyrootedinindustrialeconomicsandineconomicgeography.ThePorterianclustertheory,whichwillbedescribedindetailbelow,isthemostinfluentialandrecentofthesetheories,buthistoricallyantecedingitareseveralFrenchtheories(filièreandmilieuinnovateur)andtheindustrydistrictmodel.412HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

431Clustertheoryandpurchasingscience413TheeconomistAlfredMarshallwasthefirsttopublishadiscussiononregional-sectoralagglomerationsinhistextbook(Marshall,1961[1890]).Tryingtoexplainobservationsofsmall-scaleco-locationofentireindustries,heidentifiedthreeexplanatorymechanisms,privilegingtheseregionsascomparedtoisolatedactors,whichKrugman(1991)summarisedasfollows:1.Thepresenceofalabourpoolinindustrialagglomerationsallowsworkerstospecialiseatlowerrisk,becausemultipleemployersarepresent.Firmsinanagglomeration,inturn,candrawonabetter-educatedlabourforcethantheirisolatedcompetitors.2.Thecreationof‘intermediateinputs’,thatisspecialisedsuppliers,enablesfirmsinagglomerationstoexternalisemoreworkthantheirisolatedcompetitorswhich,intheabsenceofgoodsuppliers,havetorelyonlessefficientin-houseproduction.3.Technologyspilloveroccursthroughtheintensiveexchangeamongactorsinproximity,includingtacitknowledge,whichcanhardlybecodifiedandisnotaccessibletoactorslocatedoutsidetheagglomeration.Marshallsummariseditas:‘Themysteriesofthetradebecomenomystery;butareasitwereintheair’(Marshall,1961[1890],p.225).Fromapurchasingperspective,thehypothesiswouldbethatthebestandmostspecialisedsupplierscanbefoundinindustrialagglomerations.However,Marshall’sexplanationforagglomerationdidnotfindmuchresonanceduringhislifetime.Theindustrialdistrictmodelwasonlyrediscoveredalmost100yearslaterinItaly,whenBecattini(1979,1991)searchedforanexplanationfortheobservationofsurprisingfirmsuccessinNorth-EastItaly,asopposedtolesssuccessfulfirmsfromthesameindustries,butlocatedinotherpartsofthecountry.ItwasthennoticedthatoftenthecompetitiveItalianfirmsarelocatedin‘one-producttowns’,classicalcasesofverysmall-scaleregional-sectoralsupplychains.InItalytheybecameknownas‘industrialdistricts’andrepresentasmuchas35percentofthevalueadded(Tunisinietal.,2011).Muchcurrentliteratureonagglomerationsusestheterm‘industrialdistrict’,whichshowssubstantialoverlapwithPorter’sclustertheory.Inparallel,Frenchliteratureonthefilièreandthe‘innovativemilieu’developed.Fromapurchasingperspective,thefilièreliteratureproposesaninterestinghypothesis,accordingtowhichthedominanceinasupplychainmovesaccordingtotheproductlifecycle.Hence,inwell-establishedsupplychains,supplierswouldachievelowermargins;ininnovativechains,ontheotherhand,manufacturersaremoredependentontheirsuppliers(Malsot,1980).Thislifecyclecharacterwouldimplymoreimportanceofagglomerationeffectsinyoung,innovativesupplychains.Theinnovativemilieuapproach,inturn,triestoexplainthesuccessofregionalinnovationsystemsbylocalisedrelationalcapital(PumainandTorre,2020),observingthecoincidenceofcollaborationandcompetitioninsuchregions,whichismadepossiblethroughanintensiveknowledgeflowpropelledthroughsharedsetsofnormsandavisionofcollaboration(Steinleetal.,2007).Themilieuapproachalertsthatmanyoftheallegedagglomerationeffectsarenotoccurringautomatically,butdependonthelocalactor’sspecificinteraction.Finally,andreferringtotheindustrialdistricttheoryandthefilièreapproach(Porter,1998b,p.789),Porterdevelopedhisclustertheory,summarisedinthe‘diamondofcompetitiveadvantage’.Likethepreviousmodels,itisnotderivedfromconceptualthoughts,butinduc-tivelyemergedoutofanempiricalanalysis.Porterwasnotoriginallyaimingatunderstandingregionalagglomerations,butjoinedacommitteeinstalledbyPresidentReagantargetedatunderstandingcompetitiveadvantage,thatis,afirm’sabilitytocompeteinworldmarkets.HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

432414Handbookoftheoriesforpurchasing,supplychainandmanagementresearchEventually,largetablesofinternationallycompetitiveindustrieswerecompiledforasetofnations.Amultitudeofcasestudiesprovideddetaileddata,whichwerethenaggregatedinthediamondmodel,summarisingthattheregionalcoincidenceoftrend-anticipatingcustomers,competingproducers,leadingsuppliersandsupportingindustrieswastypicallyfoundtostandatthecoreofcompetitiveindustries.Porterconcludes:‘Forcompanies,acentralmessage…isthatmanyofacompany’scompetitiveadvantageslieoutsidethefirmandarerootedinloca-tionsandindustryclusters’(Porter,1998b,p.xiii).Consideringpurchasing’sresponsibilitytomanagetheexternalembeddingofafirminitssupplynetwork,whichPorter’sresearchiden-tifiedasamainsourceofcompetitiveadvantage,itisthereforeworthdescribingtheclustertheoryinsomedetail,elaboratingtheempiricalfindingssupportingit,andthendiscussingrecommendationsforsupplymanagement,aswellasresearchtargetsforpurchasingscience.CLUSTERTHEORY:MUTUALLYSUPPORTIVELOCALISEDVALUECHAINS‘Clustersaregeographicconcentrationsofinterconnectedcompaniesandinstitutionsinapar-ticularfield’(Porter,1998a,p.78).Followingclustertheory,suchagglomerationsaremoreinnovative,moreproductiveandgeneratemorestart-upsthandispersedbusinesses,eventuallyensuringcompetitiveadvantagesunderstoodas‘thesetofinstitutions,policies,andfactorsthatdeterminethelevelofproductivityofacountry’(Lacal-Arántegui,2019,p.623).Themostvisibleoutcomeofcompetitiveadvantageofacountryisthatitsfirmsaresuccessfullyexportingtheirproducts.Eventhoughitwascriticised(Moonetal.,1995;Waverman,1995),Porter’s‘diamondofcompetitiveadvantage’constitutesthemostinfluentialtheoryonclusters.Itrepresentstheresultsofafour-yearstudybasedonthestatisticalevaluationofinput‒outputanalysesandmorethan100casestudies.FollowingPorter’stheory,though,agglomerationperseisnotthesourceofthesketchedbenefits.Anagglomerationcouldonlybecalledacluster,withtheassociatedbenefits,ifasetofconditionsaremet:trend-anticipatingcustomersmustbepresentinaregion(‘demandconditions’inPorter’sterminology),andcompetingproducersofagood(‘firmstrategy,structureandrivalry’),whichrelyonlocalsuppliers(‘relatedandsupportingindustries’)andareembeddedinanetofsupportiveinstitutionssuchasineducationandasso-ciations(‘factorconditions’).Followingclustertheory,firmsuccessdependstoalargeextentontheenvironmentitisembeddedinand,fromamanagerialperspective,onhowthefirmcanmakeuseofthisenvironment(Figure27.1).Thediamondofcompetitiveadvantage–thecoreofPorter’sclustertheory–describesthefourkeyelementsofacompany’snationalandoftenevenregionalenvironment(roughlydefinedasanareawithinonehour’sreach)thatinfluenceitspotentialforinternationalcom-petitiveness(Porter,1990).First,trend-anticipatingcustomers(demandconditions,thenatureofhomedemand)areparticularlyreflectedbytheamountandthesophisticationoflocaldemand.Highlysophisti-catedcustomerswhoanticipateinternationaltrendsinfluencequalitystandards,thenumberofinnovations,aswellasthetechnologicalprogressofanation.Sophisticatedanddemandingcustomers,alargevolumeand–inindustrialmarkets–theavailabilityofasubstantialnumberofindependentbuyersarefavourableconditionsforinternationalsuccess,providedthenatureofhomedemandisanticipatingoratleastsimilartotheinternationaltrend.ProducersfacingHolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

433Clustertheoryandpurchasingscience415Figure27.1Clustertheorytoughrequirementsfromtheirmostimportantcustomersareforcedtoimprovetheirproducts.Theavailabilityofseveraldifferentcustomersallowsthemtoinnovateandtryoutdifferentsolutions;asopposedtonationalchampionswhichonlyaskforoneparticularsolution.Second,severalcompetingproducers(firmstrategy,structureandrivalry:thenatureofdomesticrivalry)playasignificantroleinPorter’sdiamondmodel.Astrongbaseoflocalcompetitorsisoneofthemajorstimulationsforinnovationandupgrading;nationalchampionsarecharacteristicoftheopposite.Thepivotalimportanceofdomesticrivalryisexplainedasforcingfirmstopermanentlyupdatetheirproductsandservices;thatis,toinnovateandtocutcosts,increasingproductivity.Intheabsenceoflocalcompetition,complacencycanoccur,eventuallyleadingtoalackofinternationalcompetitiveness.Inthepresenceoflocalrivals,ontheotherhand,managershavelimitedexcusesforpoorperformanceandcannotblamemacroeconomicdisadvantagescomparedtotheircompetitorsfromothercountries.Third,competitivesuppliers(relatedandsupportingindustries)canbeusedtoshareideas,knowledgeandskills.Thepresenceoflocalsuppliersandfirmsthatusesimilaroridenticaltechnologiestoproduceacomplementarygoodenablescost-effectivecollaborations,forexampleinnewproductdevelopmentprojects.Thediamonddistinguishesbetweendirectsuppliersandrelatedindustries,whichmaysharesecond-tiersuppliers,eventhoughdeliveringintoadifferentfinalproduct.Again,theavailabilityofcompetingdomesticsupplierswhichareinternationallycompetitiveisofimportance,asopposedto‘captive’suppliersservingjustalocalchampion.Apurelydomesticsupplyindustryisnotconductivetotheupgradingofacluster.Fourth,educationalandprofessionalinfrastructure(factorconditions)canbedividedinto:‘basicfactors’,suchasnaturalresourcesandanunskilledlabourforce;and‘advancedfactors’,suchashighlyqualifiedmanpower,forexampleengineersandacademics.Anation’scompeti-tiveadvantagestronglyreliesontheexistenceandmaintenanceoftheadvancedfactorswhichareuniquetoaclusterandconsequentlyhardtoimitatebyotheractorsnotrootedinthesamesystem.Theadvancedfactors,inparticulareducationalinstitutionsandprofessionalassoci-HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

434416Handbookoftheoriesforpurchasing,supplychainandmanagementresearchationsandinstitutes,playanimportantroleinthesuccessofaclusterbyprovidingresourceinputandestablishingthesocialglueamongthecluster’smembers.Thesefourdeterminantsformaninterlinkedanddynamiccomplexwhereeachelementisaffectedbytheotherthree.Thesimultaneouspresenceofallfactorsandthebi-directionalinterdependenciesbetweenalldeterminantsleadtoanenvironmentthatpromotestheforma-tionofclusters.Theclustertheorydiffersfromsimpleagglomerationempiricsbyprovidinganexplanationforcompetitivesuccess,beingaproductofinnovationandproductivityinadynamiccontextwithrepeatednewbusinessformation.Competitionisacentralexplanatorymechanismfortheinnovation,productivityandstart-upsasthemainbenefitsclustersgeneratefortheirmembers(DeWittetal.,2006;Leontiades,1990).First,innovation:accordingtoclustertheory,firmsanchoredinclustersaremoreinnova-tivebecauseof:(1)havingtheincentive(theneed)toinnovate;and(2)havingthepartnersrequiredtoachievethat.Theexistenceofseveralactorsoneachvaluecreationlevel(severalcustomers,severalcompetitors,severalalternativesuppliers)propelscompetition‒thatis,theneedtoupgradeownperformance‒andoffersalternatives.Inacluster,botharepresent:customersdemandingdifferentsolutions,aswellassuppliersofferingalternativesolutions.Theprocessofdiscovery,asatrial-and-errorprocess,cantakeplace.Trend-anticipatingcustomers,atthesametime,ensurethatthedirectionofinnovationisprofitableandthatsunkcostsareavoided.Theproximityoftheactorsallowspartnerstobeidentifiedandcompetitors’progresstobemonitored,thusreinforcingthepressuretoinnovate,whileatthesametimeprovidinginformationonsolutions.Second,productivity:competitivepressure,asinthecaseofinnovation,alsodrivesfirmsinclusterstobemoreproductive,asboth:(1)theneedtoincreaseproductivity;and(2)theavailabilityofresourcestoachievethatarepresent.Theavailabilityofalabourpoolofskilledandspecializedworkforceallowsproductivitytobeimprovedthroughhigherspecialisation.Likewise,theabundanceofspecialisedsuppliersmakesitpossibleforclusteredfirmstoexternalisemorework,concentrateontheircorecompetencies,andthusachieveproductivitybenefits.Again,likeinthecaseofthemechanismforinnovation,betteraccesstoknowledgeandthusknowledgeexchangeonbestpracticesacceleratesthecollectivelearningprocessoftheclusterfirms.Third,newbusinessformation:inclusters,the‘knowledgeisintheair’,andalsotheknowledgeonnewbusinessopportunities.Therefore,actorscannotexpecttokeepabusinessideaforthemselvesandafteralongpreparationsurprisetheworldwithanewfirm.Instead:(1)theyfeelunderpressuretoquicklyexecutetheidea,sothatnobodyelsecomesfirst;and(2)inacluster,severalcustomersarepresent,someofwhichmightwanttotryoutthenewproduct.Atthesametime,theintensiveknowledgeflowallowspotentialfounderstoidentifythebusinessneedsoftheincumbentfirms.Newventures,then,provideagrowthdynamicforclusters,allowingthemtoexpandcontinuously.Importantly,clustertheoryalsoexplainswhatclustersarenot.Asinglelargefirmestab-lishingasupplierparkinitsneighbourhoodstatisticallyaccountsasbeingaregional-sectoralagglomeration.However,intheabsenceofrivalrybetweenseveralcompetingproducersitdoesnotfulfiltheconditionstobetermedacluster.Insuchacase,fewoftheabovedescribedcompetitivemechanismsresponsiblefortheupgradingofclustercompanieswouldbeeffec-tive.Note,finally,thatinthePorterianview,clustersareconfinedtoaregionorappearonanationallevel.HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

435Clustertheoryandpurchasingscience417Providingatheoreticalexplanationforatestablephenomenon,theclustertheoryisastrongtheoryaccordingtoWacker’s(2008)modeloftheorybuilding(reflectingdefinitiondomain,relationshipandpredictionasnecessaryelementsofagoodtheory):allelementsofthetheorycanclearlybedefinedandcontributetoamodelofrelationships,whichmaketestablepredic-tions.However,acertain–alsooperational–limitationofPorter’sclustertheorymayrestinitslimitedparsimony.Allconstitutiveelementsaresupposedtobeinterlinkedandtoinfluenceeachother,whichcreatessubstantialcomplexityandmightobscurecauseandeffect;thismakesitdifficulttomeasurecausality(Leontiades,1990).Amultitudeofpossibleconnectionsanddifferentemphasesexplainthepredictedbenefitsofclusters,whichultimatelypresentahighlycompetitiveenvironment(Martínez-Marínetal.,2020).Intermsofdomaingener-alisability,clustertheoryclaimsahighlevelofabstractionandwideapplication,withonlyafewlimitations,suchastheneedforadivisibleproductionprocessandatransportablegood,asotherwisetheproductivityenhancinglabourdivisioncannottakeplace,norwoulditmakeanycontributiontocompetitiveness,ifthegoodisnotexportable(SteinleandSchiele,2002).AcritiqueofPorter’sclustertheorystemsfromthelevelofanalysis:‘WhilePorterunder-standsthatonlyfirmsmakedecisionsandthereforeonlyfirmscansustaincompetitiveadvan-tage,hechoseindustriesashisbasicunitofanalysis’(Leontiades,1990,p.31).Thelogicalconsequenceofthisviewisthatthemanagerialdiscretionisseenasreduced;asopposedto,forinstance,theviewoftheclassical‘greatmen’theoryofentrepreneurialleadership.Infact,theimplicationisthatfirmsmightbesuccessfulifembeddedinacompetitiveenvironment,thatis,inastrongindustryintheirhomecountry,andmanagement’sactionistorecognisethequalityofthelocalenvironmentandanchorthecompanythere,whilenotbeingcompletelyfreeinitsdecisions(Schieleetal.,2014).InPorter’swords,leaders‘donotworkseparatelyfromthedeterminants…ofthediamondofcompetitiveadvantage,[but]Itisoftenleadershipthatdetermineswhichofthefirmsfromafavorablysituatednationwillsucceedorfail’(Porter,1998b,p.129).OthercriticismsofPorter’stheoryrefertoitsscope,neglectingthesocialcomponentofclusters,relyingpredominantlyonthecompetitionargument(Steinleetal.,2007).Portercanbeinterpretedinawaytoassumethatwhentherequestedactorsarepresentinaregioninsufficientnumber,beneficialagglomerationeffectsalwaystakeplace.However,relyingonthemilieuapproach,ithasbeenarguedthat,asafifthelement,asupportiveandunifyingsocialsystemexplicitlyneedstobepresentinaregion,asanecessarycondition.Withaviewonfirms’environmentalembeddingemphasisedbyclustertheoryandrelatedagglomerationtheories,itbecomesclearthatpurchasingandsupplychaindesignrequiresspecialattentionfromaclustertheoryperspective.CLUSTERANDPURCHASING:BENEFITINGFROMWORLD-LEADINGDOMESTICSUPPLIERSManziniandDiSerio(2017)conductedaliteraturereviewonclusters,strategyandoperations.Theyconcludedthattheoverwhelmingpartoftheliteraturerelyingonclustertheoryisineconomicgeography,mainlytargetedatunderstandingandimprovingregionalagglomera-tions.Thereissomeliteratureapplyingtheclustertheoryinstrategicmanagement,aspartofthelargersetof‘ecosystemtheory’,whichtriestoexplaincompetitiveadvantagebyafirm’spositioninitsbusinessecosystem(JarzabkowskiandWilson,2006).Lessthan5percentofthearticlesManziniandDiSerioidentifyuseclustertheoryinoperationsmanagement,thatHolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

436418Handbookoftheoriesforpurchasing,supplychainandmanagementresearchis,notonlypurchasing,butalsoproductionandlogistics.Whiletheiranalysiscanbecriticisedonthegroundsofrelyingonapreselectedsetofjournals,usingkeywordresearchasimilarpictureemerges.Likewise,Tolossaetal.’s(2013)reviewonlyidentified17papersdealingwithclustersandthesupplychaininthebroadersense.Mostofthesepapersreportcases,suchastheAmishfurniturecluster’ssupplychain(DeWittetal.,2006),NewEnglandcottonindus-try(Bozarthetal.,2007),UnitedStatespetrochemicals(Patti,2006),Germanrailandsteel(Schiele,2008),Chinesetextiles(Ikrametal.,2018)andmachinebuilding(Xueetal.,2012).Inhisoriginalbook,though,Porterderivessomekeypropositionsforpurchasingmanagers,whichcanbesummarisedasfollows:‘Havingacompetitivedomesticsupplierindustryisfarpreferabletorelyingevenonwell-qualifiedforeignsuppliers’(Porter,1998b,p.103).Thistranslatesintoaclearrequest:‘Sourcefromthemostadvancedandinternationalhome-basedsuppliers’(Porter,1998b,p.586).Fiveargumentsarederivedfromclustertheorytosubstanti-atetheclaimtopreferclustersourcing:(1)inclustersmoreintensivebuyer‒supplierworkingrelationshipscandevelop;(2)suppliersserveastransmittersofinformationfromoneproducertothenext,thusstrengtheningall;(3)duetophysicalandculturalproximity,theinformationflowissuperior;(4)transactioncostsarelower;and(5)privilegedinnovationaccessforcus-tomersclosetothecoreresearchfacilitiesofthesupplier,thatis,beingapreferredcustomer.Consideringpurchasing,theclustertheoryhasdifferentimplicationsforfirmslocatedsomewhereintheperipheryandforthoselocatedintheindustrycentre,thecluster:‘Theimplicationsoftheclusterapproachforglobalsourcingaretwofold.Firstly,knowledgeoftheexistenceandlocationofparticularclusterscansupportthesearchprocessinsourcing.Secondly,theavailabilityofsuppliersinalocalclustermaybeareasonnottoglobalisesourcing’(SteinleandSchiele,2008,p.5).Morespecifically,clustertheorygeneratesthesesonlocationdecisions,supplierinnovation,riskassessment,clusteringandcorporatestrategy.LocationGiventhesuperiorpowerofinnovationofclusteredsuppliers,theirsuperiorproductivityandmoreadvancedlevelofspecializationduetonewbusinessformation,clustertheoryrecommendsafirmtogivepreferencetolocalsuppliers,inordertoachievecompetitiveadvantagecomparedtofirmswhichareforcedtorelyonaglobalsupplybase,incasetheydonothaveadomesticcluster.Thelargerthelocalsupplierbaseacompanycanrelyonis,thehighertheshareofclustersourcinginthetotalpurchasingvolumeisrecommended(Jin,2004).Localsourcingreducesleadtimeandinventory,andmayincreasequality(Patti,2006).Localpoolingmaybecomepossible,evenbundlingdemandswithother(small)firmsinthecluster(LandinezLamadridetal.,2018).Clustertheoryalsosupportstheideaofreshoring,understoodas‘areturnofmanufacturingactivitiesinnationalfactoriesownedbythecompanyorcarriedoutfromsupplierspresentinthesamecountryoftheparentcompany’(TalamoandSabatino,2018,p.383).However,clustertheorylinksthisrecommendationtotheconditionofthepresenceofahomecluster.Hence,thetheoryismoresophisticatedthanasimple‘sourcelocally’call,forintheabsenceoflocalcompetitiontheclusterbenefitsarenotexpectedtomaterialise.Inthesameway,andrelyingontheassumptionofanendemicbenefitofprox-imity,clustertheorydoesnotrecommendtorestrictlocalsuppliersandpreventthemfromsellingglobally,inordertogainadvantagesofscale.Porterforwardstwopropositions(Porter,1998b):HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

437Clustertheoryandpurchasingscience419Proposition1:Havingacompetitivedomesticsupplierindustryisfarpreferabletorelyingevenonwell-qualifiedforeignsuppliers.Proposition2:Sourcefromthemostadvancedandinternationalhome-basedsuppliers.InnovationGiventhesuperiorinnovationpowerofclustersuppliers,duetotheirdrivetoinnovateinducedforcompetitivereasons,andthebenefitofthesesuppliers,intheirturn,relyingonamultitudeofsupportiveorganisationsandsubsuppliers,fromclustertheoryitisderivedthatinparticularforinnovationandnewproductdevelopmentwithearlysupplierintegration,clustersuppliersarerecommended.Dependingonthecompetitivestrategyofthefirm,inthecaseofadiffer-entiationstrategy,acluster-orientedreconfigurationofthesupplychainisrecommended.Thesameistruefornichefirmsrelyingoncustomisedcomponents(GrandinettiandTabacco,2015).Clusteredsupplychainsmayhaveparticularstrengthsinincrementalratherthanradicalinnovation(Dankbaar,2007).Companiesthatarenotembeddedintheleading-edgeclustercanbedisconnectedfromthedevelopmentofinnovations.Inconclusion,clustertheoryproposes:Proposition3:Incaseacompanypursuesaninnovationstrategy,therelianceonclustersuppliersissuggested.RiskandResilienceShortersupplychainspresentalowerprobabilityofphysicalinterruptions.Atthesametime,clustercompanieshavebeenfoundtobemoreprofitableduetohigherproductivityandinno-vation,andhenceshowlessvulnerabilitytocrises.Inaddition,aclustercontainingseveralactorsoneachvaluechainlevelcanbetterreconfigureitselfshouldoneactorfaceproblems.Asopposedtothis,acaptivesupplychain,similartoanintegratedcompany,hasmorediffi-cultyinreconfiguringifonechainmemberfallsout.Hence,andinadditiontotheclassicalsuggestionsputforwardbyPorter,thehypothesisemergesthatclustersaremoreresilientandfirmsanchoredinclustersarebetterrisks(TalamoandSabatino,2018).Ontheotherhand,ifanentireclusterisaffectedbytheoccurrenceofarisk,afirmsolelyrelyingonsuppliersfromitmaysufferproblems(Lee,2014).Atthesametime,proximityreducesuncertainty,whichstandsatthecoreofrisk(Lorentzetal.,2018).Basedonclustertheoryitcanthereforebeassumedthat:Proposition4:‘Cluster-suppliersarelessriskyandmoreresilientthanagloballydispersedsupplychain.’StrategyFollowingthetraditionalstrategicmanagementview,thepurchasingfunctioncouldhardlycontributetoestablishingcompetitiveadvantageofafirm,becausetheassumptionwasofperfectfactormobility.Everycompetitorwouldrelyonthesamesuppliersinthesameway,especiallyinpayingthesamepriceandgettingthesameproduct(Ramsay,2001).Ifbuyinggoodsandcomponentsdidnotallowdifferentiatiation,itwouldbehardtoargueforachievingHolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

438420Handbookoftheoriesforpurchasing,supplychainandmanagementresearchstrategicbenefitsthroughpurchasing.Clustertheory,however,conteststhisassumption:‘aresource-basedviewofregionalclusterspositsanadditionalcategoryofresourcesthatareinternaltoaregion,butexternaltoanysinglefirm.Inotherwords,therearespatialasymmetriesinthepresenceof,andthemarketfor,certaincriticalresources’(Enright,1998,p.321).Followingtheclustertheory’sassumptionthatclustersareregionallyinterconnectedmutuallydependentsocialsystems,buyersexternaltotheclusterfacemoredifficultiesinaccessingcluster-basedsuppliersandinachievingpreferredcustomerstatuscomparedtolocalbuyers(SteinleandSchiele,2008).Clustershavebeeninterpretedasclubs,thatis,exclusivegroupswhosemembersinternallyactdifferentlythantheydotowardsexternalpartners.Assuch,buyersarerequestedtoanalyseeachimportantsuppliertoestablishwhetherthefirmis:(1)hostedinthesamecluster;(2)hostedinaforeigncluster;or(3)inanindustrywhichdoesnotshowanyclusteringphenomena.Incase(1)thecluster-basedsupplierismoreeligibleforexclusivebonding;thatis,thebuyingfirmgainingprivilegedaccesstothesupplier’sresourcesand–providedtheseresourcesarevaluableandrare–gainingcompetitiveadvantage.Theconclusionofthislineofreasoningisthatfirmswhichhaveaso-calledinvertedsupplystructure(Figure27.2)‒thatis,predominantlyrelyingoninternationalsuppliersfortheirstrategicgoods,towhichtheyhavelessprivilegedaccess‒maystrategicallybevulnerableanduncompetitive,ifconfrontedwithcompetitorswhichcanrelyonastrongsupplynetworkintheirlocalcluster(SteinleandSchiele,2008).Figure27.2‘Inverse’supplystructureasanindicatoroffirmfailureduetoanuncompetitivesupplynetworkIfclusterembeddedsuppliersofferdistinctiveadvantagesintermsofinnovation,produc-tivityandspecialisationthroughstart-upformation,thenitfollowsthatafirmwithastrongbackgroundaspreferredcustomerinaclusterhascompetitiveadvantagescomparedtoafirmwithoutitsowndomesticnetwork,beingasecond-classcustomerwithdispersedsuppliers.Themorespecialisedthesupplieris,themorelikelyitisthatitcancontributetoestablishingHolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

439Clustertheoryandpurchasingscience421competitiveadvantage.Hence,followingtheclustertheory,successfulfirmsrelyonspecial-isedsuppliersfromtheirhomecluster.Ontheotherhand,ifthebestsuppliersareclusteredinanothercountry,whichishometomajorcompetitorsofaproducer,thenclustertheorywouldpredictsuchaproducertobestrategicallyvulnerable.Theexpectationwouldbethatsuchaperipheralfirmwouldbeacandidatetoleavethemarketinacyclicaldownturn.Eventually,inafreemarketeconomy,clustertheoryexpectsregionstospecializeandindustriestocon-centrateatparticularlocations.Highlightingtheimportanceofsupplierconnections,clustertheoryattributesastrategicroletopurchasing,byshapingthesupplystructure,whichmaybeastrategicassetorastrategicliability.Clustertheory,then,conceptuallypavesthewaytoenablepurchasingtojoinstrategicmanagementandpositions:Proposition5:‘Employingclustersuppliersallowspurchasingtostrategicallycontributetoincreasingthecompetitiveadvantageofthefirmbybeingthesesuppliers’preferredcustomer.’CONCLUSION:CLUSTERTHEORYASLINKBETWEENPURCHASINGSCIENCEANDSTRATEGICMANAGEMENTTheclustertheoryisthemost-usedtheoryexplainingthephenomenonofregional-sectoralindustryagglomeration,whichwasfoundtoleadtohigherproductivity,innovationandenterpriseformationinsuchcentres.Atitscoreistheassumptionofaregionalcoincidenceofaself-reinforcingsystemofseveralcompetingproducers,theirsuppliers,supportiveinstitutionsandtrend-anticipatingcustomersleadingtothecompetitiveadvantageoffirms,whichenablesthemtoexportmore.Giventheimportancethattheclustertheoryattributestotheproximateenvironmentofafirm,itisofgreatrelevanceforpurchasing,providingbothpracticalguidanceandconceptualbacking.Clustertheorysupportsthelocationalchoiceaspartofsourcingstrategies,arguinginfavouroflocalsuppliers.Clustertheoryalsocontributestotheemergenttopicofinnovationfromandwithsuppliers,emphasisingthebenefitsofregionalcollaboration.Fromariskmanagementperspective,clustersuppliersareexpectedtobebetterrisksthanremotesuppliers.Alltheseconclusionsfromclustertheoryareempiricallytestable.However,lessthan5percentofallpapersonclusterresearchrefertosupplychainissues,leavingalargeandrewardingspaceforpurchasingandsupplyscholarstocontribute.Inaddition,researchsofarismainlyconceptualandcasestudybased,whilelargeempiricalquantitativestudiesarestillneededtotestthegeneralisabilityofclusterrelevance(Tolossaetal.,2013).Ofparticularimportanceisthatcontingencyfactorsmayberelevant,sincenotallindustriesshowclusteringeffects(SteinleandSchiele,2002).Atthesametime,clustertheoryfeedstheavenueofresearchandpracticeestablishingpurchasingasastrategicallyrelevantfunctioninthefirm.Infact,clustertheoryarguesthatafirm’sstrategymightnotbediscussedpurelybasedoninternalstrengthandassumedmarketrequirements,butasabasicprecondition,whichfundamentallyrequiresthestrategicalanalysisoftheproximate(meso)environment,inparticularthesupplynetworkthatafirmcanaccessorbuild.Clustertheoryprovidesaspecificationfortherelationalviewofthefirm(DyerandSingh,1998).Here,futureresearchattheintersectionofpurchasingandstrategicmanagementhasthepotentialtoprovidegreatbenefitforbothfields.HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

440422Handbookoftheoriesforpurchasing,supplychainandmanagementresearchLastnotleast,itisworthrecallingthatmostliteratureonclustersactuallyfocusesonthepublicsideinparticular–despitethemanycasesoffailedstate-inducedclusterpolicies(Hospersetal.,2009)–exploringhowgovernmentscanfostertheformationofregionalclusters(ManziniandDiSerio,2017).Here,publicprocurementcouldserveasaninstrument(Elolaetal.,2017).Thefeasibilityofthis,however,dependstosomeextentontherespectivelegislation.However,theincreasinginterestinpublicprocurementforinnovationcouldbenefitfromemployingtheclusterconcept,embeddingthestimulationofinnovationthroughdemand-sidemeasuresinawidercontext,namelyclusterdevelopment.REFERENCESBarbieri,E.,DiTommaso,M.R.,Pollio,C.,andRubini,L.(2019).IndustrialpolicyinChina:theplannedgrowthofindustrialtownsintheCantoneseregion.CambridgeJournalofRegions,EconomyandSociety,12(3),401–422.doi:10.1093/cjres/rsz012.Becattini,G.(1979).Dal‘settore’industrialeal‘distretto’industriale.Alcuneconsiderazionisull’unitàdiindaginedell’economiaindustriale.Rivistadieconomiaepoliticaindustriale,4(1),7–21.Becattini,G.(1991).Italianindustrialdistricts:problemsandperspectives.InternationalStudiesofManagementandOrganisation,21(1),83–90.Bozarth,C.,Blackhurst,J.,andHandfield,R.B.(2007).Followingthethread:industryclustertheory,theNewEnglandcottontextileindustry,andimplicationsforfuturesupplychainresearch.ProductionandOperationsManagement,16(1),154–157.Dankbaar,B.(2007).Globalsourcingandinnovation:theconsequencesoflosingbothorganizationalandgeographicalproximity.EuropeanPlanningStudies,15(2),271–288.DeWitt,T.,Giunipero,L.C.,andMelton,H.L.(2006).Clustersandsupplychainmanagement:theAmishexperience.InternationalJournalofPhysicalDistributionandLogisticsManagement,36(4),289–308.doi:10.1108/09600030610672055Dyer,J.H.,andSingh,H.(1998).Therelationalview:cooperativestrategyandsourcesofinterorganiza-tionalcompetitiveadvantage.AcademyofManagementReview,23(4),660–679.Elola,A.,Valdaliso,J.M.,Franco,S.,andLópez,S.M.(2017).Publicpoliciesandclusterlifecycles:insightsfromtheBasqueCountryexperience.EuropeanPlanningStudies,25(3),539–556.doi:10.1080/09654313.2016.1248375Enright,M.J.(1998).Regionalclustersandfirmstrategy.InA.D.Chandler(ed.),TheDynamicFirm(pp.315–342).Oxford:OxfordUniversityPress.Grandinetti,R.,andTabacco,R.(2015).Areturntospatialproximity:combiningglobalsupplierswithlocalsubcontractors.InternationalJournalofGlobalisationandSmallBusiness,7(2),139–161.doi:10.1504/IJGSB.2015.071189.Hospers,G.J.,Desrochers,P.,andSautet,F.(2009).ThenextSiliconValley?Ontherelationshipbetweengeographicalclusteringandpublicpolicy.InternationalEntrepreneurshipandManagementJournal,5(3),285–299.doi:10.1007/s11365-008-0080-5.Ikram,A.,Su,Q.,Fiaz,M.,andRehman,R.U.(2018).Clusterstrategyandsupplychainmanagement:theroadtocompetitivenessforemergingeconomies.Benchmarking,25(5),1302–1318.doi:10.1108/BIJ-06-2015-0059.Jarzabkowski,P.,andWilson,D.C.(2006).Actionablestrategyknowledge:apracticalperspective.EuropeanManagementJournal,24(5),348–367.Jin,B.(2004).Achievinganoptimalglobalversusdomesticsourcingbalanceunderdemanduncertainty.InternationalJournalofOperationsandProductionManagement,24(12),1292–1305.doi:10.1108/01443570410569056.Krugman,P.(1991).GeographyandTrade.LeuvenandLondon:LeuvenUniversityPress.Lacal-Arántegui,R.(2019).Globalizationinthewindenergyindustry:contributionandeconomicimpactofEuropeancompanies.RenewableEnergy,134,612–628.doi:10.1016/j.renene.2018.10.087.LandinezLamadrid,D.,RamirezRios,D.,NeiraRodado,D.,Crespo,F.,Ramirez,L.,andJimenezManjarres,W.(2018).Cooperationinclusters:astudycaseinthefurnitureindustryinColombia.InHolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

441Clustertheoryandpurchasingscience423K.SaeedandW.Homenda(eds),ComputerInformationSystemsandIndustrialManagement.CISIM2018.LectureNotesinComputerScience,vol11127.Springer,Cham,181–192.doi:10.1007/978-3-319-99954-8_16.Lee,S.H.(2014).Determiningtheoptimalnumberofclustersuppliersundersupplyfailurerisks.InternationalJournalofSupplyChainManagement,3(3),16–23.Leontiades,M.(1990).Thecompetitiveadvantageofnations–reviewedbyMiltonLeontiades.PlanningReview,18(5),30–32.Lorentz,H.,Kumar,M.,andSrai,J.S.(2018).Managingdistanceininternationalpurchasingandsupply:asystematicreviewofliteraturefromtheresource-basedviewperspective.InternationalBusinessReview,27(2),339–354.Malsot,J.(1980).Filièreseteffetsdedominationdanslesystèmeproductif.AnnalesdesMines,186(1),29–40.Manzini,R.B.,andDiSerio,L.C.(2017).Currentthinkingonclustertheoryanditstranslationineconomicgeographyandstrategicandoperationsmanagement:isareconciliationpossible?CompetitivenessReview,27(4),366–389.doi:10.1108/CR-11-2015-0088.Marshall,A.(1961[1890]).PrinciplesofEconomics.AnIntroductoryVolume(9thVariorumedn).London:Macmillan.Martínez-Marín,S.,Puello-Pereira,N.,andOvallos-Gazabon,D.(2020).Clustercompetitivenessmode-ling:anapproachwithsystemsdynamics.SocialSciences,9(2).doi:10.3390/socsci9020012.Moon,H.C.,Rugman,A.M.,andVerbeke,A.(1995).Thegeneralizeddoublediamondapproachtointernationalcompetitivness.ResearchinGlobalStrategicManagement,5,97–114.Patti,A.L.(2006).Economicclustersandthesupplychain:acasestudy.SupplyChainManagement:AnInternationalJournal,11(3),266–270.Porter,M.E.(1990).TheCompetitiveAdvantageofNations.London:Macmillan.Porter,M.E.(1998a).Clustersandtheneweconomicsofcompetition.HarvardBusinessReview,12,77–90.Porter,M.E.(1998b).TheCompetitiveAdvantageofNations(8thedn).London:Macmillan.Pumain,D.,andTorre,A.(2020).Regionalscience:economyandgeographyinFranceandFrench-speakingcountries.PapersinRegionalScience,99(2),293–313.doi:10.1111/pirs.12513.Ramsay,J.(2001).Purchasing'sstrategicirrelevance.EuropeanJournalofPurchasingandSupplyManagement,7(4),257–263.doi:10.1016/S0969-7012(01)00007-7.Schiele,H.(2003).DerStandort-Faktor:wieUnternehmendurchregionaleClusterihreProduktivitätundInnovationskraftsteigern(1.Aufl.ed.).Weinheim:Wiley-VCH.Schiele,H.(2008).Location,location:thegeographyofindustryclusters.JournalofBusinessStrategy,29(3),29–36.Schiele,H.,Harms,R.,andBanerjee,S.(2014).Anationalcompetitiveness-basedportfolioapproachforinternationalstrategicmanagement:illustratedwiththecaseoftheTATAindustries.EuropeanJournalofInternationalManagement,8(1),106–125.Steinle,C.,andSchiele,H.(2002).Whendoindustriescluster?Aproposalonhowtoassessanindustry'spropensitytoconcentrateatasingleregionornation.ResearchPolicy,31,849–858.Steinle,C.,andSchiele,H.(2008).Limitstoglobalsourcing?Strategicconsequencesofdependencyoninternationalsuppliers:clustertheory,resource-basedviewandcasestudies.JournalofPurchasingandSupplyManagement,14(1),3–14.Steinle,C.,Schiele,H.,andMietzner,K.(2007).Mergingafirm-centredandaregionalpolicyperspec-tivefortheassessmentofregionalclusters:conceptandapplicationofa‘dual’approachtoamedicaltechnologycluster.EuropeanPlanningStudies,15(2),235–251.Talamo,G.,andSabatino,M.(2018).ReshoringinItaly:arecentanalysis.ContemporaryEconomics,12(4SpecialIssue),381–398.doi:10.5709/ce.1897-9254.284.Tolossa,N.J.,Beshah,B.,Kitaw,D.,Mangano,G.,andDeMarco,A.(2013).Areviewontheintegrationofsupplychainmanagementandindustrialcluster.InternationalJournalofMarketingStudies,5(6),164–174.Tunisini,A.,Bocconcelli,R.,andPagano,A.(2011).Islocalsourcingoutoffashionintheglobali-zationera?EvidencefromItalianmechanicalindustry.IndustrialMarketingManagement,40(6),1012–1023.doi:10.1016/j.indmarman.2011.06.011.HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

442424Handbookoftheoriesforpurchasing,supplychainandmanagementresearchWacker,J.G.(2008).Aconceptualunderstandingofrequirementsfortheory‐buildingresearch:guide-linesforscientifictheorybuilding.JournalofSupplyChainManagement,44(3),5–15.Waverman,L.(1995).AcriticalanalysisofPorter'sframeworkonthecompetitiveadvantageofnations.ResearchinGlobalStrategicManagement,5,67–95.Xue,X.,Wei,Z.,andLiu,Z.(2012).Theimpactofservicesystemontheimplementationofclustersupplychain.ServiceOrientedComputingandApplications,6(3),215–230.HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:18AMviaColumbiaUniversityLibrary

44328.OrganizationallearningtheoryanditsapplicationtopurchasingmanagementandsupplychainmanagementresearchArashAzadeganandJavadFeizabadiINTRODUCTIONThequestfororganizationalintelligenceistheessenceofstrategicmanagement(LevinthalandMarch,1993).Intelligentorganizationscanbedevelopedeitherbycalculatedrationality1(Porter,1980)orbyorganizationallearning(GavettiandLevinthal,2000;Senge,1990).Inthefirstpath,thelinkagesbetweenorganizationalactionsandperformanceoutcomesisguidedbyexistingroutinesandpastexperiencewhileinthesecondpaththeintelligenceisdevelopedbythementalmodel/beliefandlandscapecognitiverepresentationofthelinkagesbetweenactionsandperformanceoutcomes.Practitionersandacademicsalikeobservedapersistentperformanceheterogeneityacrossfirmsandindustriesthatcouldbeattributed,amongothersourcesofperformanceheterogeneity,tothefirm’sexperientiallearningcapa-biliy(BalasubramanianandLieberman,2010;Senge,1990).Organizationallearningisakeyresourcefororganizationaladaptation,successandsurvival(FiolandLyles,1985;LevittandMarch,1988;March,1991).Itcouldcontributetodevelopingorganizationalintelligencebyeitherreplacingthelong-termplanning,orsupplementingandaugmentingit(LevinthalandMarch,1993).Thelearningcapabilityofanorganizationsinfluencesitsaverageperformanceaswellasdiminishingperformancevariability(thatis,improvingperformancereliability2)(LevinthalandMarch,1993;March,1991).It’sarguedthatlearningeffectonaverageper-formaneisalwaysinstrumentaltoattaincompetitiveadvantagebytheorganization,however,itseffectonperformancevariabilitymaynotbeperceiveddesirableespeciallyincontextsofintensecompetition(LevinthalandMarch,1993).Intheturbulentperformancelandscape,thefirmsmayneedtoengageinlong-jumpsandquantumchanges(O’ReillyandTushman,2004).Itiswellestablishedthathowwellorganizationslearndependsonhowwelltheyareabletoenactalearningenvironment(thatis,scantheirbusinessenvironmentandobtaininformation,thendevelopaninterpretationandconvertinformationanddataintoknowledge,andrepeat-edlyapplyittotheiroperations)(DaftandWeick,1984).Theengagementofthelearnerswiththeenvironmentisinfluencedbyavarietyofenvironmentalstimuliperceivedbyorganiza-tions,andsubsequentlycraftingtheadaptivestrategicschemastorespondtotheperceivedstimuli.Theresponse,inturn,hingesonthewayanorganizationperceivesthedynamicsofitsoperatingenvironment.Organizationsrelyingontheircognitiveresourcescouldviewtheirenvironmenteitherlinearandadditive,ormultiplicative,interdependentandpositivefeedbackevents(BoisotandMcKelvey,2011).Dependingontheseorganizationalontologicalassump-tions,theycanformtheirinterpretationoftheevents;developadaptiveschemesandactions;andlearnfromthemdifferently.425ArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

444426Handbookoftheoriesforpurchasing,supplychainandmanagementresearchRegrettably,thenotionoforganizationallearningisoftenusedinterchangeablywithknowl-edgegeneration,wheredata,informationandpastexperiencesarecombinedtodevelopanunderstandingoftherelationshipbetweenexternalevents.Clearly,organizationallearningisrelatedtodata,informationandexperience.However,weclarifywhatmaybemissingfromtheliterature:thatorganizationallearningtheory(OLT)isdistinctfromorganizationalknowl-edgemanagement.Ourstanceisthatknowledgemanagementisconcernedmorewiththeconsequencesoflearning.OLTfocusesontheprocessalongsidetheoutcomesbasedonwhichlearningtakesplace.Indeed,withoutorganizationallearning,itcanbedifficulttoeffectivelydevelopknowledge(beitintacitorexplicitforms)toconformandadjusttochangesinone’senvironment.Organizationallearningistheprocessbywhichdata(thatis,dots)arelinkedup(thatis,information)andtransformedintoknowledge(thatis,differentpatternslinkingupthedots)andexpertise(Huber,1991;March,1991).ThisdistinctionishowwedifferentiatebetweenOLT(andassociatedconceptualsubsets)fromaknowledge-basedview(KBV),arguablyanextensionoftheresource-basedview(RBV)(Barney,2001;Grant,2002).WhereastheKBVfocusesonhowtheoutcomeofthelearningprocess(knowledge)canbebeneficialtothefirm,OLTdivesmoredeeplyintohowindividualsintheorganizationscouldengagewiththeenvironment,developtheirmentalmodels,interactwithothersandgenerateorganizationalexperience.Indeed,organizationallearningtheoriesmovebeyondmereinformationanddataasinputs,toconsiderfactorssuchasintuition,mentalschemas,ideas,perspectives,patternsandevenorganizationalcultureintotheprocess(CrossanandBerdrow,2003;SkiltonandDooley,2010).Letusbeclearindifferentiatingkeytermsusedtodifferentiatethetwotheories.Whiledatareferstoasetofobjectivefactsassociatedwithevents,informationreferstoavalue-addedformofdatathataugmentsthemeaningofthedatathroughcontextualization,categorization,calculation,correctionorcondensation(Argote,2013).Again,theemphasisonOLTisintheinteractionbetweenorganizationaltaskexperienceandthecontextthatcreatesone’slearning.Thislearningprocess,attheindividual,group,department,ororganizationallevel,inturn,couldbedescribedbytwomechanismsofdeclarativeandexplicitknowledge;aswellaspro-ceduralandimplicitknowledgereflectedinroutinesandskillsrespectively(LevittandMarch,1988).Eventually,suchlearningcanbecomeembeddedwithintheorganizationasmemoriesinrepositories,routines,processes,practices,toolsandnorms(MoormanandMiner,1997).Theactivitiesthatorganizationsadoptovertime,anddecipheringandreinforcingtheinterac-tionsamongtheactivitiestodevelopcoreelementsinorganizationsandtheirevolutionovertime,areinfluencedbyorganizationallearning(Senge,1990;Siggelkow,2002).ThereareotherkeydistinctionsbetweenOLTandtheKBV.ThefirstisinthefactthatOLTdifferentiatestheformsofprocessesbywhichlearningisdone(whicheventuallyleadstoknowledge).LiteratureinOLTalsooffersadistinctionbetweencontextandcontentoflearn-ing(FiolandLyles,1985),andthenotionofculmination(learningcurve)anddiminishinginlearning(forgetting)(Blackleretal.,1999;RaoandArgote,2006).Perhapsmoreimportantly,sinceOLTisrootedinbehaviouraltheoriesandconceptsofexperimentation(CyertandMarch,1963)itofferspracticalexplanationsthatareusefultothelearningprocess.ThesecharacteristicsmakeOLTafeasiblechoiceoftheoryinexplainingorganizationalphenomenaandbehaviour,particularlyincomplicatedcontextssuchasthatrelatedtopurchasingandsupplymanagement.Aswewillfurtherexplain,organizationallearningcanofferastrongtheoreticalframeworkforthesupplychainmanagement(SCM)andpurchasingandsupplyArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

445Organizationallearningtheory427management(PSM)fields,thatarelookingforthe‘how’and‘why’relatingtowhichorgani-zationsperformbetter.Inthischapterweprovideanoverviewofpastworksinorganizationallearning,andhowitrelatestosupplychainandsupplymanagement.WedecipherstreamsofliteratureinOLTbyreviewingtheconceptualsubsets,andofferinsightsonhowtheycanbeofusetoSCM/PSMresearchers.Finally,thechapteroffersaliteraturereviewonhowOLThasbeenappliedtodateinsupplychainmanagement,andwherepotentialshortcomingsintheuseoftheoryarevisible.Throughoutthechapter,ouraimistoofferexplanationsthatcanbeofbenefittoresearcherswhoplantoleveragethetheoryandassociatedconceptualframeworksinexplainingSCM/PSM.DEFININGORGANIZATIONALLEARNING:WHATTHELITERATURESUGGESTSAsiscommonamongmanyoverarchingconceptsinmanagement,thereisnogeneralconsen-susonhoworganizationallearningisdefined.Somedefineorganizationallearningasachangeincognitionandbehaviour(CyertandMarch,1963;LevittandMarch,1988).Thisbodyofresearchconsiderschangesinknowledgereflectedinorganizationalroutinesandpracticesasreflectiveofthechangeinorganizationalknowledge.Inaseparatebehaviouralapproach,andrelyingonlearningcurveresearch,researchersconsiderchangesinthecharacteristicsoforganizationalperformancesuchasquality,speed,efficiencyandproductivityasaresultoforganizationalknowledgechange(DuttonandThomas,1984).Othersbelievethatorganiza-tionallearningshouldbedefinedasthechangeintheorganization’sknowledgewhichresultsfromtheinteractionbetweentaskperformanceexperienceanditscontextualfactors(Argote,2013).Interestingly,Huber(1991)takesanopposingstance,arguingthatorganizationscanacquireknowledgewithoutchangingtheirbehaviour.Infact,Hubergoesasfarasrefutingtheideathatorganizationallearningisanactualchangeintheorganization.Huberdoesoffersomenotableinsights.Takingabehaviouralapproachinorganizationallearning,itmustbenotedthatmanyvariablesmayneedtobecontrolledbymeasuringchangesinthebehaviourtoisolatetheeffectofthechangeinknowledge.Forexample,changeinbehaviourmightbebecauseofintroducinganewpolicybytheorganization,andnotaresultofexperience.Ifeffectivelymanaged,whatorganizationslearncanbecomememories.Thesecanbeembed-dedinorganizationalprocesses,membercognition,tasksandstandardoperatingprocedures.Thelearningembeddedintransactivememorysystems(thatis,member‒tool,member‒taskandtask‒toolnetworks)androutines(thatis,task‒tasknetworks)arecodifiableandexplicit.Suchmemoriesaremorereadilytransferableandlessdepreciablethanthememoryembeddedinmemberandmember‒membernetwork(thatis,socialnetwork)repositories,whichistacitanddifficulttoarticulate(ArgoteandMiron-Spektor,2011).Thememoryrepositoriescanbeorganizationalmembers(forexample,member‒tool,member‒task,member‒task‒tool)andareconsideredassourcesofcompetitiveadvantage(Argote,2013).ArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

446428Handbookoftheoriesforpurchasing,supplychainandmanagementresearchOVERVIEWANDCONCEPTUALSUBSETSTOORGANIZATIONALLEARNINGTHEORYTheoriginsofOLTdatebacktothe1930sandtheresearchworkofaphilosopherwhohigh-lightedtheimportanceof‘experiential’and‘progressive’learning(Dewey,1986).Focusingontheoperatingcontextofaneducationalorganization,Dewey(1986)arguedthateffectivelearningmusthavetwovirtues:continuityandinteractions.Continuityconveystheideathatwhenanexperienceiscreatedforsomeoneinanorganization,ithastobestoredandcarriedonintothefuture.Interactionreferstotheinterdependenciesbetweenpastexperienceandthecurrentsituation.Sincethen,anumberofconceptualsubsetshaveconsideredthepotentialexplanationthatlearningattheorganizationallevelcanenhanceperformance.Aswewillnotebelow,thereareatleastfourstreamsofresearchinOLT,andoneparticularextensionworthyofconsideration.Interestingly,theoriginalideasofDewey,asrelatedtoprogressiveandexperientiallearning,havegainedmuchlessattentionintheliterature;therevivalofseminalandoriginalworkscouldbeanareathatisusefulforresearch.Inthiscase,consideringthenotionsofcontinuityandinteractioncanbeaviablesourceofexplanationforresearchinSCM/PSM.Forinstance,relatedtointeraction,ofnoteistheworkofGavettiandLevinthal(2000),whoanalyzedtheinterplaybetweentwomechanismsofwisdomgeneration:inbackward-looking,thewisdomisenactedbasedonthepositiveornegativereinforcementoflinkagebetweenactionandoutcomeswhileinforward-lookingthelinkagebetweenchoicesandoutcomesisbasedontheactor’sbeliefandmentalmodeloftheperformancelandscape.Reviewingtheirworkcanbeofparticularvaluetoyoungresearchers,becausetheauthorsofferinterestinginsightsintothebenefitsoftheinteractionbetweenexperientialandcognitiveperspectivesoflearningonadaptationtotheenvironment.Inotherwords,whereasexperientiallearningrelatestowhathasbeenstoredinorganizationalmemory,cognitivelearningisbasedonmanagerialabilitytoconceptualizementalschemasorframeworks.Combined,thisparticularviewcanbeofbenefittoresearchersinthefieldofSCM/PSM.Inthenextsection,weofferfurtherexplana-tionofdifferentconceptualsubsetsrelatedtoOLT.Table28.1providesanoverviewofthekeydefinitionsrelatedtoOLT,theconceptualsubsetsandassumptionsofthetheory.ConceptualSubset1:TheAdaptationandRoutinesStreamAkeyconceptualsubsetoforganizationallearningrelatestotheworkofCyertandMarch(1963).Intheirbook,theseauthorsdefineorganizationallearningastheadaptivebehaviouroforganizationsovertime.Huber(1991)arguesthatorganizationscanacquireknowledgewithoutanychangesintheirbehaviour,anddefinesorganizationallearningasachangeintherangeofpotentialbehaviour.Otherworksinthisstreamhaveaddedmorenuanceanddetailtotheconceptofadaptationandroutine(LevinthalandMarch,1993;LevittandMarch,1988).Threedimensionsofadaptationarehighlightedacrosstheseworks:(1)adaptationofgoals;(2)adaptationofattentionrules;and(3)adaptationinsearchrules.Anexplanationofeachofthethreedimensionsseemsmeritedatthispoint.Asrelatedtotheadaptationofgoals,CyertandMarch(1963)considerorganizationsasopensystemsthatinteractwiththeirendogenousandexogenousenvironment.Contingentuponthemagnitudeofchangeintheirenvironment,theymayneedtoadapttheirgoals.Thisgoaladaptationexerciseisaffectedbythreefactors:theorganization’spastgoals,theorgan-ArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

447Organizationallearningtheory429ReferencesArgote(2013);Crossanetal.(1999);CyertandMarch(1963);Huber(1991)Argote(2013);Crossanetal.(1999);DyerandHatch(2004);Hultetal.(2003);JonesandMacpherson(2006)CyertandMarch(1963);Huber(1991)LevittandMarch(1988);NelsonandWinter(1982)ArgyrisandSchön(1978);Dodgson(1991);FiolandLyles(1985);March(1991)Argote(2013)Argote(2013);Barndt(1985);Eppleetal.(1991)Blackleretal.(1999);RaoandArgote(2006)ExplanationChangein:behaviours,routines,knowledgeandexperienceIndividual,group,organizational,interorganizational,triads,networksAdaptationofgoals,adaptationofattentionrules,andadaptationinsearchrulesoforganizationsovertimeAnoverarchingnotionincludingtherules,forms,procedures,conventions,strategiesandtechnologiesExploitativelearningconsidersdatainformationandknowledgeintheshortrun,fromtheimmediatesurroundingsandinlimitedareasofinquiryandmoreshallowconsiderations;explorativelearningconsidersdata,informationandknowledgeinthelongrun,fromabroadersetoffields,bycombininginformationfromdistantknowledgesourcesandbyusingmorein-depthassessmentandevaluationTheknowledgecreationistheresultofinteractionbetweenorganizationaltaskexperienceanditsendogenousandexogenouscontextualfactorsTheloweringofcostsofproductiononaper-unitbasisbasedontheexperienceandvolumeofproductionInclassiclearningcurveresearch,itisassumedthattheknowledgeanorganizationacquiresisgoingtopersistindefinitely;however,whatislearnedcandiminishanddepreciateovertimebasedonfactorssuchasemployeeturnover,product/processtechnologychange,andsimplychangeinorganizationalstrategyKeyelements,unitofanalysisandassumptionsoforganizationallearningtheorystreamsTable28.1ElementUnitofanalysisLevelofanalysisKeyvariables/definitionsTheadaptationandroutinesstreamAdaptivebehaviour,rangeandpotentialbehaviourRoutineExplorativeandexploitativelearningExperiential(thatis,exploitative)andinnovative(thatis,explorative)learningLearningcurvesandforgettingExperientialknowledgegenerationLearningcurveLearningforgettingArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

448430Handbookoftheoriesforpurchasing,supplychainandmanagementresearchReferencesCrossanetal.(1999);JonesandMacpherson(2006)Crossanetal.(1999);JonesandMacpherson(2006)Crossanetal.(1999);JonesandMacpherson(2006)Crossanetal.(1999);JonesandMacpherson(2006)O’ReillyandTushman,(2004);TushmanandO’Reilly(1996)Simon(1991)CyertandMarch(1963)CyertandMarch(1963)ExplanationThepre-consciousrecognitionofthepatternand/orpossibilitiesinherentinapersonalstreamofexperienceTheexplainingofaninsightoridea,tooneselforothers;thisprocessgoesfrompre-verbaltoverbalandrequiresthedevelopmentoflanguageTheprocessofdevelopingsharedunderstandingsandcoordinatedactionthroughmutualadjustmentTheprocessofembeddingindividualandgrouplearningintotheorganization’ssystems,structures,proceduresandstrategyInsteadofoptimizingthetrade-offsbetweenexperientialandinnovativelearnings,ambidexterityrestsupontheideaofcomplementarityandthesynergiceffectofexploitativeandexplorativelearningsTheorganizationsareshapedbyenvironmentalforcesmediatedbyhumanminds;thehumanmindmediationreferstothelearningprocessinwhichhumansacquireincreasinginsightsandcontinuousrestructuringoftheproblemastheproblemsarise,andtheyreflectthemselvesinorganizations’structuralelements;thehumanmind’sinformationprocessingcapacityisboundedOrganizationsavoiduncertaintyby:(1)solvingpressingproblemsratherthandevelopinglong-termstrategy;(2)avoidingtherequirementsthattheyanticipatefuturereactionsofotherpartsoftheirenvironmentbyarranginganegotiatedenvironmentOrganizationsconductthesearchthatisstimulatedbyaproblem(usuallyaratherspecificone)andaredirectedtowardsfindingasolutiontothatproblem;problemisticsearchcanbedistinguishedfromrandomcuriosityandsearchforunderstandingElementOrganizationallearningasaprocess:the‘4-I’frameworkIntuitingInterpretingIntegratingInstitutionalizingAmbidextrouslearningAmbidexterityAssumptionsabouthumanandorganizationnatureBoundedrationalityUncertaintyavoidanceProblemisticsearchArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

449Organizationallearningtheory431ization’spastperformance,andtheperformanceofothercomparableorganizations(CyertandMarch,1963).Adaptationinattentionrulesrequirestheorganizationtodeterminewhichpartofthechanging(endogenousandexogenous)environmentneedsthemostattention.Adaptationinattentionisparticularlyimportantformanagersbecauseofthelimitedextenttowhichtheycanconcentrateonaparticularissueororganizationalproblem.Assuch,adapta-tioninattentionallowsforprioritizingtimeandcognitiveeffortofmanagers,whichinturncanhelpwithorganizationaladaptation.Lastly,theadaptationinsearchrulesreferstotheorganization’sabilitytofindsolutionsasanewproblemarises(CyertandMarch,1963).Theterm‘routines’isanoverarchingnotionincludingtherules,forms,procedures,conventions,strategiesandtechnologiesaroundwhichanorganizationisestablishedandthroughwhichtheorganizationisrun(LevittandMarch,1988;NelsonandWinter,1982).Organizationalroutinesarechangesinresponsetodirectorganizationalexperiencethroughtwomechanisms:trial-and-errorexperimentation,andorganizationalsearch(LevittandMarch,1988).Certaindisturbancesmightaffecttheprocessofchangingtheroutinesbasedonorganizationalexperiences,suchasfalseinterpretationofeventsandtheimpedimentoftherealizationofpersonalinsights(MarchandOlsen,1975).GiventheheavyinvolvementofSCM/PSMmanagersinallaspectsoforganizationaldeci-sionmaking,consideringtheadaptationmodelcanbeausefulapproachtoexplainingresearchinthisfield(Feizabadietal.,2019).Forinstance,purchasingmanagersoftenhavetodecideonwhethertoextendcontractstoamediocresupplierorsearchforanewsupplier.Thisparticularresponsibilitycanbeexplainedbytheadaptationmodel.Anotherexampleofresponsibilitybypurchasingmanagersisinclearlydefininguserrequirements,itemspecificationsandcontractdetailsacrossanumberofpurchaseditemsandservices.Theadaptationandroutinesmodelhelpstoexplainhowallocatingtherightlevelofattentiononpurchaseswithmorevaluepoten-tialorriskconcernsmaybethereasonbehindthebehaviourofmanypurchasingmanagers.ConceptualSubset2:ExplorativeandExploitativeLearningSomeofthemostimportantandhighlycitedworksonOLTgobacktothelate1970sandtheseminalworkofArgyrisandSchön(1978)onbehaviouralpsychologyandorganizationaldevelopment.Fromthisperspective,organizationallearningisbasedonitsresponsetochangesinitsexternalenvironment,betheyincrementalorradical.Ingeneral,thisbodyofresearchexplicatestwolearningprocessesrelatedtothechangemagnitudeintheorganiza-tions:(1)adaptivelearning,whichexplainsthelearningprocessinreactiontoendogenousandexogenouschanges;and(2)proactivelearning,whichisthelearningprocessthatisbasedonamorepurposefulapproachratherthanareactiveapproach.Specifictothisconceptualsubset,anumberofresearchershaveuseddistinctivetermsdescribingthesetwoorganizationallearningprocesses.Forinstance,March(1991)distin-guishesbetweenexplorativeandexploitativelearning.FiolandLyles(1985)labelthemaslower-levelversushigher-levellearning,andDodgson(1991)referstothemastacticalversusstrategiclearning.Argote(2013)labelsthemasexperientialandinnovativelearning.Nomatterthelabelling,thetwoformsoflearningareessentiallydifferentiatedbasedonthescopeandextenttowhichtheyconsiderdata,informationandknowledgetobecombined.Exploitativelearningoffersmoreimmediateresultsintheshortrun.Itconsidersdata,informa-tionandknowledgefromtheimmediatesurroundingsandinlimitedareasofinquiryandmoreshallowconsiderations.Instead,explorativelearningconsidersdata,informationandknowl-ArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

450432Handbookoftheoriesforpurchasing,supplychainandmanagementresearchedgefromabroadersetoffields,bycombininginformationfromdistantknowledgesourcesandbyusingmorein-depthassessmentandevaluation.Morerecentstudies,suchasthatofGarvin(2003),differentiatelearningintogroupsthataresomewhatdifferentfromexplorationandexploitation.Garvinconsidersorganizationallearningtoconsistofintelligence,experi-enceandexperimentation.TheabovedifferentiationsareparticularlyimportanttoresearchinSCM/PSM.Duringthepastthreedecades,theroleofpurchasingandsupplymanagershasexpandedbeyondwhatareconsideredroutine,dailyortacticalactivities.Instead,supplymanagersareconsideredastrustedadvisorstoexecutivesonstrategicmattersrelatedtohowwellthesupplychainismanaged.Inshort,bothstrategicandtacticallearningiswithinthepurviewofwhatpro-fessionalsinSCM/PSMareresponsiblefor.Leveragingthedistinctioncanthereforeofferinterestingexplanationsondecisionmakingandplanninginorganizations.ConceptualSubset3:LearningCurvesandForgetting‘Learningcurve’isthecommonlabelplacedontherateoflearningbyanorganizationasrelatedtoroutineandrepetitivetasks.Learningcurvesexplaintheloweringofcostsofproduc-tiononaper-unitbasisbasedontheexperienceandvolumeofproduction.Thelearningcurveisattimesreferredtobyotherlabels,includingprogresscurve(attheleveloffirm),learningcurve,experiencecurve(atthelevelofindustry)(Barndt,1985),orsimplylearningbydoing(Eppleetal.,1991)(attheleveloftheindividualemployee).Whatisimportanttoconsiderinstudyinglearningcurvesisthatthereisadiminishingmarginalreturnforproductionefficiency.Whengraphicallyrepresented,learningcurvesoftenshowaconcavepattern,suchthatafteracertainlevel,thereisonlylimited(tono)additionallearning.Recognizingtheoptimalleveloflearningcanhelppurchasingmanagersinbetterestimatingthecostofproductionwithsupplierswithoutshort-changingsuppliers.Anotherimportantconsiderationaboutlearningcurvesisrelatedtothe(limited)extenttowhichanorganization’slearningcanbemeasuredandassessedbylearningcurves.Learningcurvesvarybyindividuals,bythetypeofprocessesinplace,andbytheincentivesandmoti-vationsetforthattheindividualandorganizationallevel.Yetathirdimportantconsideration‒therateatwhichanorganizationgeneratesknowledgefromexperience‒variesacrossfunctions,organizationsinthesameindustry,aswellasacrossorganizationsindifferentindustries.Theliteraturehaspointedtoseveralareaswithvaryinglearningrates,generallycategorizedintothreegroups:(1)increasedproficiencyofindividuals,includingdirectpro-ductionworkers,managersandengineers;(2)improvementinorganizationaltechnology;and(3)advancesinitsstructure,routinesandmethodsofcoordination.Clearly,thelargerthepro-portionoflabourinvolvedintheproduction,themoreimportantthelearningcurvebecomes(Monczkaetal.,2015).Therearekeydistinctionsbetweencontinuousanddiscreteproductionprocessesintermsoflearningrates.ResearchersinSCM/PSMshouldbecognizantofthelimitationstowhichtheirassessmentoflearningcurvesisgeneralizable.Forinstance,inordertoeffectivelyassesstheextentoforganizationallearning,manyvariablesshouldbecontrolled,suchasthetechnologytypeoreconomiesofscale.Also,therewouldstillbevariationacrossfirmsinthesameindustryintermsofthelearningrate.Analyticalmodelsthatelaboratefurtheronthepatternandthevariationoflearningpaceacrossfirms(Fang,2012;Huberman,2001)couldbeofusehere.ArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

451Organizationallearningtheory433Here,adiscussionon‘forgetting’seemsnecessary.Inclassiclearningcurveresearch,itisassumedthattheknowledgeanorganizationacquireswillpersistindefinitelyovertime.However,whatislearnedcandiminishanddepreciateovertime,basedonfactorssuchasemployeeturnover,product/processtechnologychange,andsimplychangeinorganizationalstrategy.Dependingonwhereorganizationallearningisstored(organizationalroutines,memorysystemsandstandardoperatingprocedures)therateofdepreciationinlearningcanvary.Itfollowsthatforgettingtoaccountfor‘forgetting’inproductivityanalysisandplanningcanleadtomistakesandmiscalculations(Blackleretal.,1999;RaoandArgote,2006).Theorganizationallearningcurveandthediminishingeffectoflearning(forgetting)canofferinterestingperspectivesonthestudyofSCM/PSMphenomena,particularlyasrelatedtolongitudinalstudies.Letustakeanexamplefromaprevalentandrecentglobalconcernfrom2020.ThesuddenonsetoftheCOVID-19pandemiccaughtmanyorganizationsbysurprise.Manyhadtoimplementnewanddifferentoperatingproceduresinternallyandinworkingwiththeirsuppliers.Howwellthelessonslearnedfrom2020aremaintainedtopreventfuturedisruptionsinmanagingsupplymanagementrelationshipsisoneexampleofthepotentialapplicationofresearchrelatedtothelearningcurveandforgetting.ConceptualSubset4:OrganizationalLearningasaProcess–The4-IFrameworkAfourthandlessappliedperspectiveonorganizationallearningisbasedontheworkofCrossanandcolleagues(CrossanandBerdrow,2003;Crossanetal.,1999).Theseauthorsvieworganizationallearningasaprocessofcombiningthoughtandactionthatisformedbyorganizationalmechanisms.Crossanandcolleaguesdifferentiatetheprocessbasedonfourpsychologicalandsociologicalmicro-processesthatoccurattheindividual,groupandorgani-zationallevels(JonesandMacpherson,2006):thatis,intuition,interpretation,integrationandinstitutionalization.TheframeworkisbasedontheearlierworksofDaftandWeick(1984),whoconsiderorganizationsasinterpretationsystemsthatengageinmodesofinterpretation,includingenacting,discovering,undirectedviewingandconditionedviewing.Howthemodesareusediscontingentonmanagement’sbeliefsabouttheenvironmentandorganizationalintrusiveness.MorespecifictotheCrossanmodel,intuitingoccursattheindividuallevel;intuitingisthe‘pre-consciousrecognitionofthepatternand/orpossibilitiesinherentinapersonalstreamofexperience’(JonesandMacpherson,2006).Intuitingislikelytoinfluencetheindividual’sbehaviour,butisonlyrelevanttoorganizationallearningiftheindividualinteractswithothersandattemptstosharethepatternsandpossibilitiesrecognized.Atthislevel(group),whattheindividualhasconsideredisinterpretedacrossanumberoforganizationalmembers,mostlikelyatthegrouplevel.Interpretinginvolvesfurtherelaboratinganddetailinganidea,patternrecognitionorperception.Crossanandcolleaguessuggestthattheinterpretationprocessoffersmeanstotakethemoretacitinsightintoamoreexplicitform.Theprocessmayinvolveevolv-ingthethoughtsfrompreverbaltoverbal,andattimesevendevelopingthenecessarylanguagetoexplainit.Thethirdstepintheprocessisintegrating.Inthisstage,asharedunderstandingoftheconceptisdeveloped,andattimescoordinatedactiontoadjustfirmbehaviourorunder-standingisdeveloped.Moredialogue,alongwithalargergroupofindividualsandgroupsandcoordinatedactionsacrossthem,isformedatthisstage.Finally,intheinstitutionalizationstage,actionsorthoughtsbecomemoreroutinizedacrosstheorganization.Tasks,actionsandmechanismstoensurerepeatedcompliancewiththenewwayofthinkingareimplemented.ArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

452434Handbookoftheoriesforpurchasing,supplychainandmanagementresearchInstitutionalizingallowsforindividualandgrouplearningtobeembeddedacrosssystemsandproceduresoftheorganization.ThekeydistinctionoftheCrosson4-Imodelfromotherconceptualsubsetsisinexplaininghowthenotionoforganizationallearningisintertwinedbetweenindividuallearning(whereintuitingoccurs),grouplearning(whereinterpretingandintegratingoccur),andorganization(whereinstitutionalizingoccurs).Thisperspectiveisnotablydistinctfromotherperspectives.Arguably,theCrosson4-Imodeloffersathoroughperspectiveontheprocessoforganizations(andinterorganizationallearning);itsvalidationcanbedifficult.Complementingtheideaofiteratingacrossdifferentorganizationallevels,Argote(2013)illustratesorganizationallearningasarecurringcycleinwhichexperienceisconvertedtoknowledge.Shealsonoteshowenvironmentalcontext(competitors,customers,institutions,volatility,complexityandmunificence)affectstheexperiencesthatanorganizationacquires,andindirectlyinfluencesthelearningprocessandoutcomes.Organizationalcontext(forexample,culture,technology,structure,identity,memory,goals,incentives,absorptivecapac-ity)beinginfluencedbyenvironmentalcontextaffectsthelearningprocessandoutcomesmoredirectly.Nevertheless,forresearchersinSCM/PSM,theprocess-basedperspectivecanbequiteuseful.Forinstance,the4-Imodelcanhelptoexplainhowanindividualpurchasingmanagerintuitivelyconsiderstheexternalenvironmentandtheorganization’seffectiveresponsetoit.Throughinterpretationandintegration,suchperspectivescanbevalidatedorrefutedinthedepartmentoracrossfunctions.Beyondthefunctionallevelandontotheexecutivelevel,decision-makerscanthenconsiderhowtoinstitutionalizeoriginal(andmodified)intuitionandinterpretationstodevelopaviableresponse.Regrettably,thistypeofexplanationandexten-sionofthe4-ImodelisabsentinSCM.Barringafewnotableexceptions(Belletal.,2014;Esperetal.,2010;Manujetal.,2014),moststudiesmerelymentionCrossonetal.andsetasideitsrichapplicabilitytothefield.Afinalnoteonthe4-Imodelisthatitcanbeeasilyextendedtoconsiderthenotionofinstitutionalizingtothesupplychainandbeyondthefourwallsoftheorganizationitself.Topicssuchastechnologytransfer,supplierdevelopmentandsupplierinnovation,andsharedproductdevelopment,canbenefitfromtheuseofthe4-Iframeworktoexplaintheprocessbywhichinterorganizationallearningoccurs.ConceptualExtension:AmbidextrousLearningBeyondtheconceptualsubsetsmentionedabove,itmaybeimportanttohighlightanextensiontoorganizationallearningthathasgainednotableleverageintheliterature.Ambidextrousorganizationshavebeenthetopicofmuchresearchandhaveofferedanovelwayofexplainingfirmbehaviourthatcanofferacompetitiveadvantage.FromanOLTperspective,ambidexter-ityconsistsofthecombinationofexplorativeandexploitativelearning,whichwaselaboratedoninanearliersection(O’ReillyandTushman,2004;TushmanandO’Reilly,1996).TheoriginofthenotiondatesbacktoDuncan(1976),whoarguesthatexploitation(thatis,disci-pline)isassociatedwithalignment,andexploration(thatis,creativityandinnovation)withadaptation.March(1991,p.102)clarifiesthemeaningofthetwoterms:‘explorationreferstoactivitiesrelatedtoexperimentation,discover,search,andvariationwhereasexploitationrepresentsactivitiesassociatedwithrefinement,efficiency,selection,implementation’.Ashortexplanationoftheunderlyingreasonsfortheeffectivenessofambidexterityseemsnecessaryatthispoint.LevinthalandMarch(1993)identifythreesignificantlimitationsofArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

453Organizationallearningtheory435learningorganizations.Theseincludethetendencytooverlookdistanttimes,distantplaces,andorganizationalfailures.Aneffectivelearningorganizationshouldbeabletoovercomethelearningmyopia.Byconsideringtheeffectofone’sdecisionsonthefuture,ondistantplaces(distantdepartments,distantbusinesspartners,suppliers,andsoon)onecanminimizetheeffectsofimperfectdecisions.Organizationsalsofailtolearnfromtheirmistakes.Arguably,thelackofafeedbackloopinreconsideringwhatdidnotworkinthepastleadstomakingthesamemistakesinthefuture.Thelearningmyopiaengendersanimbalancebetweenexploitativeandexploratoryactivi-tiesintheorganizationstoshapeorganizationalactions.Theargumentbehindambidexterityisthatorganizationallearningand,byextension,organizationalperformanceisimprovedbyminimizingthetrade-offsbetweenexplorationandexploitation(AzadeganandDooley,2010;Azadeganetal.,2008).TheessenceofMarch’s(1991)argumentisthetendencyoforganizations,asadaptivesystems,toemphasizeexploitationbecauseofthecertainandpre-dictablereturnsthatleadfromthem,whichinturnhelpinimprovingperformancereliability.Arguably,improvedreliability(orthereductionofperformancevariability)isnotthesameasraisingperformance.March(1991)arguesthatorganizationallearningcouldenhancebothperformancerelia-bilityandaverage.However,performancemeanismorehelpfulthanreliabilityinimprovinganorganization’scompetitiveadvantagebecausetrainedandexperiencedpersonnelactuallyperformathigherlevels(LevinthalandMarch,1993).Moreover,trainedandexperiencedpersonnelcreateconditionsinwhichaverageknowledgeandmutuallearningbeingenhancedoverthelongrunisadesirableoutcome.Theeffectsarealsoimportantintermsoftheorgan-ization’sadaptabilitytoitsoperatingenvironment.Higheremphasisonexploitationandaccumulatingexperienceonexistingroutines,tech-nologies,procedureswouldputtheorganizationinacompetencyorsuccesstrap(LevittandMarch,1988).Ontheotherhand,moreconcentrationonexplorationandgeneratingcompletelynewknowledgemightputtheexistenceandshort-termsurvivalofthefirmintodanger,andtiptheorganizationintoanendlesssearchorfailuretrap(LevinthalandMarch,1993;RaischandBirkinshaw,2008).Akeydimensionofusefulorganizationalexperienceisintheirnovelty.Whileorganizationalexperienceandthelearningcreatedfromthemaremorecertainwhenthereisalowerdegreeofnovelty(thatis,exploitation),theassociatedreturnsaretangibleandmoredeterministic.However,asanorganizationembarksonexperiencesbeyonditsroutineindevelopingradicallynewknowledge(thatis,exploration),theexpectedreturnbecomestemporallyandspatiallymoreuncertain(LevinthalandMarch,1993).Itfollowsthatfindingahealthybalancebetweenexploitationandexplorationisnecessaryforthelong-termsurvivalandviabilityoftheorganization.LevinthalandMarch(1993)explainthisintermsoflearningmyopia.Oftenexploitativeactivitiesareoveremphasizedbyorganizationsbecauseofthemoreimmediateresults.Ontheotherhand,explorationtakestimetoshowresultsandisoftenriskier.Balancingbetweenexploitationandexplorationoftenrequiresplacingcloserattentiontoexplorationandaddingeffortsinthisarea.AnotablelineofworkonorganizationallearningisthatofferedbyPeterSengeandhisworkrelatedtolearningorganizations(Senge,2014).InthebookTheFifthDiscipline,Sengeexplainslearningorganizationsasthose‘wherepeoplecontinuallyexpandtheircapacitytocreatetheresultstheytrulydesire,wherenewandexpansivepatternsofthinkingarenurtured,wherecollectiveaspirationissetfree,andwherepeoplearecontinuallylearninghowtolearntogether’.Thedefinitionappliestobothexplorativelearningandexploitativelearning.ArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

454436Handbookoftheoriesforpurchasing,supplychainandmanagementresearchWhetherthelearningisfocusedontheshortrun,andwithimmediatefeedbackandlessrisk(thatis,exploitation),orisfocusedonthelongrun,withoutmuchimmediatefeedbackandhigherrisks,theabilityofagroupofindividualstolearnhowtolearntogethercanbeacom-petitiveadvantage.Sengegoesontoexplainthecomponentsthatentailalearningorganiza-tion.Theseincludesystemsthinking,personalmastery,mentalmodels,sharedvisionandteamlearning.Afullexplanationofthecomponentsofthefifthdisciplineisoutsidethescopeofthischapter,butthereaderisencouragedtoreviewandapplythecombinationofMarch’s(1991)conceptswiththatofTheFifthDiscipline.However,balancingbetweenthetwocanbequitechallenging,sinceorganizationstendtostickwithprovenexperiencesthatyieldmoreapparentreturnsintheshortterm,andcertainty,ascomparedtoengaginginexplorativeexperienceinwhichtheirreturnsarelong-term,uncertainandslowertocometofruition.Sincethen,studiesonambidexterityandambidex-trousorganizationshavemovedtoconsidertheconceptininterorganizationalsettingssuchasnetworkclusters(Ferrary,2011),sustainability(Duetal.,2013),processandprojectmanage-ment(LeybourneandSainter,2012;Rialtietal.,2018),publicutilities(Gieskeetal.,2020)andothercontexts.Thetrade-offbetweenexploitativeandexplorativelearninginorganizationscienceisdescribedasmanagingthetensionbetweencreativityanddiscipline.Specifictooperationsandsupplymanagementresearch,theworkofFisher(1997)onconceptualizingandlinkingambidexteritytothefieldisworthyofnote.Fisher(1997)con-siderstwocategoriesofproductswithtwoconfigurationsofthesupplychain.Inlinewiththeambidexterityconcept,anefficientsupplychainresonateswithexploitation,andaresponsivesupplychainresemblesexplorationorientation.AlthoughFisher(1997)focusedonthefit,alignment,andcongruenceofthetwotypesofproductswithtwosupplychainconfigurations,theworkisanintriguingpointforsupplychainscholarstoreflectonthesupplychainsetofactivities,bypassingthedualityandsimultaneouslyembodyingahighextentofefficiencyandflexibility.WhileFisherfocusedonthedichotomyacrosstypesoflearning,recentresearchislookingintohavingthetwosupplychainconfigurationssimultaneously,inlinewiththenotionofambidexterity(Aslametal.,2018;Ojhaetal.,2018b).SCM/PSMresearchersinterestedinpursuingambidexterityasatheoreticalexplanationfortheirstudiesneedtobecognizantofdifferentlevelsoflearningand,thus,levelsofbalanceinlearning.Statedotherwise,ambidexteritycanoccurattheindividual,group,department,organizationorsupplychainlevel.Ateachlevel,routinesandlearningbehaviourscancreateimbalances.Moreimportantly,levelsoflearningcanaffectoneanother.Forinstance,anorganizationthattendstorecruitindividualswithanexploratorystyleoflearninginallofitsfunctionsanddepartmentsmayfinditdifficulttocreateambidexterityatthefirmlevel.Ontheotherhand,anorganizationthattendstofocusjustonexploratorylearningasacorporatestrategymayfinditdifficulttoeffectivelyutilizeindividualorgrouplearningskillsthatarefocusedonexploration.Indeed,theinteractionbetweenindividualandorganizationhasimplicationsformanagingthetrade-offsbetweenexplorationandexploitation.Beyondtheorganization,theinteractionbetweentheorganizationanditsbusinesspartners(thatis,suppli-ersandcustomers)canalsoinfluenceitsabilitytobeambidextrous.Thisofferschallenges,butalsoopportunities,forresearchersinSCM/PSM.Forinstance,studyinghowanexploitativefocusonsupplymanagementfitswithanexplorativeorganizationallearningstylecouldbeaveryinterestingtopicofresearch.Withinprocurement,whetherandhowambidexterityatthedepartmentlevelisbeneficialcanalsobeaviableareaofresearch.ArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

455Organizationallearningtheory437MethodologyConceptualSurvey-basedSurvey-basedSurvey-basedCasestudySurvey-basedSurvey-basedSurvey-basedModelingSurvey-basedSurvey-basedCasestudySurvey-basedSurvey-basedCasestudyCasestudySurvey-basedSurvey-basedSurvey-basedArchivaldataSurvey-basedSurvey-basedSurvey-basedApplicationoforganizationallearningandkeyfindingsOfferschallengesandbenefitsofapplyingorganizationallearningthroughcasestudiesintheautomotiveindustry.Organizationallearninghasapositiveeffectoninformationprocessinginthepurchasingsystem,andcycletimeofthepurchasingprocess.Organizationallearninghasapositiveinfluenceoncustomerorientationandrelationshipcommitment.Organizationallearninghasconsequencesonsupplymanagement,andfirm’sperformanceconsequences.Focusesonhospitaloperationsandfindsthatlearningfromfailuresrequirescarefulunderstandingoftheirnature.Organizationallearninghasapositiveeffectonminimizingthebullwhipeffect,butrequireseffectivecommunicationbetweenparties.Organizationallearninghasapositiveeffectonimprovedrelations,logisticsservicesandfirmperformance.Differentcombinationoflearningstyles,whichleadstoambidexterity,enhanceshowwellsupplierinnovativenessimprovesbuyerperformance.Interorganizationallearningintheformofknowledgetransferreducesthefirm'sinternaloperationalcosts.Astrongorganizationallearningorientationexacerbatestheinverserelationshipbetweentechnologicalreadinessandinterfirmcollaboration.Offersempiricalevidenceofhowcombinationoflearningstylesbetweensupplierandbuyerenhancesperformance.Exploitativelearningisparticularlyeffectiveinmanagingexploitativelearningstylesforacquisitionanddevelopmentfirmstrategies.Leveragesorganizationallearningtheorytoexplainhowinternalintegrationisanenablerofexternalintegration.Offersexplanationofhowlearningcurvesimprovesorganizationallearninginthecontextofcollaborativeplanning,forecastingandreplenishment(CPFR).Appliesargumentsfromorganizationallearningtheoryonhowexternaltechnologyintegrationisapplicabletothedevelopmentoflogisticsinformationsystems.Appliesorganizationallearningtheorytothird-partylogisticsprovidersbyofferinganexplanationofthelearningstages(Intuition,interpretation,integration,andinstitutionalization).Offersexplanationsofwhyinnovationtimingandmarketentrystrategyareambiguousforsmallandmedium-sizedenterprises,basedoninterorganizationallearning.Offersexplanationofhowdevelopinginnovativeproductsrequireseffectiveuseoflearningfromexternalsources.Extendshoworganizationallearningcanbeviewedasoutside-inandinside-outorganizationallearning,whichaffectsupplychaincollaborationsdifferently.Differentiateshowinternalandindustry-wideproductrecalls,asformsoffailure,providetheimpetusfororganizationallearning.Learningorientationshaveastrongeffectonhowleadershipstyle(transformational)affectstheabilityofthefirmtoreachambidexterity.Interorganizationallearningfacilitatesdevelopmentofmanufacturingflexibilityandcustomersatisfaction.Usesexplanationsfromthedouble-looplearningconcepttoexplainhownear-misseventsleadtostrongerfocusonproceduralversusflexibleresponsestrategies.LiteratureonorganizationallearninginsupplychainandsupplymanagementYear200020002000200320042006200720082008200920102011201320132014201420152015201620172018a20182019Table28.2AuthorsWestandBurnesHultetal.Hultetal.Hultetal.TuckerWuetal.PanayidesAzadeganetal.Chaetal.Richeyetal.AzadeganandDooleyFerraryYuetal.Yaoetal.Belletal.Manujetal.Bounckenetal.DobrzykowskiCaietal.HallandJohnson‐HallOjhaetal.Saenzetal.Azadeganetal.ArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

456438Handbookoftheoriesforpurchasing,supplychainandmanagementresearchAPPLICATIONOFOLTINSCM/PSMTable28.2offersaselectreviewofliteraturethathasleveragedOLT(anditsvarioussubsetsofconceptualstreams)inSCM/PSM.Severalinterestingobservationscanbemadefromthesearticles.Tostart,despitethefactthatOLThasbeenusedinotherdisciplinesfordecades,SCM/PSMresearchersseemtohavediscoveredtheconceptintheearly2000s.AsecondimportantobservationisinthefactthatresearchersoftenuseOLTandtheconceptoftheknowledge-basedvieworknowledgemanagementinterchangeably(Bounckenetal.,2015;RicheyandAutry,2009;Yuetal.,2013).Wenotedabovehowtheconceptsaredistinguish-ableandhowtheactualmeritsofOLTareinitsabilitytoexplaintheprocess,ratherthanthemereoutcomeoflearning.Another,andperhapsmoreimportantobservation,isthattheOLTcanbeappliedinvaryingextenttotheorizeandexplainorganizationalandsupplychainphenomena.Inmostcases,organizationallearningissimplyusedasaplatform(orevenamereplaceholder)forhoworganizationalexperiencesleadtoimprovedperformance.Intheseandsimilararticles,thedepthandrichnessofthevariedstreamsoftheoriesinorganizationallearningseemtonotbeleveraged.Inotherwords,insuchcases,organizationallearningisusedtomentionwhatisusedtoimproveperformance,ratherthanhowperformanceisimproved(Caietal.,2016;Hultetal.,2000;Panayides,2007;WestandBurnes,2000;WuandKatok,2006).Theconceptofambidexterity(orthecombinationofexploratoryandexploitativelearningstyles)seemstohavedrawnmanySCM/PSMresearcherstouseitsexplanationsinmoredepth(Ferrary,2011;Ojhaetal.,2018a).Thisisbeyondthescopeofthischapter;nevertheless,wehighlightsomekeyliteratureonthetopic.Ofnoteistherelationshipbetweenambidexterity,flexibilityandadaptation,andperformance(KrishnanandPertheban,2017;Kristaletal.,2010;Rojoetal.,2016;Tamayo-Torresetal.,2014).ThestreamofworkbyAzadegan(2011),AzadeganandDooley(2010)andAzadeganetal.(2008)explainsandempiricallyvalidateshowbuyerswithdifferentiatedlearningstyles(explorativeorexploitative)maybebetteroffwithsuppliersthathavedifferentlearningstyles,toeffectivelyimprovetheirperformance.Interestingly,Hultetal.(2003)offerthenotionoflearningorientationandmemoryorientationasameanstoenhanceorganizationallearningasastrategicresource.Whilenotrelatedtoanyoftheconceptualdefinitionsorstreamsmentionedearlier,theattempttodifferentiateorgani-zationallearningintodifferentsubsetsinthisstudyiscommendable.Afewstudieshavelookedatfailuresasameansfororganizationstolearn(HallandJohnson‐Hall,2017).AninterestingstudywhichcanberelatedtoforgettingisthatbyTucker(2004),whobreaksdownpotentialreasonsforoperationalfailuresintolackofcontrolsandinabilityofpersonneltorestorefunctions.TheworkofAzadeganetal.(2019)offersexplana-tionsofhow‘near-misses’(failuresthatwereprevented)offersameanstolearnfromand,inturn,changeanorganization’sapproachtofuturedisruptions.Aswenotedearlier,ahandfulofstudieshaveconsideredthe4-Itheoreticalconcept(Manujetal.,2014).OfnoteistheworkofBelletal.(2014),whonotonlyleveragethenotionsofintuiting,interpreting,integratingandinstitutionalizingintotheirexploratoryassessmentofexternaltechnologyintegration,butalsocarefullyinfusetheconceptsof‘feed-forward’and‘feedback’explanationsofferedbyCrossonetal.intheirstudy.ArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

457Organizationallearningtheory439FINALTHOUGHTSDespitetherichanddiversetheoreticalexplanationsofferedbyOLTandtheseveralsub-setofstreamsintheory;atrueandeffectiveexplanationofresearchphenomenausingthetheoryseemsscantinSCM/PSMliterature.Inthischapterwehaveprovidedpotentialmeansbywhichresearcherscanmoreeffectivelyleveragethisinterestingandpotenttheorytoexplaintheirareaofwork.Thesupplychainandpurchasingmanagementactivitieshavebecomecoreelementsindeterminingthefirm’ssuccessacrossawiderangeofindustries,andwarrantstrategicman-agement.Thestrategicmanagementresearchattemptstoaddressthreeproblems(LevinthalandMarch,1993):(1)theignoranceproblem:uncertaintyaboutthepastandfuture,andthecausalstructureofrelationships;(2)theconflictproblem:multiplenestedagentswithseveraltimepreferencesandacomplexincentivestructure;and(3)theambiguityproblem:lackofclarity,instabilityandendogeneityinagents’choicesandtheiridentity.Consideringtheshiftinthecompetitionbasisfromfirmstothesupplychains,thethreestrategyproblemsgetampli-fiedindevelopingintelligenceinthesupplychaindomain.Long-termplanninganddesigningalearningorganizationbothhaveconsiderablelimitationstoaddressthestrategyproblems.Inparticular,organizationallearningisrestrictedbymyopicviewsoftemporal,spatial,andoverlookedfailure.OthertheoriessuchastheRBVanditsextensiontheKBVshouldalsobeconsideredasdevelopingintelligencethroughlearningfromexperience.Giventhecomplexnatureofstrategicproblems,bothcalculatedrationalityandorganizationallearningshouldbeusedascomplementaryapproachestoinfluenceorganizationalactions.Consideringtheincreasingattentioninrecentyearsonartificialintelligenceandmachinelearning,theymeritresearchattention.Moreresearchisrequiredtoshedlightonhowandunderwhatconditionsartificialintelligenceandmachinelearningcouldimpactuponorgani-zationallearning(Choudhuryetal.,2020;Feizabadi,2020).Forexample,Balasubramanianetal.(2020)developedaconceptualargumentontherisksfororganizationallearningofsubsti-tutinghumanlearningbymachinelearning.Theyhighlightedtwopotentialrisks‒ofreducingroutineorganizationaldiversity,anddiminishingtheknowledgerichness‒aspossibleissuesrelatedtoreplacinghumanlearningbymachinelearning,whichcouldmuteoramplifythelearningmyopia.Machinelearningmightbebeneficialwhenthesystemislooselycoupled,tofacilitatetheproblemdiagnostics,butitisnoteffectiveinatightlycoupledsystemwithdenseinterdependenciestofacilitateproblemdetection.Bothproblems‒diagnosisfacilitatedinlooselycoupledsystems,andproblemdetectionintightlycoupledsystems‒arerecognizedasessentialelementsoforganizationallearning(LevinthalandMarch,1993).Futureresearchneedstoinvestigatetheoreticallyandempiricallytheimplicationsofartificialintelligenceandmachinelearningadoptionsbyfirmsandsupplychainsfororganizationallearningandfordevelopingintelligentorganizations,whichistheessenceofstrategicmanagement.Herewenotethatamongthebenefitsoforganizationallearningisitsapplicabilityacrossseveralunitsandlevelsofanalysis.Indeed,theunitofanalysisforstudiesthatareconceptu-alizedbasedonOLTcanbebehaviours,routines,knowledgeorexperience.Similarly,sincelearningoccursatamultitudeoflevels,theuseofOLTcanbeviableattheindividual,group,organizationalorinterorganizationallevels.ThisisincontrasttoothertheoriescommonlyusedinSCM/PSM,suchastheresource-basedview(RBV)andtransactioncosteconomics(TCE),whichareessentiallylimitedtofirm-levelexplanations(Azadeganetal.,2020).Analysisatdifferentlevelsinorganizationallearning,andtheirinteractiontype,areoftencrit-ArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

458440Handbookoftheoriesforpurchasing,supplychainandmanagementresearchicalfordevelopingresearchthatistrulyreflectiveoftherealworld,especiallyforSCM/PSMresearchers.However,specialcareneedstobetakenindesigninganddevelopingtheresearchquestions.Forinstance,whethergrouplearningcomplementstheorganizational-levellearn-ing,actsasasubstitute,orisindependent,isimportanttoconsiderinmulti-levelstudies.Moreover,thepropertiesofcoordination,communicationandinfluenceoccuratthegrouplevelintheorganization.WehopethatresearchersinSCM/PSMensurethattheyareproperlydifferentiatingtheiruseoforganizationallearningfromknowledge-basedviews,andconsiderthenuancesassociatedwithdifferenttypes,contexts,combinationsandprocessestowhichorganizationallearningapplies.Asthesupplychaincomplexityexpands,theimportanceofthetransferoflearningandintegrationacrossthefirm’sboundariesbecomesmoreofaconsideration.WehighlightedthekeynotablecharacteristicsofOLTanditsdifferencesinuseandappli-cabilitytootherrelatedintellectualareassuchassupplychainmanagement.SuchfeaturesofOLTmakeituniquefromanontologicalandepistemologicalperspectiveandthusrequirecarefulconsiderationwhenused(EdmondsonandMcManus,2007;Wacker,1998).Giventhefocusontheprocessandtheunderlyingreasonsforlearning,researchersshouldrecognizethatcertaintypesofmethodologiesarebettersuitedfortheuseofOLT.WhereassurveyresearchiscommonlyappliedforexplainingOLT,perhapsthereisalimittotheextentthatthismethod-ologycanbeused,simplybecauseofitsinabilitytodeterminecausality(versuscorrelation).Instead,methodologiesthatcandivedeeperintoexplainingthephenomenon(in-depththeoryvalidationqualitativemethods),orthosethatofferevidenceofcausality(vignette-basedexperimentsorsimulations)couldbeviablemethodologies.ByrecognizingtherichnessofferedbyOLTandeffectivelyreflectingitintheirresearchdesign,SCM/PSMresearcherscanbeassuredthattheirworkwouldbeastrongercontributiontothefield.NOTES1.Organizationalintelligenceisdevelopedbyspecifyingwell-definedobjectives,pursuingtheobjec-tivesbycollectinginformationtoassessalternativecourseofactionsintermsoftheirexpectedreturns,andchoosingthebestfuture-orientedcourseofaction.Calculatedrationalityissubjecttoseverallimitations:availabilityofinformation,organizationalinformationprocessingcapacities,andtheassumptionofpreferencesfollowingaxiomsofrationality.2.Moretrainedandexperiencedindividualsandgroupsintheorganizationenhanceitsaverageperfor-mancecomparedtoorganizationswithlowerlearninglevels;also,experiencedandknowledgeableindividualsandgroupsintheorganizationengenderfewersurprises,henceimprovingperformancereliability.REFERENCESArgote,L.(2013).Organizationallearning:Creating,retainingandtransferringknowledge.Springer,NY.doi:10.1007/978-1-4614-5251-5.Argote,L.,andMiron-Spektor,E.(2011).Organizationallearning:Fromexperiencetoknowledge.OrganizationScience,22(5),1123–1137.Argyris,C.,andSchön,D.A.(1978).Organizationallearning:Atheoryofactionperspective.Boston,MA:Addison-WesleyPublishingCompany.Aslam,H.,Blome,C.,Roscoe,S.,andAzhar,T.M.(2018),Dynamicsupplychaincapabilities:Howmarketsensing,supplychainagilityandadaptabilityaffectsupplychainambidexterity.InternationalArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

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462444Handbookoftheoriesforpurchasing,supplychainandmanagementresearchRao,R.D.,andArgote,L.(2006).Organizationallearningandforgetting:Theeffectsofturnoverandstructure.EuropeanManagementReview,3(2),77–85.doi:10.1057/palgrave.emr.1500057.Rialti,R.,Marzi,G.,Silic,M.,andCiappei,C.(2018).Ambidextrousorganizationandagilityinbigdataera:Theroleofbusinessprocessmanagementsystems.BusinessProcessManagementJournal,24(5),1091–1109.doi:10.1108/bpmj-07-2017-0210.Richey,R.G.,andAutry,C.W.(2009).Assessinginterfirmcollaboration/technologyinvestmenttradeoffs:Theeffectsoftechnologicalreadinessandorganizationallearning.InternationalJournalofLogisticsManagement,20(1),30–56.doi:10.1108/09574090910954837.Rojo,A.,Llorens-Montes,J.andPerez-Arostegui,M.N.(2016),Theimpactofambidexterityonsupplychainflexibilityfit.SupplyChainManagement,21(4),433–452.https://doi.org/10.1108/SCM-08-2015-0328.Saenz,M.J.,Knoppen,D.andTachizawa,E.M.(2018).Buildingmanufacturingflexibilitywithstrategicsuppliersandcontingenteffectofproductdynamismoncustomersatisfaction.JournalofPurchasingandSupplyManagement,24(3),238–246.Senge,P.M.(1990).Theartandpracticeofthelearningorganization.NewYork:Doubleday.Senge,P.,Ross,R.,Kleiner,A.,andRoberts,C.(2011).Thefifthdisciplinefieldbook:Strategiesandtoolsforbuildingalearningorganization.London:NicholasBrealeyPublishing.Siggelkow,N.(2002).Evolutiontowardfit.AdministrativeScienceQuarterly,47(1),125–159.doi:10.2307/3094893.Simon,H.A.(1991).Boundedrationalityandorganizationallearning.OrganizationScience,2(1),125–134.Skilton,P.F.,andDooley,K.J.(2010).Theeffectsofrepeatcollaborationoncreativeabrasion.AcademyofManagementReview,35(1),118–134.Tamayo-Torres,J.,Gutierrez-Gutierrez,L.,andRuiz-Moreno,A.(2014).Therelationshipbetweenexplorationandexploitationstrategies,manufacturingflexibilityandorganizationallearning:Anempiricalcomparisonbetweennon-ISOandISOcertifiedfirms.EuropeanJournalofOperationalResearch,232(1),72–86.Tucker,A.L.(2004).Theimpactofoperationalfailuresonhospitalnursesandtheirpatients.JournalofOperationsManagement,22(2),151–169.Tushman,M.L.,andOreilly,C.A.(1996).Ambidextrousorganizations:Managingevolutionaryandrevolutionarychange.CaliforniaManagementReview,38(4),8–29.doi:10.2307/41165852.Wacker,J.G.(1998).Adefinitionoftheory:researchguidelinesfordifferenttheory-buildingresearchmethodsinoperationsmanagement.JournalofOperationsManagement,16(4),361–385.West,P.andBurnes,B.(2000).Applyingorganizationallearning:Lessonsfromtheautomotiveindustry.InternationalJournalofOperationsandProductionManagement,20(10),1236–1252.https://doi.org/10.1108/01443570010343762.Wu,D.Y.,andKatok,E.(2006).Learning,communication,andthebullwhipeffect.JournalofOperationsManagement,24(6),839–850.Yao,Y.,Kohli,R.,Sherer,S.A.,andCederlund,J.(2013).Learningcurvesincollaborativeplanning,forecasting,andreplenishment(CPFR)informationsystems:Anempiricalanalysisfromamobilephonemanufacturer.JournalofOperationsManagement,31(6),285–297.doi:10.1016/j.jom.2013.07.004.Yu,W.,Jacobs,M.A.,Salisbury,W.D.,andEnns,H.(2013).Theeffectsofsupplychainintegrationoncustomersatisfactionandfinancialperformance:Anorganizationallearningperspective.InternationalJournalofProductionEconomics,146(1),346–358.Yu,W.T.,Jacobs,M.A.,Salisbury,W.D.,andEnns,H.(2013).Theeffectsofsupplychainintegra-tiononcustomersatisfactionandfinancialperformance:Anorganizationallearningperspective.InternationalJournalofProductionEconomics,146(1),346–358.doi:10.1016/j.ijpe.2013.07.023.ArashAzadeganandJavadFeizabadi-9781839104503DownloadedfromPubFactoryat05/28/202209:11:21AMviaColumbiaUniversityLibrary

46329.SignallingtheoryChristianvonDeimling,MichaelEßigandAndreasH.GlasINTRODUCTIONThereisevidencethatsignallingtheoryisbecomingincreasinglypopularinseveralman-agementresearchareas(Berghetal.,2014;Connellyetal.,2011a).AlthoughthetheorywasinitiallydevelopedinthelabourmarketbySpence(1973,2002),signallingisseenasageneralphenomenonapplicableinanymarketsufferinginformationasymmetry(Morris,1987,p.47;Spence,1973,p.356).Therefore,studiescitingsignallingtheoryareavailable,forexample,intheliteratureonstrategy,corporategovernance,mergersandacquisitions,entrepreneurship,qualitymanagement,marketing,investmentandfinancedecisions,andhumanresourcesmanagement(Connellyetal.,2011a;Taj,2016).Signallingtheoryhasalsofounditswayintoresearchonbuyingdecisions,mostlyrelatedtoabusiness-to-consumercontextandoftendis-cussedfromamarketingpointofview(EtzionandPe’er,2014;Hossainetal.,2018;KirmaniandRao,2000;Raoetal.,1999;Wellsetal.,2011).Adoptionofsignallingtheoryforpurchasingdecisionsinabusiness-to-businessenviron-mentorinthebroadersupplychaincontextseemstofollowafarslowerpace(Bakshietal.,2015;Chengetal.,2020;StumpandHeide,1996;TerlaakandKing,2006).Also,recentactivitiestoprovideacompendiumofappliedtheoriesinsupplychainmanagement,andinpurchasingandsupplymanagement,indicatethatsignallingtheory,ascomparedtootherthe-ories,hasnotgainedmuchattention(Chicksandetal.,2012;Defeeetal.,2010;Halldórssonetal.,2015;Kembroetal.,2014;Shooketal.,2009;Spinaetal.,2016;TouboulicandWalker,2015;Walkeretal.,2015;Wynstraetal.,2019).Intheirinvestigationof2522purchasingandsupplymanagementarticlesfromasetof18high-impactmanagementjournalspublishedintheperiod1995‒2014,signallingtheorydoesnotseemtoplayasignificantrole,whileothertheoriesintheareaofinformationeconomicssuchasagencytheoryorgame-theoreticalapproachesgainedmomentum(Wynstraetal.,2019).Thischapterproceedsinsixfurthersections,followingWacker’ssuggestionsforamoredetaileddescriptionofatheory(Wacker,1998).Thefirstsectionisconcernedwithdefiningthescopeofsignallingtheoryanditskeyvariables.Thesecondsectionrenderstheconditionsforwhensignallingtheorycanbeeffectivelyapplied.Thethirdsectionprovidesinsightsintothedomainofsignallingtheoryanddealswiththequestionofwheretoapplysignallingtheory(ingeneralterms).Thefourthsectioncoversthesignallingtheorypredictions.Thefifthsectionshedslightonhowthetheoryhasbeenusedparticularlyinthefieldofpurchasingandsupplymanagement.Thesixthsectiondealswithanoutlookonfutureresearchopportunities(Wacker,1998).445ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

464446Handbookoftheoriesforpurchasing,supplychainandmanagementresearchKEYVARIABLESANDDEFINITIONSDeeplyrootedininformationeconomics,signallingtheoryaddresseshowpartiesinapotentialtransactiontrytoreacttotheasymmetricalinformationstructureofmarkets(Raoetal.,2018).Inessence,signallingtheorydivertsattentiontoakeychallengefacingdecision-makers,namelyhowtheycanusesignalsinsituationsthathaveincompleteandasymmetricallydis-tributedinformation(Berghetal.,2014).Informationasymmetrydescribesaconditionwhereonepartyinarelationshiphasmoreorbetterinformationthananother(Berghetal.,2019).Inadecision-makingsituation,thisinformationasymmetry(ifnotaddressed)canleadtooppor-tunisticbehaviour,bothbefore(exante)andafterthedecisiontobemade(expost).Hence,involvedpartiesarevulnerabletoadverseselection(exante)andtomoralhazard(expost)(Berghetal.,2019;KirmaniandRao,2000).Inthiscontext,signalsareconsideredasinfor-mationalcuessentoutbythebetter-informedpartytoinfluencedecisionsbytheless-informedparty(Taj,2016,p.339).Signalsaremainlyconsideredtoaddressadverseselectionproblems,exantetoadecision(KirmaniandRao,2000,p.67).Asignalisconsideredaseffectiveifitiscostly,ifitisdifficulttoimitate,ifaparticularassetorwealthisatrisk,ifitiscredible,andifitcanbeconfirmedafterthecontracthasbeensigned(Berghetal.,2014;Connellyetal.,2011a;Connellyetal.,2011b;Ippolito,1990).Asaresultofsendingoutobservablesignals,sendersandreceiverscandistinguishbetween–orseparate–high-fromlow-qualityactors(Berghetal.,2014).Hence,signallinghelpstoinfluenceexanteresourceallocationdecisionsonbothsides(senderandreceiver)(Spence,1973,1976).Hence,atthecore,thedyadicrelationshipbetweenthesenderandthereceiverservesastheunitofanalysisinthesignallingtheory.Inthisdyadicrelationship,particularattentionispaidtotheexchangeofinformationandthedecisionsbasedonit.Inordertoseparatehigh-fromlow-qualityactors,itcanbeassumedthatseveralofthesedyadicexchangerelationshipsexist(dyadicrelationshipbetweenahigh-qualitysenderandareceiver,anddyadicrelationshipbetweenalow-qualitysenderandareceiver).Signallingtheorythentakesalookatthedifferentdyadicrelationshipsintheirentiretysothatameaningful(investment)decisioncanbemadebetweenalternatives.Theincentiveforthebetter-informedpartytoinvestinsendingsignalsisthatonecancred-iblyconveyone’shiddenqualitiesthroughthesignaltothereceiver(Connellyetal.,2011a;Raoetal.,1999;Riley,2001;Spence,1973,2002).Thisallowsthesenderofthesignaltostandoutfromitspeersorcompetitors.Thesenderweighswhetherandhowmuchefforttoinvestinthesignalbymaximizingpotentialpay-offs(KirmaniandRao,2000;Spence,1973,2002).Theincentivefortherecipientofthesignal(theless-informedparty)isthatthesignalenablesthemtomakeinformeddecisionsabouthiddenpropertiesthatwouldotherwisebedif-ficulttoevaluatefromtherecipient’spointofviewbeforesigningthecontract(Spence,1973,2002).Theadvantageforthereceiveristhatthesignalhelpstoidentifyandselectthemostsuitableoptionthathas(mostlikely)thedesiredqualityproperties.Futureconfidenceinthecredibilityofthesignalincreasesifitcanbeconfirmedafterthecontracthasbeenconcluded,andfirst-handexperienceprovestheexistenceofthehiddenqualities(Spence,1973,2002).Fortherecipient,acrediblesignalcanalsopayoffintermsofsavingexanteandexposttransactioncosts(KirmaniandRao,2000).Spencearguesthatsendersandreceiversstrivetowardssituationsinwhichsignallingequilibriaarerealized(Spence,1973,2002).ThesesignallingequilibriaarePareto-optimalifthereexistsnootherfeasiblesolutionforwhichanimprovementforonepartydoesnotleadtoasimultaneousdegradationinone(ormore)oftheotherparties(Berghetal.,2014,p.1337).ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

465Signallingtheory447Theessentialpredictivemechanismthatdrivesthedifferentexplanationsassociatedwithsignallingtheoryistheexistenceofa‘separatingequilibrium’(Berghetal.,2014,p.1335),andthatinvestinginthesignalespeciallypaysoffforthepartywithhigh-qualityattributes(alsocalled‘sheepskineffect’).Againstthisbackground,signallingtheoryhelpstostipulateanswerstoquestionssuchas:(1)Howmuchtime,energyandmoneyshouldbeinvestedbythesignallingentityintothesignal?(2)Howfarcanthereceivingentitytrustthesignaltobecredible?and(3)Underwhatcircumstanceswillthesignallingequilibriumbreakdown?Signallingtheoryprovidesaunique,practicalandempiricallytestableperspectiveonproblemsofsocialselectionunderconditionsofimperfectinformation(Connellyetal.,2011a,p.63).Signallingalwaysrequiresactiveactiononthemarketandthusplanning,organizationandcontrol.Signal-theoreticapproachesalwaysconsiderpre-contractualsignalling(andrelateddecisions).Thecontributionofsignallingtheoryisthepredictionthathigher-qualityfirmswillchoosesignalswhichallowtheirsuperiorqualitytoberevealed.Incomparison,lower-qualityfirmswillchoosesignalswhichattempttohidetheirpoorquality(Morris,1987).Itisclaimedthatthepredictionofchoicescanatleastbeimprovedbyaddingtogetherthepredictionsfromothertheoriesgroundedininformationeconomics,suchasagencyortransactioncosttheory(Morris,1987).Toillustratethebasicideabehindsignallingtheoryinmoredetail,Spencesharedamodel(‘themostsimpleone’thathecoulddevise)thathedevelopedfromobservationsonthejobmarket(Spence,2002,p.436).Hisoriginalobservationswillbethedeparturepoint,asthereisalsosomecriticismthatthecentralconstructsofsignallingtheorygotblurredovertime(Connellyetal.,2011a,p.39;Raoetal.,2018,p.296).FollowingSpence,signallingtheoryisbasedoneightkeyconstructs.Itisassumedthat(1)asignallingentity(orsignaller)and(2)areceivingentity(orreceiver)areexchanging(3)asignaltoalleviateinformationasymmetryinapotentialtransaction.Inmorecomplexmodels,signalsoccurinconjunctionwith(4)indices,andhenceformasetofsignalsandindicesthatareexchangedbetweensignallersandreceivers.Creatingasignalisassociatedwith(5)signallingcoststhatinconjunctionwithpaymentschedulesdeterminepayoff-structuresforthesignallingentity.Signalsgaincredibilityiftheycanbeconfirmedafteracertaindecisionhasbeentakenconcerningthetransactioninquestion.This(6)signalconfirmationisembedded(togetherwiththeafore-mentionedconstructs)in(7)aninformationalfeedbackloopthatisnotrunthroughonce,butseveraltimes.Theexchangeofthesignalbetweenthesignallerandthereceiverresultsin(8)avarietyofPareto-optimalsignallingequilibria.Whilethekeyconstructs‘signaller’,‘receiver’and‘signal’havereceivedconsiderableattentionsofar(Connellyetal.,2011a;Taj,2016)theotherconstructsoftenremainintheshadows.Overtime,aninthconcepthasbeenadded,namely(9)‘signallingenvironment’.ThekeyconstructsandtheirdefinitionsarebrieflyprovidedinTable29.1.Asastartingpoint,Spenceassumesthatinmostjobmarkets,theemployerisnotsureoftheproductivecapabilitiesandcapacitiesofpotentialemployeesatthetimetheyarehired(Spence,1973,p.356).Also,aconfirmationofthoseproductivecapabilitiesandcapacitieswillnotnecessarilybecomeavailablerightafterhiring,asitoftentakestimeforemployeestolearnandtogetaccustomedtothe(new)jobinquestion(Spence,1973,p.356).Whiletheproductivecapabilitiesandcapacitiesofjobapplicantsremainmostlyunknowntoemploy-ersbeforehiring(andevenremainunknownforacertaintimeafterhiring),thepotentialemployeesarewellawareoftheirownproductivecapabilitiesandcapacities.Againstthisbackground,Spenceconcludesthatfortheemployer,thehiringdecisionisoneunderuncer-ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

466448Handbookoftheoriesforpurchasing,supplychainandmanagementresearchReferences(Chengetal.,2020,p.219;Spence,2002,p.436;Taoketaoetal.,2018,p.1040)(Connellyetal.,2011a,pp.47–51;Ozmeletal.,2012;Taj,2016,p.339)(Chengetal.,2020;Connellyetal.,2011a;GomulyaandMishina,2017)(Connellyetal.,2011a;Spence,1973,2002;Taj,2016)(Connellyetal.,2011a,pp.47–51;Ozmeletal.,2012)(Connellyetal.,2011a,p.52;Droveretal.,2018;Taj,2016,p.340)Receiversasindividuals(stakeholders,consumers,investors,employers,acquirers),ReceiversasgroupsExplanationOriginal:Signallerspossessinformationconcerningindividuals,products/servicesororganizations,whichcanbetransformedintosignalsdeliveredtoreceivers.Asthesignallersexpecttobenefitfromreducedinformationasymmetry,theyarewillingtoinvestinsignalstoreveallessobservablequalities.Examples:Signallersasindividuals(employees,recruiters,managers,individualentrepreneurs,individualleaders),Signallersasgroups(specificgroupsofmanagers),Signallersasproducts,Signallersasfirms(sellers,suppliers,youngfirms),Signallersasnetworksoffirms(anallianceofmultiplefirms)Discussion:Signallersmightexhibitcharacteristicsthatinadditiontothesignalstheysenddeterminetheperceptionandinterpretationprocessonthereceiver’sside(forexample,signallershonesty/dishonesty,signallerscredibility,signallersbehaviour).Original:Thereceiverslackinformationabouttheindividual,productororganizationinquestionandwouldliketoreceivethisinformationinordertomakeaninformeddecision.Thereceiverholdsbeliefsonthehiddenqualitiesofthesignallerandinterpretstheincomingsignals.Examples:(specificgroupsofmanagers,stakeholder,investors,theboardofdirectors).Receiversasfirms(buyingfirms,competitors).Receiversasnetworksoffirms(anallianceofmultiplefirms)Discussion:Thecharacteristicsexhibitedbythereceivermight(atleastinpart)determinetheeffectivenessofsignalling.Thesignallingprocessisthoughttohavealimitedimpactifthereceiverisnotactivelylookingforthesignal.Theextenttowhichreceiversscantheirenvironmentistermed‘receiverattention’.Inaddition,‘receiverinterpretation’isofkeyimportanceastheymayinterpretsignalsdifferentlyfromwhatsignallershaveintended.Also,thecognitiveabilitiesofreceiversarediscussedandhowtheydealwiththevastnumbersofsignalsavailabletothem.KeyconstructsofsignallingtheoryTable29.1Constructs(1)Signallingentity(orsignaller)(2)Receivingentity(orreceiver)ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

467Signallingtheory449References(Spence,1973,p.357;Spence,2002,p.434;Taj,2016)(Berghetal.,2014,p.1339;Berghetal.,2019;Chengetal.,2020,p.219;Connellyetal.,2011a,pp.47–51;Courtneyetal.,2017;EliashbergandRobertson,1988;Moratis,2018;TerlaakandKing,2006;Xuetal.,2018;Yasaretal.,2020,p.4)(Chengetal.,2020,p.220;Connellyetal.,2011a;Connellyetal.,2011b;Droveretal.,2018,p.218;EtzionandPe’er,2014,p.1607;Ippolito,1990,p.42;KirmaniandRao,2000,p.69;Mavlanovaetal.,2012;Moratis,2018;Sternetal.,2014;Wuetal.,2013)(Spence,1973,p.357;Spence,2002,p.434)(Spence,1973,pp.368–374)-ExplanationOriginal:Signalsarethingsonedoesthatarevisibleandthatareinpartdesignedtocommunicate.Signalsarecomposedoutofobservablecharacteristicsthataresubjecttomanipulation.Signalsareinformationalcuessentoutbyonepartytoanotherinordertoinfluencedesiredoutcomes.Examples:Reputationofthefirm,boardstructure,earningsclaims,consultantsurveys,branding,advertisements,numberofpatents,certifiedmanagementstandards,educationandexperienceofhumanresources,investmentsinmemberships,investmentsinspecificassets,pricingstructure,theprestigeofathirdparty(suchasaventurecapitalist),third-partyendorsements,pre-announcingaparticularbehaviour(forexample,inthecaseofnewproductrelease/introduction).Discussion:Differentpropertiesofsignalsarediscussed(forexample,intensity,strength,clarityandvisibilityofasignal;signalfit;signalbonding;ease/difficultytoimitatesignal;theeffectivenessofsignalsindifferentmarkets).Attemptsaremadetodevelopdifferentsignaltypologies(forexample,‘defaultindependentsignals’vs.‘defaultcontingentsignals’;intentionalvs.unintentionalsignals;positivevs.negativesignals;easy-to-verifyvs.difficult-to-verify;low-vs.high-costsignal).Itisdiscussedhowsetsofsignals(mixedvs.unmixedsignals,ormixofconflictingsignals)orsignaldynamics(signalsatdifferentpointsintime;signalconsistency;efficientbalanceofsignalratesanddurations;valueofsignalsovertime)mighthelptoalleviateinformationasymmetry.Original:Indicesareattributesoverwhichonehasnocontrol,andthatcannotbealtered.However,indicesmightalterthereceiver’sperception(inconjunctionwithsignals)andareassumedtohaveanimpactoninformeddecisions.Indicesrepresentpubliclyavailableinformationonanindividual,productorfirm.Examples:Age,sex,gender,race(asfarasindividualsareconcerned,examplestakenfromSpence,1973);Examplesinacompany/suppliercontextarerare.Itcanbeassumed,thatpubliclyavailableknowledgeofcompanies/supplierscanbeinterpretedasindices.Hence,thenameofasupplier,itsbrands/productportfolio,location,size,turnover,profit,etc.,canbeemployedasindices.Discussion:Whiletheinformationalinfluenceofindicesondecisionsseemswellexaminedinthejobmarket,itseemsasthoughindicesarerarelydiscussedinothermarketsituations.Indicesareoftennotaddressedorareevenneglectedinstudiesinmanagementresearch.Constructs(3)Signal(ormarketsignal)(4)IndicesChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

468450Handbookoftheoriesforpurchasing,supplychainandmanagementresearchReferences(KirmaniandRao,2000,p.73;Spence,1973,p.359;Spence,2002,p.436)(Berghetal.,2014,p.1338;Spence,1973,2002)(Berghetal.,2014,p.1338;Connellyetal.,2011a,p.61;Spence,1976,p.596)(Spence,1973,p.368;Spence,2002,p.437)(EtzionandPe’er,2014)(Berghetal.,2014,p.1348;Yasaretal.,2020,p.8)expostexperience.expost)occurrenceofexpectationofasignaltoexantesignalofsuperiorproductquality)withoutthe(exanteExplanationOriginal:Costsassociatedwithobtainingasignal(time,energyandmoney).Signallingcostsaretobeinterpretedbroadlyeventoincludepsychicandothercosts,aswellasthedirectmonetaryones.Thecostofthesignalisnegativelycorrelatedwiththeunseencharacteristicthatisvaluabletothereceiver.Theamountofsignallingcostsshouldbejusthighenoughtodissuadethelow-qualitysignallerfromsignalling,yetlowenoughtomakesignallingattractiveforthehigh-qualitysignaller.Examples:Allcostsconcernedwithobtainingacollegedegree(tuitionfeesplusallopportunitycostsduringthattime);costsconcernedwithobtainingacertaincertification(obtainingsuchacertificationwouldbemorecostlyforafirmwithpoorqualitypracticesthanforafirmthatalreadyhashighstandards).Discussion:Ingeneral,signallingcostsaredefinedbroadlyandaredifficulttodetermine.Analternativetothecostlinessofasignalmayexistwhenthereisapenaltyassociatedwithfalsesignalling.Futureresearchmightexploretheextenttowhichsignalcostsandpenaltycostsserveassubstitutesorcomplements.Spenceraisedanothersetofissuesconcerningsignallingcosts,namely,whethersignallersdistinguishamongreceiversatthetimethattheinvestmentdecisionintothesignalismade(andwhethertheyareinvestingdifferentsignallingcostsfordifferentreceivers).Original:Signalconfirmationreferstowhethertheexpectedattributestransportedbythesignalarerealized(orisatleastnotdisconfirmed)throughsubsequentexperience.Examples:Warranty(asanawarrantyclaim.Discussion:Sincesignalconfirmationisrarelyexamined,itisdiscussedhowtoincludeandempiricallytestsignalconfirmation.Thiswouldrequiretolinkthereceiver’sAgainstthisbackground,italsoseemscriticaltoaccountforconfirmationbias.Confirmationbiasoccurswhenindividualsmayweighsignalsthatagreewiththeircurrentpositiongreaterthanthosethatwillcontradicttheirpriorheldknowledge.Constructs(5)Signalcosts(6)SignalconfirmationChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

469Signallingtheory451References(Berghetal.,2014,p.1352;Spence,1973,p.360)-(Connellyetal.,2011a,p.55;Taj,2016)(Berghetal.,2014,p.1336;Spence,1973,p.361)-(Berghetal.,2014;EtzionandPe’er,2014)(Spence,1973,1976,2002)‒(Berghetal.,2014,p.1335;Chengetal.,2020,p.220;Connellyetal.,2011a,p.55;ParkandPatel,2015;Taj,2016)ExplanationOriginal:Asnewsignalsarereceivedovertime,boththesignallerandreceivermayadjusttheirexpectationsforfuturetransactions.Receivers’conditionalprobabilisticbeliefsaremodified(receiversmakeandlearnfrommistakes,adjusttheirexpectations,andthentryagain),offeredreturnschedulesareadjusted,signallerbehaviourconcerningsignalchoicechanges(aspayoffstructuresalsochange),andafteradecisionhasbeenmade,newdatabecomeavailabletothereceiver.Eachfeedbackloopgeneratesthenextone.Examples:Informationexchange,thatoccursearlyintheprocurementprocess(marketanalysis,supplierevaluation).Discussion:Recentdiscussionsinmanagementresearchassumethatinformationasymmetryworksintwodirections:receiversdesireinformationaboutsignallers,butsignallersalsodesireinformationaboutreceiversinordertoknowwhichsignalsaremosteffective.Hence,thereisfeedbackintermsofinformationcuessentfromthereceivertothesignaller(countersignals).Insuchsituations,itmightbenecessarytodistinguishbetweendifferenttypesofinformationasymmetry(IandII),whereIistheinformationasymmetrybetweensenderandreceiver(requiringasignal)andIIstandsfortheinformationasymmetrythatisoccurringbyareversedistributionofroles(requiringacountersignal)Original:Aseparatingequilibriumoccurswhensignallerswithdifferenthiddenattributesalwayschoosetoinvestindifferentsignals.Hence,thesignalalwaysrevealsthesignallerwithacertainsetofattributes,sothatthereceiver’sbeliefsbecomedeterministicovertime.Therearemultipledifferentsignallingequilibria(separating,poolingandsemi-separating).Examples:‒Discussion:Theseparatingequilibriumconceptisseenastheessentialpredictivemechanismthatdrivestheuniqueexplanationsassociatedwithsignallingtheory.Hence,thecurrentdiscussioncentresonhowtotestforandassurethepresenceofandmeansforestablishingaseparatingequilibrium.Berghetal.arguethat,lackingtheequilibriumconcept,researchersmaybeatrisktoidentifyvariousbehavioursorcharacteristicsassignalsinthegenericsense,thatarenotconsistentwithsignallingtheory’ssignals.Otherequilibriaarealsodiscussed,suchastheepisodicequilibriumthatoccursincompetitiveanddynamicmarkets.Original:Notaddresseddirectly.However,Spenceisawareofthefactthattheperceptionofasignalanditscredibilityisinfluencedbythenumberofsignallersonthemarket,andtheoccurrenceofcrediblesignalsthatareconfirmedafterthedecisionhasbeenmade.Examples:Industrycharacteristicsinwhichtherelationshipisexamined.Discussion:Signallingenvironmentisanunderresearchedarea.Forinstance,avolatileenvironmenttendstointroducedistortionandnoiseintothesignallingprocessand,thus,maydiminishspecificsignals’visibility.Constructs(7)Informationalfeedbackloop(8)Signallingequilibria/separatingequilibria(9)SignallingenvironmentChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

470452Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtainty,andischaracterizedbyanasymmetricdistributionofinformation.Whileinformationasymmetrycanbasicallytaketwoforms‒informationasymmetryofquality,andinformationasymmetryofintentions(Stiglitz,2000)‒Spencefocusedoninformationasymmetryoflatentandunobservablequality(Connellyetal.,2011a,p.42).Thepotentialemployeeisusuallybetterinformedontheirownproductivecapabilitiesandcapacitiesthantheemployer(Spence,1973,p.356).Itisassumedthatthosewithhighabilitywilltrytoseparatethemselvesfromthosewithlowerabilitybyreducingtheinformationasymmetryifincentivesarehighenough.Bothemployerandemployeearevulnerabletoadverseselectionandmoralhazardsassociatedwithincompleteinformationabouttheotherparty(Berghetal.,2014,p.1337).Thiscanbeadaptedtopurchasingandsupplymanagementproblems:suppliers–whoaremorecapableabouttheircapabilitiesandcapacitiesnotonlybeforebeingselectedbutevenaftersigningthecontract–mustbeselectedfrombuyersdealingwiththisinformationasymmetry.(1)Signallersand(2)ReceiversInordertoovercometheabove-mentionedinformationproblem,Spenceintroducedtwointeractingroles:signallingentitiesandsignalreceivingentities.Signallers(forexample,jobapplicantsor,inpurchasingandsupplymanagement:suppliers)possessinformationconcern-ingindividuals,products/servicesororganizations,whichcanbetransformedintosignalsdeliveredtoreceivers(forexample,potentialemployersor,inpurchasingandsupplyman-agement:buyers).Asthesignallersexpecttobenefitfromreducedinformationasymmetry,theyarewillingtoinvestinsignalstoreveallessobservablequalityattributes.Thereceiverslackinformationabouttheindividual,productororganizationinquestionandwouldliketoreceivethisinformationinordertomakeaninformeddecision.Thereceiverholdsbeliefsonthehiddenqualitiesofthesignallerandinterpretstheincomingsignals(Berghetal.,2014;Connellyetal.,2011a;Spence,1973,1976,2002).(3)Signalsand(4)IndicesWhiletheemployer(receiver)cannotbesureoftheproductivecapabilitiesandcapacities,hecanalternativelyobservetheimagethejobapplicant(signaller)presentsbeforehand(Spence,1973,p.357).Spenceassumesthatthisimageiscomposedofasetofsignalsandindices(Spence,1973,p.357).Hereservestheterm‘signal’tothoseattributesoftheimagethatareobservableandthatcanbeintentionallyalteredbytheapplicant(Spence,1973,p.357).Itiscriticaltonotethatifthebetter-informedside(employeeorsupplier)takestheactiveroleinconveyinginformationabouthiddenattributes,thisisqualifiedassignalling(orassendinga‘marketsignal’).Incontrast,‘marketscreening’wouldrequiretheless-informedsidetoactivelyprovideasetofdifferentcontractualagreementsfromwhichthebetter-informedsidecanselect(Riley,2001,p.438).Moreover,signalscanbedefinedassnapshotspointingtounobservablesignallerqualitiesatagivenpointintime(Moratis,2018,p.3).Indicesareattributesthatarenotgenerallythoughttobealterable,andtheyarenotamatterofindividualchoice,suchasrace,genderorageoftheapplicant(Spence,1973,p.357).Indicesarecon-sideredasthepubliclyavailableinformation.Itisassumedthatindiceshaveanimpactonjobapplicants’overallimage(Spence,1973,p.368).Thevarioussetsofsignalsandindicesareassumedtonotonlydefinetheemployers’beliefsontheproductivecapabilitiesandcapacitiesofpotentialemployees,butalsodeterminetheemployers’decisiononwhatwagetoofferforChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

471Signallingtheory453whatsetofsignalsandindices(Spence,1973,p.358).Inpurchasingandsupply,imagescould,forexample,refertosuppliers’attributessuchasname,locationormanufacturingprogramme.(5)SignallingCostsTheefforttoobtainaparticularsignalbythesignallingentityistermed‘signallingcosts’,whicharetobeinterpretedbroadly(moreintermsofopportunitycosts)(Spence,1973,p.359).Thepotentialjobapplicantinvestsinasignalifthereissufficientreturnasdefinedbytheofferedwage(orpayment)schedule(Spence,1973,p.358).Henceitisassumedthatindi-vidualsmakerationalinvestmentchoicesconcerningeducation,andthattheyselectsignalstomaximizethedifferencebetweenthesignallingcostandtheofferedwages(Spence,1973,p.437).Toobtainandsendasignal,thejobapplicant(signaller)can,forexample,investtime,energyandmoneytoimprovetheireducationalstandinginthemarketbyacquiringcertificatesoracollegedegree.Thecorrespondingsignal(thecollegedegree)containsinformationsug-gestingspecificqualitiesaboutthepotentialemployeethatwouldotherwisebenebuloustotheemployers(Chengetal.,2020,p.219).(6)SignalConfirmationBesides,employershavebeliefsabouttherationalebetweentheselectedsignalandtheindi-vidual’sunderlyingproductivity(Spence,2002,p.437).Ifthehighabilityoftheapplicantisconfirmedafterhiring,thecorrespondingsignalisconsideredaseffective(Spence,2002,p.437).Hence,numerousconfirmationscanincreasetheeffectivenessofacertainsignal.Also,thoseconfirmedsignalshelptoshapetheemployer’sconditionalbeliefs(intermsoftherelationofasignalandtheunderlyingproductivity)(Spence,1973,p.360).Thecredibilityofasignalisalsoimportantforasignaltobeeffective.Highsignalcredibilityissaidtooccurwhentheemployerbelievesthatsendingacertainsignalrequiresasignificantinvestment,andthattheinvestmentisatriskifthesignalisnotinlinewiththeunderlyingqualitiesofthepotentialapplicant(Wellsetal.,2011,p.376).Insummary,signallingcostandreturnstructuresandtheircredibilityprovidethebasisforaselectionprocesswherebyemployerscanusethesignaltoselectanemployeefromamongalargersetofemployees(Berghetal.,2014,p.1337).(7)InformationalFeedbackLoopSpencepointsoutthatsignallingisnottobeseenasastaticactivitybut,incontrast,asoneembeddedintoaclosed,‘self-confirming’(Spence,2002,p.437)feedbackloop(Spence,1973,p.359).Thisfeedback-loopconsistsoffourelements:(1)employers’conditionalproba-bilisticbeliefs;(2)offeredwageschedules(asafunctionofsignalsandindices);(3)signallingdecisionsbyapplicants;and(4)hiringdecisionsandobservationsoftherelationshipbetweenproductivityandsignal(alsocalled‘signalconfirmation’).Spenceassumesthatnewmarketinformationcomesintotheemployerthroughhiringandsubsequentobservationofproductivecapabilitiesastheyrelatetosignals(4).Thisinformationalterstheemployer’sconditionalprobabilisticbeliefsontherelationofsignalsandproductivity(1).Theconditionalprobabilis-ticbeliefsdeterminetheofferedwageschedule(2).Thisleadstoasituationinwhichapplicantbehaviourforsignalchoiceandcorrespondinginvestmentschanges(3).TheinformationChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

472454Handbookoftheoriesforpurchasing,supplychainandmanagementresearchconveyedtotheemployersleadstonewincomingmarketinformationwhichafteracertaintimelagisconfirmedordisconfirmed(4),andanewroundstarts(Spence,2002,p.437).Itiscriticaltonotethatconditionalbeliefs(1),offeredwageschedules(2),signalchoice(3),andhiringdecisionsandconfirmedsignals(4),generallydifferfromtheonesfacingthepreviousfeedbackloop(Spence,1973,p.359).Hence,Spenceincludedatime-based,evolutionaryperspectiveinhismodelthatconsistsofmultiplefeedbackiterations.ThefeedbackloopisillustratedinFigure29.1.Whileconditionalbeliefs(1),offeredwageschedules(2),andhiringdecisions/confirmedsignals(4),representactionsontheemployer’sside(receivingentity),thesignallingdecisionisreservedtothejobapplicant’sside(signallingentity).Figure29.1InformationalfeedbackloopinthejobmarketasproposedbySpence(1973,p.359)Spence’sbasicideasabouttheinformationalfeedbacklooponthelabourmarketcanalsobeappliedtotherelationshipbetweenbuyersandsuppliersinveryearlystagesinaprocurementprocess.FollowingSpence’sidea,newmarketinformationonpotentialsupplierscomesintothebuyer,forexamplethroughmarketanalysisandsubsequentobservationofproductivecapabilitiesofpotentialsuppliers(4).Thismarketinformationmayalterthebuyer’scon-ditionalprobabilisticbeliefsontherelationofsignalsandproductivity(1).Theconditionalprobabilisticbeliefsdeterminetheassumptionsonplannedcontractspecificationsandcon-tractvalues(2).Thisleadstoasituationinwhichsupplierbehaviourforsignalchoiceandcorrespondinginvestmentschanges(3).Theinformationconveyedtothebuyersleadstonewincomingmarketinformationthat,afteracertaintimelag,getsconfirmedordisconfirmed(4),andanewroundstarts.ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

473Signallingtheory455Figure29.2Feedbackloopadoptedtoabuyer‒supplierrelationship(8)SignallingEquilibria(asSignallingOutcome)Manysignallingequilibriacanbetheresultoftheabove-mentionedfeedbackloop;infact,Spencepointsoutthatthereisacontinuumofsignallingequilibria,thatcanbesortedbytheParetocriterionbetweenthepoles’‘poolingequilibria’and‘separatingequilibria’(Spence,2002,p.437).Anequilibriumisbestthoughtofasasituationinwhichbeliefs(intermsoftherelationbetweentheproductivecapabilitiesandcapacitiesandthesignal)areconfirmedoratleastnotcontradictedbythenewdataattheendofthefeedbackloop.Spenceassumesthatsuchbeliefswilltendtopersistovertimeasnewentrantsintothemarketflowthrough(Spence,1973,p.368).Inthejobmarketexample,thismeansthattheobservedsignalcorre-spondstotheunderlyingproductivity,andthattheemployeeisofferedtheappropriatewage(basedonthesignalsent).ThissituationisconsideredParetooptimalifthereexistsnootherfeasiblesolutionforwhichanimprovementforonepartydoesnotleadtoasimultaneousdegradationinone(ormore)oftheotherparties(Berghetal.,2014,p.1337).Apoolingequilibriumiscreatedwhentheemployerbelievesthattheycannotdistinguishbetweenlow-andhigh-abilityapplicants.Inthissituation,allpotentialapplicantswouldbetreatedthesame.Hence,allapplicantswouldbeofferedthesame(weightedaverage)wageschedule.Inthissituation,thereisnoincentiveforadditionalinvestmentintoasignalforhigh-abilityapplicantstoseparatefromthelow-abilityapplicants.Itisclearthatthegroupoflow-abilityapplicantsbenefitsfromthissituationtoalargerextent(intermsoffree-ridingbehaviour).Hence,poolingcanoccurwhenhigh-qualityactorsarenotabletorecoupthegreatercoststheymustinvestinattainingseparation.So,inessence,theyallowlow-qualityactorstofree-rideonthesignal(EtzionandPe’er,2014,p.1609).Itneedstobenotedthatthissituationisonlytolerableforhigh-abilityemployeesifthegroupoflow-abilityworkersisrelativelysmallinsize.Hence,theywouldnotlosetoomuchinacceptingthelowerweightedaveragewageschedule(Spence,1973,p.437).ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

474456Handbookoftheoriesforpurchasing,supplychainandmanagementresearchAseparatingequilibrium,incontrast,iscreatedwhenemployersbelievethattheycandistinguishbetweenlow-andhigh-abilityapplicants.Inthissituation,thereisanobserva-blerelationbetweenabilityandcorrespondingsignal.Offeredwageschedulesdisplaytheemployers’beliefsondifferentabilitylevelsconcerningreceivedsignals.Hence,anapplicantwithacollegedegreeisofferedadistinctivelyhigherwagethananapplicantwithoutacollegedegree.Itneedstoberememberedthatlow-abilityapplicantsneedtoinvestmoretime,energyandmoneyinobtainingasignal(suchasacollegedegree).Aseparatingequilibriumoccurswhenthecostofasignalissufficientlyhightopreventlow-qualityactorsfromattainingone,therebyyieldingdemarcatedsubpopulations:high-qualityactorsthatgeneratethesignal,andlow-qualityactorsthatdonot(EtzionandPe’er,2014,p.1608).High-abilityapplicantswillonlyinvestinobtainingacollegedegreeiftheearningsforgoingtocollege(equalsthewageofferedtothoseholdingadegree),lessthesignallingcosts,outweightheearningsofnotgoingtocollege.Low-abilityapplicantswillnotinvestingoingtocollegeiftheearningsfornotgoingtocollegeexceedtheearningsforgoingtocollegelessthesignallingcosts.Morrisstatesthatlow-abilityemployeeswillthenchoosedifferentsignalswhichattempttohidetheirpoorproductivity(Morris,1987,p.53).Thisgivesroomformoralhazard.Spencealsointroducestheterm‘lower-levelequilibriumtrap’(Spence,1973,p.374).Spencenotesthatthecombinationofsignals(forexample,collegedegree)withindices(forexample,gender)mightleadtoaltered(andunfair)beliefsaboutproductivityontheemploy-er’sside.Thismayresultindifferentofferedwageschedules;forexample,menwithcollegedegreesareofferedhigherwagesthanwomenwithcollegedegrees.Spencearguesthatthecombinationofsignalsandindicesleadstoaseparationofbeliefsintotwoindependentgroups(thatareinthemselveshomogenous).Duetotheembodiedmechanismsinthemodel,albeitinformationallybased,thereisnochanceforthedisadvantagedgrouptoobtainthesamestandingastheothergroup(Spence,1973,pp.373–374).(9)SignallingEnvironmentWhileSpencedoesnotexplicitlyaddresstheinfluenceofthesignalenvironmentontheout-comesofsignalling,thereseemstobeagrowinginterestinthesignallingenvironmentanditsoutcomes(Connellyetal.,2011a;ParkandPatel,2015;Taj,2016).ParkandPatelarguethatinsituationswheredecisionmakerslackclearinformationduetoenvironmentaldistortionornoise,theyoftenrelyoninformationaboutsignalsendersinconjunctionwithotherinformationfromtheenvironmentinordertoestablishdiscerniblepatternstoevaluatethesignalsenders(ParkandPatel,2015).Itisassumed,forexample,thatthesignallingenvironment,eitherwithinanorganizationorbetweenorganizations,canaffecttheextenttowhichsignallingreducesinformationasymmetry(Connellyetal.,2011a).Morespecifically,howfarenviron-mentaldistortionsmayoccurandinhowfarthoseenvironmentaldistortionshavethepotentialtolowertheobservabilityofasignalarediscussed(Connellyetal.,2011a).Environmentaldistortionsmayoccurinsituationswhere,forexample,themediumforpropagatingthesignalreducestheobservabilityofthesignal.Also,thepresenceofothersignalreceivers(externalreferents,thirdparties),whoalsointerpretthesignalsandpublishtheirinterpretationresults(forexample,universityrankingsforevaluatingeducationalquality)mayinfluenceordistortsignalling.Distortionoccurswhenasignalisinterpretedbyothersinaparticularway,andanindividualwhoisunsureabouthowtointerpretthesignalmaylooktoimitationasameansofdecisionmaking(alsoknownasthe‘bandwagoneffect’)(Connellyetal.,2011a).Also,ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

475Signallingtheory457theshareofmorehonestsignallersormoredeceptivesignallersonthemarketmayincreaseordecreasesignalreliability(Connellyetal.,2011a).Inaddition,unintendedsignalsmayincreasethenumberofsignalstoevaluateandinterpret(fromthereceiver’spointofview).Hence,providingcountersignals(signalsissuedbythereceiver)mayhelptoreducenoise,tosortoutrelevantsignalsandimprovetheirinterpretation(Taj,2016)KEYCONDITIONSANDASSUMPTIONSTheapplicationofsignallingtheoryrequiresathoroughunderstandingofkeyconditionsandassumptions(Wacker,1998).Theseconditionsandassumptionscanbebrokendownintoconditionsandassumptionsrelatedtobehaviouralaspects,thosereferringtofundamentalmechanismsrootedinsignalling,andthoserelatedtothemarketstructure.Behaviouralelementsareconcernedwith:(1)rational;and(2)risk-neutralhumanbehaviourindecisionmaking.Conditionsandassumptionstargetingfundamentalmechanismsrootedinsignallingtheoryincludetheexistenceof:(3)exanteinformationasymmetry;(4)expostobservabilityofhiddenqualityattributes;(5)(exante)payofftransparency;(6)bondvulnerability;and(7)inverserelationofsignallingcoststohiddenqualityattributes.Also,inSpence’sjobmarketmodel,marketsconsistof:(8)numerous(competing)signallerswithvaryinghiddenattributes;(9)repeatedfeedbackloops;and(10)areceivingentitythatpersistsinthemarketovertime.Signallingtheoryismosteffectivelyappliedunderthosestrictconditions.Hence,thesecondi-tionsmustbecarefullyexaminedineachcase.Althoughtheconditionsunderwhichsignallingmaybeanappropriatestrategyarewelldescribedintheliterature,itseemsasthoughthereisalackoftestingthoseconditionsanddescribingthosetests(Berghetal.,2014;Connellyetal.,2011a).TheconditionsandassumptionsarepresentedinTable29.2.Rational(a)andRisk-NeutralBehaviour(b)Itisassumedthatallmarketparticipantsarerationalwealthmaximisers(Morris,1987).Hence,individualsareactingintheirowninterest,tryingtorealizethehighestpossiblebenefitforthemselves.Onemightcriticizethatthisbehaviourisatleastcomplementedbybehaviourinwhichindividualsalsoactintheinterestoftheirorganizationsorinvestors(Morris,1987).IntheSpencejobmarketexample,thiswouldmeanthatindividualsarerationallyinvestingineducation.Iftheydidnotinvestinthesignal,theywouldincurlowerwages(Spence,1973).Also,potentialapplicantswillrationallyselectthemselvesoutofcertainjobmarkets.Asaconsequence,certainsignalconfigurationswillneverappearinthesemarketsandwillneverreachthereceivers.Thissituationmightresultininformationallybaseddiscrimination(Spence,1973).Itisalsoassumedthatthereceiversmakerisk-neutraldecisions(Spence,1973).Thismeansthatthemarketparticipants(andespeciallythereceivers)areindifferenttoriskwhenmakinganinvestmentdecision.Hence,theywouldexclusivelyinvestinassetswiththehighestexpectedyield.Risk-aversereceiverswouldpreferloweryieldswithknownrisks,asopposedtohigh-riskreceiverswhowouldpreferhigheryieldswithunknownrisks.WhileSpenceisawareoftheinfluenceofriskontheoutcomeoftheinvestmentdecision,heexplicitlyexcludesriskanditsinfluencefromfurtherconsiderations(Spence,1973).ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

476458Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable29.2ConditionsforapplyingsignallingtheoryConditionsExplanation(remark)ReferencesOverallconditions;humanbehaviouralaspectsRationalbehaviour(wealthItisassumedthatallmarketparticipantsarestrivingforthehighest(Morris,1987;Spence,maximization)possiblebenefitwithlimitedalternativecoursesofaction.1973)Risk-neutralbehaviourItisassumedthatthemarketparticipants(andespeciallythereceivers)(Spence,1973)areindifferenttoriskwhenmakinganinvestmentdecision.ConditionsrelatedtofundamentalmechanismsExanteinformationasymmetryItisassumedthatinformationasymmetryexistsbetweeninteracting(Berghetal.,2014,parties(betweensignallingandreceivingentities)beforeadecisionisto2019;Kirmaniandbetaken.Thesignallerisbetterinformedthanthereceiver.ThereneedsRao,2000;Morris,tobeaninformationproblemandinformationscarcity.1987)ExpostobservabilityofhiddenItisassumedthathiddenqualityattributesarediscernibleafteradecision(KirmaniandRao,qualityattributeshasbeentaken.Itneedstobenotedthattheremaybeacertaintimelag2000;Spence,1973,beforehiddenqualityattributescanberevealedandconfirmed.2002)ExantepayofftransparencyItisassumedthatsignallersandreceivershavesufficientknowledge(KirmaniandRao,ofcosts(forexample,signallingcosts)andotherpayoffs(forexample,2000)signallingcostscomparedtoanypayments/returnoninvest).BondvulnerabilityItisassumedthat‘bonding’occurswhensomeassetorwealthis(Connellyetal.,forfeitedunderspecifiedconditions.Forbondingtobeeffective,market2011a;Ippolito,1990;conditionsmustallowfirmstoacquireabondthatissufficientlylargetoKirmaniandRao,altertheincentivestocheat.Costsofsignalsmustbestructuredinsuch2000)awaythatdishonestsignalsdonotpay.SignallingcostsareinverselyItisassumedthatsignallingcostsarelowerforthosesignallers(Morris,1987;Spence,relatedtoqualitywithhigh-quality/high-abilityattributesandthatsignallingcostsare1973,2002)significantlyhigherforthosesignallerswithlow-quality/low-abilityattributes.ConditionsrelatedtothemarketstructureMultiplecompetingsignallingItisassumedthattherearecompetingsignallingentitiesonthemarket,(Connellyetal.,entitieswhichexhibitvaryinghiddenqualities.Hence,marketsconsistof2011a;Morris,1987;signallerswithheterogenoushiddenqualitiesorabilitiesandthusSpence,1973,1976,competinginterests.2002)RepeatedsignallingcyclesItisassumedthatsuccessivewavesofnewsignallerscomeintothe(Spence,1973)(feedbackloops)market.Thisaltersreceivers’conditionalprobabilisticbeliefs,andleadstoachangeinofferedpaymentstructures.Thisleadstochangesinsignallingbehaviourwithrespecttosignalchoicechanges(onthesignaler’sside).Afteradecisionhasbeentaken,newdatabecomeavailabletothereceiversthroughconfirmedsignals.Eachcycle,then,generatesthenextone.PersistenceofreceivingentityItisassumedthatthereisacertaincontinuityprovidedbythereceiver’s(Spence,1973)inthemarketovertimetogatherpersistentpresenceinthemarket.experienceExAnteInformationAsymmetry(c)Itisassumedthatinformationasymmetryexistsbetweeninteractingparties(betweensignal-lingandreceivingentities)beforeadecisionistobetaken.Typically,thesignallerisbetterinformedthanthesignalreceiver.Informationasymmetryoccurswhenonepartyhasaccesstoprivilegedorprivateinformation.Thisinformationmaybeproprietary,belegallyprotected,orChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

477Signallingtheory459arisefromspecializedassetsorexpertise,andcanbethesourceofacquisitiongainsandcom-petitiveadvantage(Berghetal.,2019).Therearetwotypesofinformationwhereasymmetryisofparticularinterest.First,informationasymmetryisimportantwhenonepartyisnotfullyawareofthecharacteristicsorattributesofanotherparty.Second,informationasymmetryisimportantwhenonepartyisnotfullyawareofthebehaviourortheintentionsofanotherparty.Connellyandcolleagueshighlightthatstudieswhichexplicitlyinvokesignallingtheoryfocusontheroleofsignallinginunderstandinghowpartiesresolveinformationasymmetriesaboutlatentandunobservablequalityattributes(Connellyetal.,2011a).Morespecifically,thisinformationasymmetryonlypersistsexantetoadecision,sinceSpenceassumesthatthosehiddenqualityattributescanbeconveyedthroughasignal,andcanbeconfirmedexposttoadecision.Itneedstobenotedthatsignallingmostlyreferstoactionsthatshouldinfluencedesiredoutcomesconveyingpositivesignals.Hence,thereisanimplicitassumptionofpositiveintentionsonthesignaller’sside(Reueretal.,2012;Taj,2016;Wellsetal.,2011).Inpurchasingandsupplysituationsexanteinformationasymmetryisatypicalcharacteristicbeforeenteringintocontractualrelationships.ExPostObservabilityofHiddenQualityAttributes(d)Iftheexpostinspectiondoesnotunambiguouslyobserveandconfirmhiddenqualityattrib-utes,receiverswillnotbeabletoformoradvancetheirconditionalprobabilisticbeliefswithrespecttothequestionofhowcredibleasignalconveysinformationonhiddenqualityattributes.Hence,signallingislessusefulforsituationsinwhichviolationsofqualityclaimscannotbeunambiguouslyestablishedaftertheinvestmentdecisionhasbeenmade.Also,signallingseemslessfeasible,forexample,forcredenceproductsorservices,astheirqualityisnotdiscernableaftertheinvestmentdecisionandisnotdiscernableevenafteruse(KirmaniandRao,2000).However,thereseemstobenosuggestionofhowmucheffortto‘invest’insignalconfirmation.ExAntePayoffTransparency(e)Signallingmodelsareoftenexposedtocriticismwhenitcomestopayofftransparency.Payofftransparencyoccurswhenthesignallernotonlyknowstherequiredsignallingcoststoobtainaspecificsignal,butalsoknowsthepotentialpaymentstructuresofsignalreceivers.InSpence’sexample,thejobapplicantwouldnotonlybeawareofinvestmentsrequiredineducationaladvancementsbutwouldalsoknowtheofferedwageschedulesofpotentialemployers(KirmaniandRao,2000).BondVulnerability(f)‘Bondvulnerability’occurswhensomeassetorwealthisforfeitedunderspecifiedconditions(Ippolito,1990).Theassetorwealththatisatriskisoftenreferredtoasabond(HoandWei,2016).Forbondingtobeeffective,marketconditionsmustallowfirmstoacquireabondthatissufficientlylargetoaltertheincentivestocheat(Ippolito,1990).Inotherwords,costsofsignalsmustbestructuredinsuchawaythatdishonestsignalsdonotpay(Connellyetal.,2011a).Hencethereceiver’sbeliefthatthesignallermadeasignificantinvestmentbysendingChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

478460Handbookoftheoriesforpurchasing,supplychainandmanagementresearchthesignal;andtheinvestmentisatriskifafalsesignalissent.Wellsetal.(2011)arguethatafalsesignalisthusprohibitivelyexpensiveforasignallerwithlow-qualityproducts.SignallingCostsareInverselyRelatedtoQuality(g)Forasignaltohelpalleviateasymmetricinformation,itneedstobeeffective(Spence,1973,p.367).Spencepointsoutthatacriticalassumptioninhismodelisthateffectivesignallingdependsuponthenegativecorrelationofcostsandproductivities(Spence,1973,p.358).Heemphasizesthatifthisconditionfailstohold,everyapplicantwillinvestinthesignalinthesameway,andasaconsequenceapplicantscannotbedistinguishedfromoneanother(Spence,1973,p.358).Inhismodel,potentialemployeeswithlowproductivecapabilitiesandcapaci-tiesneedtoinvestataleveldisproportionatelyhigherthanjobapplicantswithhighproductivecapabilitiesandcapacities(Berghetal.,2014,p.1337).Aspreviouslystated,individualsmakerationalinvestmentchoicesconcerningeducationandtheyselectsignalstomaximizethedifferencebetweenthesignallingcostandtheofferedwageschedule.Duetoadifferentcoststructureandlowerexpectedreturns,low-abilityemployeeswillmostlikelynotinvestinthesamesignalashigh-abilityemployees.Consequently,onecanconcludethattherearesignalsthatfallindifferentcostandreturnstructures(KarasekandBryant,2015).Spenceaddedthateffectivesignallingdependsnotonlyuponthenegativecorrelationofcostsandproductivitiesbutalsoupontherebeinga‘sufficient‘numberofsignalswithintheappropriatecostandreturnstructures(Spence,2002,p.437).MultipleCompetingSignallingEntities(h)Spencepointsoutthatmultiplesignallingentitiesthatexhibitvaryinghiddenqualitiesshouldbecompetingfortheinvestmentdecisionofthereceivingentity.InSpence’smodel,atleasttwodifferentgroupsofsignallerswithdifferenthiddenqualityattributes(highabilityversuslowability)aredistinguishedfromoneanother.Thisconditioniscrucialforcreatingaseparat-ingequilibriumandforhelpingtoderiveandexplaininvestmentdecisionsinoneoptionovertheotheroption(Spence,1973,1976,2002).However,thesourcesofsignalsandthespecificsignalssentimplythatreceiversneedtocopewithavastnumberofsignalsinaparticulardeci-sionmakingsituation.Whilesignallingtheoryimplicitlyimpliesthatreceiverscandealwithanendlessnumberofsignals,itseemsmorerealisticthatreceiversrelyonasmallersubsetofthesesignalsandmustmakesenseofthesesubsets(Droveretal.,2018).Also,beingcon-frontedandhavingtoselectbetweenmultiplecompetingsignallingentities,namelysuppliers,isacommonsituationinpurchasingandsupplymanagementdecisions.RepeatedSignallingCycles(FeedbackLoops)(i)Itisassumed,thatsuccessivewavesofnewsignallerscomeintothemarket,whichaltersreceivers’conditionalprobabilisticbeliefs,changesofferedpaymentstructures,changessignallingbehaviourwithrespecttosignalchoicechanges,andafteradecisionhasbeentaken,newdatabecomeavailabletothereceiversthroughconfirmedsignals.Eachcycle,then,generatesthenextone(Spence,1973,1976,2002).ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

479Signallingtheory461PersistenceofReceivingEntityintheMarketOverTimetoGatherExperience(j)Inordertoconfirmasignal,Spenceassumesthatthereceiverofthesignalneedstostayactiveinthemarketovertime.Thepersistenceofthereceiverinthemarketovertime(Spence,1973)willnotonlyhelptoconfirmincomingsignals,butalsodetermineanddevelopthereceiver’sconditionalbeliefsaboutsignalcredibility.Thiswillthenleadtoadjustmentsinofferedpaymentstructuresandwillthushavethepotentialtoalterselectedsignals.Hence,stayingactiveinthemarketwillhelpthereceivertoentersubsequentlearningcycles.Thismightalsoleadtoasituationinwhichthereceivingentitycancompareawidevarietyofsignalsinordertoenhancedecisionswithexperience.DOMAINWHERETHETHEORYAPPLIESAlthoughthetheorywasinitiallydevelopedinthelabourmarketbySpence(1973,2002),signallingisseenasageneralphenomenonapplicableinanymarketsufferinginformationasymmetry(Morris,1987,p.47;Spence,1973,p.356).Therefore,studiesciting‘signallingtheory’are(forexample)availableintheliteratureonstrategy,corporategovernance,entre-preneurship,qualitymanagement,marketing,investmentandfinancedecisionsandhumanresourcesmanagement(Connellyetal.,2011a;Taj,2016).Signallingtheoryalsofounditswayintoresearchonbuyingdecisions,mostlyrelatedtoabusiness-to-consumercontextandoftendiscussedfromamarketingpointofview.Hence,signallingisoftenemployedbythosewhoofferproductsandservicestothemarket,andsignalsareinterpretedandusedforbuyingdecisionsbyconsumers(AtkinsonandRosenthal,2014;Cheungetal.,2014;EliashbergandRobertson,1988;EtzionandPe’er,2014;Hossainetal.,2018;KirmaniandRao,2000;Mavlanovaetal.,2012;Raoetal.,1999;Wellsetal.,2011).Adoptionofsignallingtheoryforpurchasingdecisionsinabusiness-to-businessenvironmentorinthebroadersupplychaincontextseemstofollowafarslowerpace(Bakshietal.,2015;Chengetal.,2020;HoandWei,2016;Jonesetal.,2010;Shaoetal.,2020;SimaensandKoster,2013;TerlaakandKing,2006;WoltersandSchuller,1997).Besidesapplyingsignallingtheoryinmanagementresearch,thereisalsoextensiveuseofsignallingtheoryinbiology,anthropologyandeconomics(Connellyetal.,2011a).THEORETICALPREDICTIONS(FACTUALCLAIMS)Theessentialpredictivemechanismthatdrivesthedifferentexplanationsassociatedwithsig-nallingtheoryistheexistenceofa‘separatingequilibrium’(Berghetal.,2014,p.1335),andthatinvestinginthesignalpaysoffforthehigh-abilityapplicant(alsocalledthe‘sheepskineffect’).Againstthisbackground,signallingtheoryhelpstostipulateanswerstoquestionssuchas:(1)Howmuchtime,energyandmoneyshouldbeinvestedbythesignallingentityintothesignal?(2)Howfarcanthereceivingentitytrustthesignaltobecredible?and(3)Underwhatcircumstanceswillthesignallingequilibriumbreakdown?Signallingtheoryprovidesaunique,practicalandempiricallytestableperspectiveonproblemsofsocialselectionunderconditionsofimperfectinformation(Connellyetal.,2011a,p.63).Thus,signallingtheorycanhelptofindwaystoreduceexantetransactioncostsbyemployingeffectivesignals.Also,sig-ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

480462Handbookoftheoriesforpurchasing,supplychainandmanagementresearchnallingtheorycanbeseenashelpfulinloweringexposttransactioncoststhroughconfirmedsignalsovertime.HOWHASTHISTHEORYBEENUSED?Asalreadypointedout,signallingismosteffectiveunderconditionsinwhichprepurchaseinformationaboutqualityattributesisscarce,post-contractinformationaboutqualityattrib-utesisunambiguous,partiesareinformedaboutthepayoffs,andthebondisvulnerable(KirmaniandRao,2000).Inthearticlesonpurchasingandsupplychainmanagement,threecontent-relateddirectionshavesofarbeentakenintheapplicationofsignaltheory.Thefirstdirectionfocusesonbuildinglong-termrelationshipsbetweensuppliersandbuyers(Jonesetal.,2010;WoltersandSchuller,1997).WoltersandSchullerexaminehowsignalscanbeusedforbuildingtrustandcommitmentexantetoenteralong-termbuyer‒supplierrelationshipintheautomotiveindustry.Theyassumesignalssuchasjointtargets,agreementsoncostsharingmechanisms,modellinglifetimecontracts,dualandsinglesourcing,earlysup-plierinvolvementandsuppliercoaching.Theyarguethattheoriginalequipmentmanufacturer(OEM)issignallingitsdesireandwillingnessforalong-termcooperativepartnershipwithitscounterpart.Theaimofsignallinginthiscontextwouldbetoinfluencethedecisionofasuppliertoenterintosuchalong-termcollaboration.Thefindingsarebasedontwoselectedcasestudies(WoltersandSchuller,1997).Jonesetal.alsoexaminetrust-relatedsignals,theirmanifestationandtheirinfluenceonenteringintoalong-termpartnership.Signalscreatingtrustandthataresentbythepotentialsupplierstoabuyercouldbe,forexample,apromisetoperform(qualityandon-timedelivery),aprofessionalrelationship(agent-to-agentdialogueandcommunications),openness(sharingschedules,forecasts,costinformation),benevolentcollaboration(processinvestment,relationshipinvestmentandsharingrisks/rewards)andempathy(actionstoaidapartner,actionstoincludeapartnerindecisionmaking).Jonesetal.arguethatmeasuringthesefivesignalsnotonlycreatesamoreholisticviewontrustbutalsoprovidessomeguidanceregardingwhereeffortsneedtobemadetoimprovetrust.Theirfindingsarebasedonalarge-scalesurveydesignedtocoverthemanufacturingindustryinNorthAmerica(Jonesetal.,2010).Bothpublicationsemploymultiplesignalsthatneedtobeemployedinconjunctionwithoneanothertorealizealong-termpartnership.Thesecondstranddealswiththeprocurementofservices,performance-orientedcontractsandrecoveryactionsafterapoorlyperformedservice(Bakshietal.,2015;Chengetal.,2020;HoandWei,2016).Bakshietal.examinethesignalreliabilityofanewlydevelopedproductandrelatedafter-salesservices.Therefore,theyareinvestigatingtheinteractionbetweenreliabilitysignalling(privateinformation)andthevendor’sdiscretionaryinvestmentinsparesinventory(privateaction).Theirfindingsarebasedonamoreformal,mathematicalmodellingapproach(Bakshietal.,2015).HoandWeiinvestigatehowfarpastexperienceininformationtechnology(IT)servicesoutsourcingservesascuesthataffectperceivedservicequality.Theempiricalfindingsvalidatetheimportanceofdisseminationandinvestmentofpastexperi-encesforITprovidercompaniesandgiveacueofutilizingproviders’experiencestoalleviateuncertaintywhenassessing.TheresultsarebasedonasurveyissuedandcollectedinTaiwan(HoandWei,2016).Chengetal.framesupplier-induceddisruptionsasnegativesignalsfromsuppliers(signallers)tobuyers(receivers)andsuppliers’recoveryactionsaspositivesignals.Usingthecriticalincidenttechniquetocapturedisruptionevents,theyfindthatthemessagesChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

481Signallingtheory463ofsuppliersconveyedthroughtheirrecoveryactionsmayormaynotbe‘loudandclear’,dependingonthecontext(Chengetal.,2020).Thethirddirectionisdevotedtosignallingthatentailscertificatesofqualityorisconcernedwithsustainabilityreportingorsociallyconsciouspurchasing(Shaoetal.,2020;SimaensandKoster,2013;TerlaakandKing,2006;Thomasetal.,2021).TerlaakandKingusean11-yearpanelofUnitedStatesmanufacturingfacilitiestotestwhethercertificationwiththeISO9000qualitymanagementstandardgeneratesacompetitiveadvantage.Theirresultssuggestthatcertifiedfacilitiesgrowfasteraftercertification,andthatoperationalimprovementsdonotaccountforthisgrowth.Resultsalsoindicatethatthegrowtheffectisgreaterwhenbuyershavegreaterdifficultyinacquiringinformationaboutsuppliers(TerlaakandKing,2006).SimaensandKosterdealwiththegrowingawarenessof(un)sustainableoperations.Throughthelensofsignallingtheory,andbasedondocumentanalysis,theyexaminetheinfluenceofsustainabilityreporting(asasignal)tostakeholdersandbuyers(SimaensandKoster,2013).Shaoetal.exploretwomechanisms‒signallinganddisclosure‒whichafirmcanusetocommunicateitssourcingdecisionstoconsumersinasettingwhereonlysomeconsumerscareaboutthefirm’ssourcingpractices.Theirfindingshighlighttheimportanceoftransparencyandsociallyconsciousconsumptionindrivingresponsiblesourcing(Shaoetal.,2020).Thomasetal.decomposesocialsustainabilityintodimensionsofemployeewelfareandphilanthropytodeterminetheireffectsonsupplierselection.Theresults,derivedfromavignette-basedexper-imentinatransportationcontext,showthatbuyershavesignificantpreferencestoselect,trustandcollaboratewithsupplierswhichhavedesirablelevelsofemployeewelfare,philanthropyandpricing.Thomasetal.assumethatthesefindingshelptorefinetheunderstandingofsocialsustainabilityconceptualizationsandsupplierselectioncriteria(Thomasetal.,2021).Ifonefocusesexclusivelyondyadicrelationships(asdonebySpence),theabove-mentionedconstructsandtheexistingcontributionstosignallinginthepurchasingandsupplymanage-mentresearchcanbetransferredintothegraphicinFigure29.3.Therepresentationsumma-rizesthesignallingactivities(signalling)ofbuyers(receivers)andsuppliers(signallers),thatareinteractingonsupplymarkets(signallingenvironment).Thegraphicindicatesthatsignalsalsorequireacertaincommunicationchannel(notoriginallypartofSpence’stheory)totrans-mitthesignal.Intheageofdigitizationanddigitalizationthosemeansofcommunicationareassumedtohaveanimpactonthesignallingactivities(forexample,intermsofavailabilityofinformation,increasedinformationasymmetry,signallingfrequency,andnoiseanddistor-tionsfromthesignallingenvironment).Thevisualrepresentationalsopointsoutthedifferenttypesofinformationasymmetries(IandII)thatoccur,dependingonwhichorganizationsaretakingontheroleofthesignallingand/orthereceivingentity.Theexamplesprovidedinthegraphicrefertoeffortstosignalone’seffortsandone’scommitmenttosustainabilityinabuyer‒supplerrelationship.OUTLOOKONFUTURERESEARCHOPPORTUNITIESWhatseemsinterestingtonote,whenconsideringtheabove-mentionedthreeresearchstrands,isthattheyallseemtofocusondyadicrelationshipsbetweenasignallingentity(supplier)andabuyingentity(buyer).WhilethisdyadicinteractionisdeeplyrootedinSpence’ssignallingtheory,itdoesnotconsiderasupplychainperspectiveoranindustrialnetworkperspective(Miemczyketal.,2012).Thesupplychainperspectivewouldextendthefocustomultiple,ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

482464Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFigure29.3Overviewofkeyconstructsofsignallingtheoryinadyadicpurchasingandsupplymanagementcontextinterconnectedbuyer‒supplierdyads,withthesupplychainultimatelyspanningfromoriginalrawmaterialextractorstoafocalorganizationanddowntofinalendcustomers.Thissupplychainperspectivecouldenhancethecurrentviewonsignallingbyquestioningwhetherandhowsignalsarepassedandtreatedinasupplychain.Fromthebuyer’spointofview(forexample,asthefocalorganizationinasupplychain)thiswouldresultinreceivingandpro-cessingdirectsignalsfromitssuppliersandindirectsignalsfromitssuppliers’suppliers.Thiswouldnotonlyhelptoalleviatedirectinformationasymmetrywithitsimmediatesuppliers,butwouldalsohelptoalleviateinformationasymmetryfurtherupstreaminthesupplychain.Fromthesuppliers’pointofview(tier1ton)thiswouldalsoposethequestionofwhichsignaltoinvestin(intermsofsignalchoice)andhowmuch(inordertoimproveindividualbuyer‒supplierrelationships)orifthereisawaytocollectivelyinvestinasignal(intermsofriskorburden-sharingstrategyinasupplychain,andinordertogainthecontractwithothercompetingsupplychains).Additionalquestionsarisewhenconsideringtheperspectiveofindustrialnetworks,thatinvolveadditionalstakeholders(otherthanalreadyinvolvedinthesupplychain),andtheirpotentialinfluenceonsignalling(forexample,assignalcoordinatorsonbehalfofmultiplesuppliers,orasentitiesimposingnoiseinthesignallingenvironment).Expandingthelevelofanalysisseemspromisingtoadvancesignallingtheoryandseemsrelevant,forexample,intheareaofsustainablesupplychainsandsustainablesupplychainmanagement,whereacompany’ssustainabilityprofilerequiresaviewofnotonlythecompa-ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

483Signallingtheory465ny’sdirectsuppliersbutalsoitsextendedsupplychainoreventhewidernetworkinwhichitoperates(Miemczyketal.,2012;SimaensandKoster,2013;Taoketaoetal.,2018).Expandingthelevelofanalysisfromdyadictonetwork-likearrangements(supplychains)mightalsoincludeexaminingsignallinginbuyer‒buyerrelationshipsorinsupplier‒supplierrelationships.Inthiscontext,signallingtheorycanbeusedtoexaminetheformationofbuyer‒buyercooperations(orsupplier‒suppliercooperations).Againstthisbackgroundonecouldmorecloselyexaminewhatsignalswouldhelptodistinguishsuitablefromunsuitablepartnersinordertocreatewin‒winrelationships.Atthispoint,itwouldbeparticularlyinterestingtoseewhethernotonlycostsavings(asacounterparttoSpence’sofferedwageschedules)candrivetheinvestmentinsignalsforjointpurchasingactivities,butalso‘softer’factors,suchassharedmarketknowledge,risksharingorpoolingofthesupplierbase(asfarasbuyer‒buyerrelationshipsareconcerned)(SchotanusandTelgen,2007;Schotanusetal.,2010;Walkeretal.,2013).Atthenextlowerlevel,theoverviewdevelopedbyWynstraetal.(2019)forthemostcriticaltopicsintheareaofpurchasingandsupplymanagementcanbeemployed.Theydistinguishfourmajorresearchareasonthebasisofalarge-scaleliteraturereview:strategicpurchasingandsupplymanagementactivities;tactical/operationalpurchasingandsupplymanagementactivities;enablersforsuccessfulpurchasingandsupplymanagementactivities;andbenefits/competitiveprioritiesofpurchasingandsupplymanagement(Wynstraetal.,2019).Theseactivitiesallrequireinvestmentdecisionsandthealleviationofpotentialinfor-mationasymmetries.Intheareaofstrategicpurchasingandsupplymanagement,decisionsrelatedtomake-or-buy,globalversuslocalizedsourcing,supplierrelationshipmanagement,supplierinvolvement(alsoinnewproductdevelopment),supplierdevelopmentorstrategiccostmanagementallofferinterestingstartingpointsforfutureresearch.Forexample,onecouldexaminetheuseoflifecyclecostswhentenderingcontractsandobtainingoffers,todeterminewhetherlifecyclecostsaresuitableasasignalformoreinnovative,moresustain-ableandlessmaintenance-intensiveproductsandservices,andwhatinfluencetheyhaveondecisionmakingandthereductionofinformationuncertainties.Intheareaoftactical/operationalpurchasingandsupplymanagementactivities,topicsthatoccurexantetoacontractualrelationshipcouldbeofinterest.Thisrelatestothesignalsthatareusedonbothsidesoftheaisletomakeaninformeddecision.Suchsignalscouldbedecla-rationsontheeconomicandtechnicalperformanceofsuppliers,self-declarationsintermsofsustainabilityactivities,orriskmanagementactivities,labelsandcertificates.Thosesignallingactivitiesgainadditionalimportancewhenthepotentialsupplierisofferinghighlyinnovativeproducts(where,forexample,othersignalssuchasreferencesareabsent).Intheareaofenablersforsuccessfulpurchasingandsupplymanagementactivities,topicssuchashumanresources(HR),developmentandtraining,informationandcommunicationtechnologies,orperformancemeasurementsystemsaresuitableentrypoints.InHRonecouldinvestigatewhatsignalsaresentbypotentialjobapplicantswhenitcomestodifferentrequiredcompetenceprofilesinpurchasingandsupplymanagement(Balsetal.,2019).Informationandcommunicationtechnologyisespeciallyinterestingagainstthebackgroundofdigitizationanddigitalization.Whiledigitizationmaytransformpreviouslyanalogousinformationintodataobjects,digitalizationreferstonewbusinessmodelsthatemployandexploitdata.Inapurchasingandsupplymanagementcontext,thiscouldresultinnewandautomateddecisionmakingalgorithmsonthebuyer’sside.Onthesupplier’ssidethequestionarisesofhowfarinvestmentsinsignals(forexample,intosignallinggooddataquality)maymakesense,andChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

484466Handbookoftheoriesforpurchasing,supplychainandmanagementresearchhowfardigitizationanddigitalizationintroducenoiseanddistortionsinthesignallingenvi-ronment.Intermsofperformancemanagementsystems,signallingbecomesrelevantwhenconsideringtheconditionofexpostsignalconfirmationthatisunambiguous.Intheareaofcompetitiveprioritiesofpurchasingandsupplymanagementonecouldques-tionhowtoensuretherealizationoftheseprioritiesbyalsousingsupplier-inducedsignals.Empiricalresearchinalloftheseareascouldfocusondeterminingwhetherandunderwhatconditionsorganizationswouldconsiderdifferentsignallingorsignal-enhancingstrategies,theefficacyof(combinationsof)thesestrategies,andtheperceptionsofinvolvedparties.Also,decisionsmaybesupportedbyprovidinginsightsintohowmuchtoinvest,inwhichsignal,withwhatsignaloutcome.Thesestrategiesare,again,notlimitedtotheadoptionofstandards,butalsoincludetheapplicationofreportingframeworksandengaginginothertypesofsustainability-relateddisclosures(Moratis,2018).Hence,signallingtheorymaybeinformativeforunderstandingorganizationalactivitieswithrespecttopurchasingandsupplymanagement,andmayhelptoimprovetheunderstandingofhowtoallocateresources(intermsofsignallingcosts).Intermsoftheoreticaladvancements,itcouldbebeneficial,similarlytowhatConnellyetal.andBerghetal.areproposing,toinvestigateeachoftheconstructsinmoredetailinthecontextofpurchasingandsupplymanagementinabusiness-to-business(B2B)envi-ronment.Answerstothequestions:Howcansignallersmanageaportfolioof(different)signalstomaximizecollectiveeffectiveness?,Howcanreceiversmeaningfullyaggregatesignalsinsequencesandpatterns?,Whatdifferenttypesofsignalsareused?,Howdoesfeedback-seekingbehaviorimprovethesignallingprocess?,Underwhichcircumstancesaresignallingequilibriarealized?,Whendonoisyenvironmentsdiminishsignalobservability?,Howcancompetingreceiversinjectnoiseintothesignallingenvironment?couldadvancetheunderstandingofeachoftheconstructs(Berghetal.,2014;Connellyetal.,2011a).Moreover,whatchangesariseiftheinformationasymmetryassumptionisrelaxed?Inthecaseofagencytheory,itsprimarymechanismsforsafeguardingagainstthehazardsofinformationasymme-try,suchasmonitoringbehaviourandoutcome-basedincentives,becomelessimportant,andinformationsignalsmightbecomethemainbasisforguidingexantecontractualagreements(Berghetal.,2019,p.149).Whatalsoseemsinterestinginthiscontextisifonechangestheunderlying(classic)agencyrelationshipfromsuppliertobuyer.Hence,inasupplyandpur-chasingcontext,thebuyerwouldbethebetter-informedactorandthesupplierwouldsufferinformationasymmetry.Thiscouldverywellbethecase,whenbuyingservices,suchasITormanagementconsultingservices.Inthosecases,thebuyerwouldneedtodecidetoinvestinacertainsignalinordertoalleviatetheinformationasymmetry,andtosubsequentlysteertheapplicationofrequired,specializedcompetences(oftheserviceproviders)(AxelssonandWynstra,2002;Lusch,2006;VargoandAkaka,2009).REFERENCESAtkinson,L.,andRosenthal,S.(2014).Signalingthegreensell:Theinfluenceofeco-labelsource,argu-mentspecificity,andproductinvolvementonconsumertrust.JournalofAdvertising,43(1),33–45.Retrievedfromhttps://doi.org/10.1080/00913367.2013.834803.Axelsson,B.,andWynstra,F.(2002).BuyingBusinessServices.Chichester:JohnWiley&Sons.ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

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488470Handbookoftheoriesforpurchasing,supplychainandmanagementresearchWu,C.W.,Reuer,J.J.,andRagozzino,R.(2013).Insightsofsignalingtheoryforacquisitionsresearch.AdvancesinMergersandAcquisitions,12(2013),173–191.Retrievedfromhttps://doi.org/10.1108/S1479-361X(2013)0000012010.Wynstra,F.,Suurmond,R.,andNullmeier,F.(2019).Purchasingandsupplymanagementasamultidis-ciplinaryresearchfield:Unityindiversity?JournalofPurchasingandSupplyManagement,25(5),100578.Retrievedfromhttps://doi.org/10.1016/j.pursup.2019.100578.Xu,X.,Zeng,S.,andChen,H.(2018).Signalinggoodbydoinggood:Howdoesenvironmentalcor-poratesocialresponsibilityaffectinternationalexpansion?BusinessStrategyandtheEnvironment,27(7),946–959.Retrievedfromhttps://doi.org/10.1002/bse.2044.Yasar,B.,Martin,T.,andKiessling,T.(2020).Anempiricaltestofsignallingtheory.ManagementResearchReview,1–27.Retrievedfromhttps://doi.org/10.1108/MRR-08-2019-0338.SUGGESTEDFURTHERREADINGFormoreinformationoninformationasymmetry:Bergh,D.D.,Ketchen,D.J.,Orlandi,I.,Heugens,P.P.M.A.R.,andBoyd,B.K.(2019).Informationasymmetryinmanagementresearch:Pastaccomplishmentsandfutureopportunities.JournalofManagement,45(1),pp.122–158.Retrievedfromdoi:10.1177/0149206318798026.Goodliteraturereviewsontheapplicationofsignalingtheory:Bergh,D.D.,Connelly,B.L.,Ketchen,D.J.,andShannon,L.M.(2014).Signallingtheoryandequilib-riuminstrategicmanagementresearch:Anassessmentandaresearchagenda.JournalofManagementStudies,(December).Retrieved25October2014fromdoi:10.1111/joms.12097.Connelly,B.L.,Certo,S.T.,Ireland,R.D.,andReutzel,C.R.(2011).Signalingtheory:Areviewandassessment.JournalofManagement,37(1),pp.39–67.Retrieved16July2014fromdoi:10.1177/0149206310388419.Taj,S.A.(2016).Applicationofsignalingtheoryinmanagementresearch:Addressingmajorgapsintheory.EuropeanManagementJournal,34(4),pp.338–348.doi:10.1016/j.emj.2016.02.001.ChristianvonDeimling,MichaelEßig,andAndreasH.Glas-9781839104503DownloadedfromPubFactoryat05/28/202209:11:26AMviaColumbiaUniversityLibrary

48930.PortfoliotheoryCeesJ.GeldermanINTRODUCTIONTheworkofMarkowitzintheearly1950sistheoriginofportfoliotheoryforinvestmentpurposes.Portfolioapproachesareusedformanagementproblemsinvariousfieldsanddis-ciplines.Forbusinesspurposes,portfolioapproacheshavebeendevelopedforapplicationsininvestmenttheory,strategicmanagement,marketingandpurchasingmanagement.Managingsupplierrelationsisincreasinglyconsideredasastrategicallyimportantactivityforthefirm.Intheory,therearemanydifferenttypesofbuyer‒supplierrelationships.Inpractice,companiesneedavarietyofrelationships,eachprovidingitsdifferentbenefits.Purchasingprofessionalsshouldhavethecapacitytocopewithavarietyofrelationships,tobehandledindifferentiatedways.Companiesneedavarietyofrelationships,eachprovidingitsdifferentbenefits,wherenogeneralbesttypeofrelationshipexists(YoungandWilkinson,1997;GaddeandSnehota,2000).Obviously,notallsuppliersaretobedealtwithinthesameway.Thisgivespurchasingmanagersthetaskofdevelopingandexecutingasetofdifferentiatedsupplierstrategies.Theneedfordifferentiatedsupplierstrategiesrequiressomesortofclassification(LilliecreutzandYdreskog,1999).Purchasingportfolioanalysisisconsideredasaparticularlyusefultool,developingandselectingdifferentiatedpurchasingandsupplierstrategies.KEYCONCEPTSANDDEFINITIONSAportfolioreferstoacollectionofdifferentbutconnecteditems.Theitemsmaybeobjectsorsubjects.Ingeneral,theportfolioconceptfocusesontheinterdependenciesamongtheobjects/subjectsandemphasizesanintegratedapproach(Turnbull,1990).Theportfolioconceptstressestheimportanceofthewholeratherthantheparts.Itreflectstheimportanceforbalanceinacollectionofindividualelements.Asaconsequence,itallowsfordifferentiationanddiversification,inanaimforbalanceandanoptimaluseoflimitedresources.Wedefineaportfoliomodelas‘atoolthatcombinestwoormoredimensionsintoasetofheterogeneouscategoriesforwhichdifferent(strategic)recommendationsareprovided’(Gelderman,2003,p.21).Threebasicelementsaretoberecognizedinthisdefinition:dimensions,categoriesandstra-tegicrecommendations.Theuseoftheportfoliomodelimpliestheclassificationofobjects/subjects,usuallypresentedintheformofatwo-dimensionalmatrix.Thebasicideaisthatthepositionsoftheunitsonthegridorinthematrixshoulddeterminetheformulationofthemostappropriatestrategy(YorkeandDroussiotis,1994).Modelsandtoolsthatdonotprovideguid-anceformanagementdecisionsaremerelyclassificationschemes,notportfoliomodels.Inpurchasing,classificationtoolscanbeseenasthepredecessorsoftheactualportfoliomodels.471CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

490472Handbookoftheoriesforpurchasing,supplychainandmanagementresearchPORTFOLIOTHEORYPortfoliotheoryisessentiallyconcernedwiththecollectivereturnsfromtheuseofassetstogetherwiththeirpossibleredistributionovervariousoptionsatthediscretionofmanage-ment.How‘assets’,‘returns’and‘options’aredefineddependsontheareaofapplication(Yorke,1984,p.9),Portfoliotheoryhasitsrootsininvestmenttheory.TheworkofMarkowitzintheearly1950sistheoriginofmodernportfoliotheoryforinvestmentpurposes.Balancingtheobjectivesofhighyieldandlowrisk,theportfolioapproachfocusesontheefficientallo-cationoflimitedresources.FurtherdevelopmentfromMarkowitz’sportfoliotheorygaverisetowhatisknownasmodernportfoliotheory(Sharpe,1963;1964).Portfoliotheoryhasbeenconsideredbothanormativemethod(providingrecommendationsforportfolioselection)andapositivemethod(providinghypothesesaboutinvestmentbehaviour)(Castroetal.,2015).Intheearly1950stheinvestmentcommunitytalkedaboutrisk,buttherewasnospe-cificmeasureforthiskeyconcept.Investorshadtoquantifyriskforinvestmentdecisions.Markowitz(1952)derivedtheexpectedrateofreturnforaportfolioofassetsandanexpectedriskmeasure.Heshowedthatthevarianceoftherateofreturnwasausefulmeasureofportfoliorisk,andhederivedaformulaforcomputingthevarianceofaportfolio.Markowitzshowedthat:●Theexpectedrateofreturnofaportfolioistheweightedaverageoftheexpectedreturnfortheindividualinvestments.●Thestandarddeviationofaportfolioisafunctionnotonlyofthestandarddeviationfortheindividualinvestment,butalsothecovariancebetweentheratesofreturnforallthepairsofassetsintheportfolio.Inalargeportfolio,thesecovariancesaretheimportantfactors.Markowitz’sformulanotonlyindicatedtheimportanceofdiversifyinginvestmentstoreducethetotalriskofaportfolio,butalsoshowedhowtodiversify.TheMarkowitzmodelisbasedonseveralassumptionsregardinginvestorbehaviour(ReillyandNorton,2017):1.Investorsconsidereachinvestmentalternativeasbeingpresentedbyaprobabilitydistribu-tionofexpectedreturnsoversomeholdingperiod.2.Investorsmaximizeone-periodexpectedutility,andtheirutilitycurvesdemonstratedimin-ishingmarginalutilityofwealth.3.Investorsestimatetheriskoftheportfolioonthebasisofthevariabilityofexpectedreturns.4.Investorsbasedecisionssolelyonexpectedreturnandrisk,sotheirutilitycurvesareafunctionofexpectedreturnandtheexpectedvarianceofreturnsonly.5.Foragivenrisklevel,investorspreferhigherreturnstolowerreturns.Similarly,foragivenlevelofexpectedreturn,investorspreferlessrisktomorerisk.Undertheseassumptions,aportfolioofassetsisconsideredtobeefficientifnootherportfoliooffershigherexpectedreturnwiththesameorlowerrisk,orlowerriskwiththesame(orhigher)expectedreturn.Markowitz’sconclusionisthatrationalinvestorswould(orshould)wanttoselect‘efficientportfolios’,thatisportfolioswithaminimumofrisk(variance)foragivenexpectedreturn,orwithamaximumexpectedreturnforagivenrisk(variance).CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

491Portfoliotheory473NowadaystheMarkowitzformulaisstillbeingusedasthebasisformoderninvestmenttheoryandinvestmentpractice.Theconsequencesarefar-reachingandprovidemuchguid-anceforinvestmentdecisions.Themostimportantimplicationisthatdiversificationreducesvariabilityandrisk.Thegreatestpayofftodiversificationcomeswhenstocks(orotherassets)arenegativelycorrelated(BrealyandMyers,2012).Whenthereisaperfectnegativecorre-lation(–1)betweentwoassets,theoverallvarianceoftheportfolioiszero(0).Thiswouldbearisk-freeportfolio(ReillyandNorton,2017).Investorsareadvisednottoinvestalltheirmoneyintoonestock,buttoreducetheirriskbydiversification.Investorsshouldbeinterestedintheeffectthateachstockhasontheriskoftheportfolioasawhole.Itisthereforenotdeci-sivehowriskyaninvestmentis,butwhattheimpactwillbeontheriskoftheentireportfolio.Oneofthesimplestwaysforanindividualtodiversifyistobuysharesinamutualfundwhichholdsadiversifiedportfolio.Softwareprograms,called‘optimizers’,areusedtodetermine‘efficientportfolios’.Financialplannersuseinformationonpastreturnsandmanagerperfor-mance,inadditiontooptimizers,tomakerecommendationstotheirclients(ReillyandNorton,2017).RELEVANCEFORPURCHASINGANDSUPPLYMANAGEMENTInvestmenttheorybasicallydealswiththechoiceofinvestmentsbetweenaninfinitenumberofpotentialportfolios,resultingin‘yes’or‘no’typesofrecommendations.Itisallaboutthecompositionofaninvestmentportfoliobyreducingrisksandoptimizingreturns.Inpurchas-ingmanagement,however,itisamatterofchoiceofstrategiesforagivennumberofitems(usuallyproducts),resultinginasetofdifferentiatedpurchasingandsupplierstrategies.Thismeansthatthereareimportantdifferencesinscopeandperspective.Anothermajordifferenceregardstheexistenceofanotherpartyandthefactorofsocialinteraction(Yorke,1984).Hereliesasharpcontrastwiththeapplicationofportfoliotheorytoinvestmentpurposesandtopurchasingpurposes.Thereisalwaysanunpredictableelementinapurchasingcontext,duetothedynamicsofbusinessandhumanbehaviour.Therisk-factorisofanotherorder.Intheinvestmenttheorythevariable‘risk’ismeasurableinarathereasyandunambiguousway,basedonamathematicalformula.Itisclearthatsuchaformuladoesnotexistforthedeterminationofriskinapurchasingcontext.Themainsimilarity,however,isthatanyportfolioapproachfocusesontheefficientalloca-tionoflimitedresources.Inageneralsensethisproblemisrelevantforinvestmentdecisionsandforpurchasingdecisions.Anothersimilarcharacteristicreferstothetrade-offbetweenrisksandrewards.Forinstance,therearebenefitsinspreadingpurchasesamonganumberofsuppliers.However,thereisatrade-offinvolved.Theneteffectofdealingwithalargenumberofsupplierscanbetoshiftthebalanceofpowertowardsthesellerratherthantowardsthebuyer.Justasinthefinancialworld,risksandrewardsarecloselylinked.Buyersshouldthereforebeawareofthebalancebetweenriskandreturn.Nicholson(1993)pointsoutthatbuyersshouldaskthemselves:1.Iftheoverallbusinessriskincreasesduetoapurchasingstrategy,isthatincreasedriskmatchedbyanincreasedreturnorbenefit?2.Ifthebuyerobtainsanincreasedrewardforthefirm,hasitbeenachievedbyexposingthebusinesstoahigherlevelofrisk?CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

492474Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSmeltzerandSiferd(1998)arguedthatproactivepurchasingmanagementisconcernedwithriskmanagement.Itshouldmitigateriskand,atthesametime,provideahigherreturn.Toconclude,purchasingmanagementhastodealwithissuesofrisksandrewards,albeitthatthecontextofdecisionmakingisdifferentincomparisontoinvestmentproblems.HISTORYOFPURCHASINGPORTFOLIOMODELSInthe1983PurchasingConferenceinCopenhagen,Kraljic,directorintheDüsseldorfofficeofMcKinseyCompany,presentedanewandpromisinginstrumentforthedeterminationofasetofdifferentiatedpurchasingstrategies,andapolicyforthemorefundamentalrestructur-ingoftheportfolioasawhole.TheHarvardBusinessReview(HBR)publishedhisseminalpaper,‘Purchasingmustbecomesupplymanagement’(Kraljic,1983)whichpointedattheneedforcompaniestoprogresstowardmoreeffectivesupplymanagement,accompaniedbyapracticalportfoliotoolforshapingthesupplystrategy.TheKraljicportfolioapproachcanbeconsideredasanimportantbreakthroughinthedevelopmentoftheoryinthefieldofpurchasingandsupplymanagement.Theportfolioapproachisconsideredapowerfultool,tobeusedfordiagnosticandprescriptivepurposes,thatgoesfarbeyondtherathersimplisticclassificationmodelssuchastheABCanalysis(Syson,1992).Althoughothermodelshavebeendeveloped,Kraljic’sapproachsubsequentlybecamethedominantapproachtowhattheprofessionregardsasoperationalprofessionalism.Purchasingportfoliomodelshavegainedgroundinbothacademicresearchaswellasinpractice(NelloreandSöderquist,2000).BynowtheHBR1983contributionhasprobablybecomethemostcitedandreferredtoarticleinthefieldofpurchasingandsupply(chain)management.ItisnotedthatKraljic(1977)presentedexactlythesameconceptsandideasmuchearlier,albeitinaGermanbusinessjournal(BeschaffungAktuell),thatdidnotgetmuchattentionintheinternationalbusinessandacademiccommunity.ThematrixwasdevelopedforBASFintheearly1970s(c.1973,1974),withinthecontextofalargecashmanagementproject.Purchasingmanagementwasjustoneofthebusinessfunctionsinvolved.AsaMcKinseyconsultanthewasaskedtodevelopanewtoolforpurchasing,similartothethenrecentlyintroducedmarketingmatrices,forexampletheBostonConsultingGroup(BCG)matrix(GeldermanandVanHaaster,2002).THEKRALJICPURCHASINGPORTFOLIOAPPROACHKraljic(1983)introducedthefirstcomprehensiveportfolioapproachforthedeterminationofasetofdifferentiatedpurchasingstrategiesandapolicyforthemorefundamentalrestruc-turingoftheportfolioasawhole.Some20yearsagoheadvisedmanagerstoguardtheirfirmsagainstdisastroussupplyinterruptions,andtocopewithchangingeconomicsandnewtechnologies.Hismessagewas‘purchasingmustbecomesupplymanagement’.Kraljic(1983,p.112)proposedafour-stageapproachasaframeworkfor‘shapingthesupplystrategy’:1.Classifyallthepurchasedmaterialsorcomponentsintermsofprofitimpactandsupplyrisk.2.Analyzethesupplymarketforthesematerials.3.Determinetheoverallstrategicsupplyposition.CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

493Portfoliotheory4754.Developmaterialsstrategiesandactionsplans.Kraljic’sapproachincludestheconstructionofaportfoliomatrixwhichallowsforaclassi-ficationofproductsonthebasisoftwodimensions:profitimpactandsupplyrisk(‘low’and‘high’),‘Theprofitimpactofagivenitemcouldbedefinedintermsofthevolumepurchased,percentageoftotalcost,orimpactonproductqualityorbusinessgrowth.Supplyriskisamorecomplex,compositedimension.Itmightbeassessedintermsofavailability,numberofsuppliers,competitivedemand,make-or-buyopportunities,andstoragerisksandsubstitutionpossibilities.Itshouldbenotedthatthesearemerelyexamples.Kraljicintroducedmatricesanddimensionsthataredescribedingeneralterms,allowingforcustomizeduse.Kraljic(1983,p.113)clearlystatedthat‘nolistofevaluationcriteriaisequallyapplicabletoeveryindustry’.Kraljic’sportfolioapproachallowsforsufficientcustomization(Gelderman,2003).Theresultisa2x2matrixandaclassificationinfourcategories:bottleneck,non-critical,leverageandstrategicitems.Eachofthefourcategoriesrequiresadistinctiveapproachtowardssuppliers(seeFigure30.1),GeldermanandVanWeele(2002,p.31)concluded:‘Non-criticalitemsrequireefficientprocessing,productstandardization,ordervolumeandinventoryoptimization.Leverageitemsallowthebuyingcompanytoexploititsfullpurchas-ingpower,forinstancethroughtendering,competitivebidding,targetpricingandproductsubstitution.’Bottleneckitemspresentsignificantproblemsandrisks.Volumeassurance,vendorcontrol,securityofinventoriesandbackupplansarerecommendedhere.Forthestrategicitemsafurtheranalysisisrecommended.Byplottingthebuyingstrengthsagainstthestrengthsofthesupplymarket,threebasicpowerpositionsareidentifiedandassociatedwiththreedifferentsupplierstrategies:balance,exploitanddiversify.Eachofthethreestrategicthrustshasdistinctiveimplicationsfortheindividualelementsofthepurchasingstrategy,suchasvolume,price,supplierselection,materialsubstitution,inventorypolicy,andsoon.Companiescouldconsolidatetheirsupplypositionbyconcentratingfragmentedvolumesinasinglesupplier,acceptinghighprices,andcoveringthefullvolumerequirementsthroughsupplycontracts.Toreducethelong-termriskofdependenceonasinglesource,however,companiescouldalsosearchforalternativesuppliersormaterials,orevenconsiderbackwardintegration(diversify).‘Whenbargainingfromweaknessthecompanymayhavetoofferlonger-termcontractobligationsoraccepthigherpricesinordertoensureanadequatesupply’(Kraljic,1983,p.114).Ontheotherhand,ifthebuyingcompanyisstrongerthanthesuppliers,itcanbargainandactfromapositionofstrength.Thecompanycouldpressforpreferentialtreatment.Itcanspreadvolumeoverseveralsuppliers,exploitpriceadvantages,increasespotpurchasesandreduceinventorylevels.Withnodominantpartyathand,awell-balancedintermediatestrategyisadvised.Kraljic’spurchasingportfolioapproachisstillthedominantapproachintheprofession.Afteritsintroductionin1983,manyvariationshavebeenintroduced,proposingnewdimen-sions,valuesandsegments.ScholarshaveintroducedvariationsoftheoriginalKraljicmatrix(Elliott-ShircoreandSteele,1985;Syson,1992;HadelerandEvans,1994;OlsenandEllram,1997;LeeandDrake,2010;Luzzinietal.,2012;Drakeetal.,2013;Bildsten,2014;GangurdeandChavan,2016;Ghanbarizadehetal.,2019;RezaeiandLajimi,2019).However,theproposedmatricesareverysimilartotheKraljicmatrixinthattheyusepracticallythesamedimensionsandcategories,andsuggestsomeofthesamerecommendations(GeldermanandVanWeele,2005).Thesecontributionsbuildontheoriginalwithmoresimilaritiesthandiffer-ences(cf.Ekströmetal.,2021).AnotablerefinementisthemodeldevelopedbyGeldermanCeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

494476Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFigure30.1TheKraljicmatrix:categoriesandstrategicrecommendations(2003)thatexplicitlyincludespurchasingstrategiestopursueotherpositionsinthematrix.Practitionerscanselectappropriatestrategiestomoveanitemorproductintoanothermatrixquadrant(Pagelletal.,2010;Bianchinietal.,2019).Ifwetakealookatthebottleneckandthestrategicquadrantattherightsideofthematrix,thosemovementsarepursuedthatreducethesupplyrisk.Intermsofthematrix,thismeansmovingtotheleft.Incertaininstances,non-criticalitemscanbemovedupwards,andleveragepositionscouldbeexchangedforstrategicpositions(GeldermanandVanWeele,2003).DOMAINWHERETHETHEORYAPPLIESThedomainofpurchasingportfolioapproachesappliestothedevelopmentofpurchasingandsupplierstrategiesbya(buying)company.Still,purchasingportfolioanalysisallowsfordifferentlevelsofanalysis.Thelevelofaggregationreferstothequestionwhetherindividualitems,smallerorbroaderproductgroupswillbepositionedinthematrix.Whatistheunitofanalysis?Usuallyproductsorproductgroupsarepositionedinthematrix;however,suppliersorsupplierrelationshipscanalsobepositionedinthematrix(Åhman,2002).Theportfolioanalysismightberestrictedtocertaintypesofproducts,forinstancerawmaterials,logisticalservicesornon-productrelatedproducts.Individualitemscanbepositionedinamatrix,butalsoproductgroups.Portfolioanalysiscanbeconnectedtodifferentorganizationalunits:thecorporatelevel,thelevelofareabusinessunits,andthelevelofamajorcustomer.Tocon-clude,thepurchasingportfolioanalysisallowsforverydifferentunitsandlevelsofanalysis.CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

495Portfoliotheory477RELATIONSHIPSBETWEENTHEVARIABLESPortfoliotheory,asdevelopedforinvestmentpurposes,intendstoproviderecommendationstoinvestorsintheirquesttoassembleanassetportfoliothatmaximizestheexpectedreturnforagivenlevelofrisk.Theexpectedreturnofaninvestmentportfolioistheweightedaverageoftheindividualexpectedreturnsoftheassetsintheportfolio.Theriskofaportfolioismeas-uredbyitsstandarddeviation,whichdependsonthestandarddeviationofeachassetintheportfolio,theweightsofeachassetandthecorrelationbetweeneachasset.Diversificationisacommonallocationstrategyaimedatminimizingrisksbyholdingassetsthatarenotperfectlypositivelycorrelated.Thecoreideaisthataportfolioofassetsfromdifferentclassesislessriskythanaportfolioofsimilarassets.Portfoliotheoryfocusesontherelationshipbetweenassetsinaportfolioinadditiontotheindividualriskofeachasset.Thesearethekeyconceptsandideasofportfoliotheoryinanutshell.Thekeyvariablesofportfolioinvestmenttheoryarerisksandreturnsofindividualassetsaswellasrisksandreturnsoftheportfolioofassets.Purchasingportfoliomodelsaresimilarinthesensethattheyareaimedatminimizing(supply)riskswhilemaximizingthepotentialeffectofusingbuyingpower.Anotablediffer-ence,however,istheoperationalizationofvariablesandthenatureofthestrategicrecommen-dations.IntheKraljicmatrix,theprofitimpactofasupplyitemisdeterminedby:1.thevolumepurchased;2.thepercentageoftotalpurchasecost;3.impactonproductquality;4.impactonbusinessgrowth.Thesupplyriskisdeterminedby:1.theavailability/scarcityoftheitem;2.thenumberofsuppliers;3.thecompetitivedemand;4.make-or-buyopportunities;5.storagerisks;6.substitutionpossibilities.Itemsareclassifiedaccordingtotheleveloftheirprofitimpactandsupplyrisk.Asetofdifferentiatedpurchasingstrategiesareprovidedforeachofthefourcategories.Theselectionandelaborationofstrategicrecommendationsiskeytoany(purchasing)portfoliomodel.InadditiontothevariousfactorsthatconstitutethetwodimensionsoftheKraljicmatrix,GeldermanandVanWeele(2003)foundthatexperiencedportfoliousersalwaysincludedadditionalinformationon:1.theoverallbusinessstrategy(relatedsituationsonendmarkets);2.thespecificsituationsonsupplymarkets(thatispowerpositions);and3.theintentionsandcompetencesofindividualsuppliers.TheelementsoftheKraljicapproacharesummarizedinFigure30.2.CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

496478Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFigure30.2OverviewofelementsandrelationshipsintheKraljicmatrixCRITIQUESANDSUPPORTOrganizationsusuallyhavealargenumberofproductsandavarietyofsuppliers,whichgenerallynecessitatesdifferenttreatment.Forquitesometime,ABCanalysis(orParetoanalysis)wastheonlytoolfordifferentiatingbetweenimportantandlessimportantpurchases.However,ABCanalysisconcentratesonthefinancialvalueofitems,ignoringthecostofpoorquality,performancerisk,socialrisk,andothercomponents(Hartmannetal.,2001).Moreover,ABCanalysisdoesnotprovidestrategicrecommendationsforthecategories;itmerelyprovidesinformationontheconcentrationofpurchasespend.TheintroductionoftheKraljicportfolioapproachhasbeendescribedas‘amajorbreak-through’inthedevelopmentofprofessionalpurchasing,representingthemostimportantsinglediagnosticandprescriptivetoolavailabletopurchasingandsupplymanagement(Syson,1992).Kraljic(1983)madeareasonablecasefortheusefulnessoftheportfolioapproachbydescribingtheexperiencesoffourlargeindustrialcompanies.Studieshaveshownthatapurchasingportfoliomodelisapowerfultoolfor:1.coordinatingthesourcingpatternsoffairlyautonomousstrategicbusinessunitswithincompanies,resultinginleverageandsynergy(Carter,1997;GeldermanandVanWeele,2002);2.differentiatingtheoverallpurchasingstrategy,withdifferentstrategiesfordifferentsup-pliergroups(LilliecreutzandYdreskog,1999;GeldermanandVanWeele,2003);3.discussing,visualizingandillustratingthepossibilitiesofthedevelopmentofdifferenti-atedpurchasingstrategies(GeldermanandVanWeele,2002,2003);4.configuringandmanagingsupplierrelationships,consideringvariousinterdependenciesandtrade-offsamongrelationships(WagnerandJohnson,2004).CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

497Portfoliotheory479Portfolioapproachescanbeusedtoimprovetheallocationofscarceresources(OlsenandEllram,1997).Aportfoliomodelprovidesaframeworktounderstandandtofocusacompa-ny’ssupplystrategy(HadelerandEvans,1994).Portfoliousagehasbeenassociatedwiththelevelofpurchasingsophisticationofcompanies.Aportfolioapproachcanmakethedifferencebetweenanunfocused,ineffectivepurchasingorganizationandafocused,effectiveone(HadelerandEvans,1994),especiallyforthosecompaniesthathaveneverthoughtsystem-aticallyabouttheirprocurementexpenditure(Cox,1997).Theutilizationofthispurchasingmethodologymayliftthepurchasingactivityoutofthetactical,fire-fightingmodeintoastra-tegicrole(Elliott-ShircoreandSteele,1985),Moreover,itmayconvincetopmanagementoftheeffectiverolethatpurchasingcanplayincontributingtoacompany’sprofitandsuccess(Carter,1997).However,purchasingportfoliomodelshavebeenseverelycriticizedtoo.Therearedoubtsandquestionswithrespecttothefollowingmeasurementissues:1.Theselectionofvariables.Howcouldoneknowwhetherthemostappropriatevariablesarebeingused(NelloreandSöderquist,2000)?Andhowcouldwedealwiththeimpactofthehighsensitivitytothechoiceofdimensionsandweights(Aloinietal.,2019)?2.Thesupplier’sside.Whyisthesupplier’ssidedisregardedinmostportfoliomodels(Homburg,1995;Kamann,2000)?3.Theoperationalizationofdimensions.Whatexactlyismeantbyprofitimpactandsupplyrisk(Ramsay,1996)?4.Themeasurementofvariables.Howshouldtheweightingoffactorstakeplace(OlsenandEllram,1997)?Anddoesthemeasurementnotmerelyreflectthepurchaser’ssubjectivemindset(Luzzinietal.,2012)?5.Thelinesofdemarcation.Whatistheexactdifferencebetweena‘high’anda‘low’supplyrisk(Homburg,1995)?6.Thesimplicityofrecommendations.Howcouldonededucestrategiesfromananalysisthatisbasedonjusttwodimensions(DuboisandPedersen,2002)?Othercriticismsrelatetomorefundamentalissuesandobjections.Portfoliomodelshaveatendencytoresultinstrategiesthatareindependentofeachother(Coate,1983).Theydonotdepicttheinterdependenciesbetweentwoormoreitemsinamatrix(OlsenandEllram,1997);instead,theyconcentrateonseparateproducts(Ritter,2000),focusingonsupply,notonsup-pliers(RezaeiandLajimi,2019).Portfoliomodelsfailtocapturecontext-relateddimensionsandotherimportantconstraints,suchasoverallbusinessstrategyofthecompany,corporatepurchasingpoliciesandthenetworkcontext(Kangetal.,2012;Aloinietal.,2019).Becauseportfoliomodelsarelimitedtoanalysingproductsinadyadiccontext,theyfailtocapturealltheaspectsthatareconsideredvitalforbuyer–supplierrelationshipsfromanetworkperspec-tive(DuboisandPedersen,2002).Inlinewiththeforegoing,someareaversetorecommen-dationseithertoexploitpower(OlsenandEllram,1997),ortoreduceriskassociatedwiththeinterdependenceofcompanieswithinanindustrialnetwork(DuboisandPedersen,2002).Fromadifferentperspective,Cox(1997)condemnedtheportfoliomethodologybecauseitdoesnotprovideanyproactivethinkingaboutwhatcanbedonetochangetheexistingrealityofpowerinthevarioussupplychainsinwhichcompaniesareinvolved.Theargumentssupportingportfoliomodelshavebeenreportedinempiricalstudies,whilethecounterargumentscanbefoundinconceptualstudies(GeldermanandVanWeele,2005).Thecritiqueofportfoliomodelsdoesnotincludetheexperienceofpractitioners.ExperiencedCeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

498480Handbookoftheoriesforpurchasing,supplychainandmanagementresearchusershavefoundareplytothecritiqueofportfoliomodels,stressingthatthatthereisnosimple,standardizedblueprintfortheapplicationofportfoliomodels(GeldermanandVanWeele,2003).Itrequirescriticalthinkingandsophisticationofthepurchasingfunction.Portfoliousagecanbedrivenbypurchasingsophistication(professionalismandposition).However,itcanalsobearguedthattheintroductionofthepurchasingportfolioincompaniesdrivespurchasingsophistication.Adoptingaportfolioapproachcouldworkasacatalystforchangewithincompanies(GeldermanandVanWeele,2005).ASSUMPTIONSANDTHEORETICALFOUNDATIONAlthoughpurchasingportfoliomodelsingeneralandtheKraljixmatrixspecificallyhavebeencriticizedforalackofadequatetheoreticalfoundations(Luzzinietal.,2012),wepositthatallofthesemodelshavetheirrootsinportfoliotheory.Inaddition,wewillarguethatthewell-knownKraljicapproachisessentiallyandimplicitlybasedonresourcedependencetheory(seeGelderman,2003).Purchasingportfoliomodelsareallbasedongeneralportfoliotheory,whichisdevelopedforinvestmentpurposes.Portfoliotheoryisessentiallyconcernedwiththecollectivereturnsfromtheuseofassets,togetherwiththeirpossibleredistributionovervariousoptionsatthediscretionofmanagement.Allportfoliomodelsareaimedatbalancingobjectivesofhighyieldandlowrisk,andtheefficientallocationoflimitedresources.Resourcedependencetheory(RDT)providesatheoreticalframeworkforunderstandingthedependenceofoneorganizationonanother(PfefferandSalancik,1978).Themainprincipleofresourcedependencytheoryisthatitconsiderstheabilitytoacquireandmaintainresourcesasthekeytoorganizationalsurvival.Organizationsrequirepersonnel,money,sociallegitimacy,customers,andavarietyoftechnologicalandmaterialinputs.Inaverybroadsenseeveryorganizationmusttransactwithelementsintheenvironmenttoacquirethemanyresourcesthatitdependson.InRDTtheimportanceofaresourceisacrucialfactor,determiningorgan-izationaldependence.Subsequently,therearetwofactorstotheimportanceofanyresourceexchange:therelativemagnitudeoftheexchange,andthecriticalityoftheresource(PfefferandSalancik,1978,pp.45‒51).ItcanbearguedthatthedimensionsintheKraljicmatrixcorrespondwiththesevariables:profitimpactcanbeseenasanelaborationofmagnitude,andsupplyriskasatranslationofcriticality.Inotherwords,thecombinationofprofitimpactandsupplyriskdeterminestheimportanceofaparticularproductcategory.Moreinsightinbuyer‒sellerrelationshipsisgainedbydistinguishingbetweenlevelsofdependencewithrespecttoboththebuyer’sdependenceandtheseller’sdependence(BlenkhornandMacKenzie,1994;Kumar,1996;FrazierandAntia,1995).Adistinctioncanbemadebetweenthreelevelsofinterdependence:lowinterdependence(balanced),unbal-ancedexchange,andhighinterdependence(balanced).Inthecaseofamutualdependence,powerisinbalance.Inconclusion,therearefourpossiblecombinationsofdependence:1.Highmutualdependence(balancedpower).2.Lowmutualdependence(balancedpower).3.Highsupplier’sdependence,lowbuyer’sdependence(buyerdominated).4.Lowsupplier’sdependence,highbuyer’sdependence(supplierdominated).CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

499Portfoliotheory481Table30.1Kraljic’sstrategicrecommendationsandtheirimpactondependenceItemcategoryStrategicObjectivesImpactondependencerecommendationsBottleneckVolumeassurancePreventshortageofcriticalsuppliesReducesthenegativeeffectsofresourcecriticalityanddependence;Doesnotremovethesourcesforthehighlevelofbuyer’sdependenceNon-criticalEfficientprocessingReducecostoforderingandmaterialsDoesnotaffectthelowlevelofbuyer’shandlingdependenceLeverageExploitpurchasingReducedirectpurchasingcostIncreasesthesupplier’sdependencepowerStrategic(1):ExploitpowerIncreaseoverallsupplierperformance,Increasesthesupplier’sdependencebuyer’sincl.favourablepricingandreduceddominanceinventoriesStrategic(2):Diversify(a)findmaterialsubstitutes/newIncaseof(a)reducesthehighlevelofsupplier’ssuppliers;or(b)preventshortageofbuyer’sdependence;ordominancecriticalsupplies,forexampleacceptincaseof(b)doesnotchangethehighlevelhigherpricesorlonger-termobligationsofbuyer’sdependenceStrategic(3):BalanceDeveloplong-termsupplyrelationshipsIncreasesthehighlevelsofbuyer’sandbalancedsupplier’sdependencerelationshipSources:Kraljic(1983)andGelderman(2003,p.137).Ifwetakeacloselookatthesefourcategories,weconcludethatthisclassificationistotallyinaccordancewithKraljic’smatrix.Thecategoriesrefertoveryfundamentaltypesofbuyer‒supplierrelationships.Thatisprobablywhy‘leverage’,‘strategic’,‘non-critical’and‘bottle-neck’arefourlabelsthathavefoundtheirwayintothecommonlanguage:1.‘Strategic’referstohighmutualdependencerelationships.2.‘Non-critical’referstolowmutualdependencerelationships.3.‘Leverage’referstobuyer-dominatedrelationships.4.‘Bottleneck’referstosupplier-dominatedrelationships.Now,wewillanalyseKraljic’sstrategicrecommendationsfromapoweranddependenceperspective.Table30.1summarizesthegenericrecommendationsthatareprovidedforthequadrantsofthematrix.Inaddition,columnsareaddedforthemainobjectivestobepursuedbythestrategicrecommendationsandfortheirintendedandexpectedimpactonthepower-dependencerelationshipswithsuppliers.‘Volumeassurance’and‘efficientprocessing’areadaptivemethods,aimedatotherobjectivesthanchangingtheprevailingpower-dependencerelationshipswithsuppliers.Therecommendationshandleproblemsthatareaconsequenceofthematrixposition:thenegativeeffectsofashortageofsuppliesandthenegativeeffectsontheoperationalpurchasingcosts.Quiteadifferentpictureisfoundintheleverageandstrategicquadrant,whereeitherthebuyer’sdependenceorthesupplier’sdependenceisincreased,orboth.Inotherwords,thepro-videdrecommendationsareaimedatchangingtherelativepowerpositiontowardssuppliers.Buyersareadvisedtoproactivelyusepossibilities,especiallyinlightoftheexistingrelation-shipswithsuppliers,attributedintermsofrelativedominance.Theexploitationofpurchasingpowerwillexpandthebuyer’sdominanceintherelationshipevenmore.Incasesofsupplier’sCeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

500482Handbookoftheoriesforpurchasing,supplychainandmanagementresearchdominancemorerestraintactionsarerecommended,suchas‘findmaterialsubstitutes’and‘accepthigherpricesorlong-termobligationstopreventshortagesofsupply’.Finally,inthecaseofpowerbalance,anadaptivestrategyisrecommendedtomatchandtodeveloptheexisting(long-term)relationshipwiththesupplierinthestrategicquadrant.Kraljic’sseminalarticledoesnotprovideanyreferencetoatheoreticalfoundationorcomprehensiveperspective.Thegeneralideaoftheportfolioapproachis‘tominimizesupplyvulnerabilityandmakethemostofpotentialbuyingpower’(Kraljic,1983,p.112).Inaninterview,Kraljicacknowledgedthattheselectionofdimensionswasbasedondiscussionswithpurchasingprofessionals,insearchof‘thingsthatreallymatterinpurchasing’.Basically,amatterofcommonsense.Healsoconfirmedthathisportfolioapproachwasbasicallycon-cernedwithusingandchangingthebalanceofpowerwithsuppliers.PoweranddependenceareindeedattheheartoftheKraljicpurchasingapproach(GeldermanandVanHaaster,2002).Thein-depthanalysisoftheKraljicapproach,thedimensionsandtherecommendations,hasmadeareasonablecasefortheconclusionthattheresourcedependencetheoryshouldbeconsideredasthe(implicitlyapplied)theoreticalfoundationfortheKraljicportfolioapproach(Gelderman,2003).HOWHASPORTFOLIOTHEORYBEENUSED?InvestmentandFinancialManagementPortfoliotheorywasforemostandprimarilydevelopedasatheoryforinvestmentdecisions.Markowitz(1952)derivedtheexpectedrateofreturnforaportfolioofassetsandanexpectedriskmeasure.Heshowedthatthevarianceoftherateofreturnwasausefulmeasureofportfolioriskandhederivedaformulaforcomputingthevarianceofaportfolio.NowadaysMarkowitz’sformulaisstillbeingusedasthebasisformoderninvestmenttheoryandinvest-mentpractice.Theconsequencesarefar-reachingandprovidemuchguidanceforinvestmentdecisions.Themostimportantimplicationisthatdiversificationreducesvariabilityandrisk.Withinthefinancialworld,researchhasdevelopedandwideneditsscopesignificantly.BuildingontheworkofMarkowitz,Sharpe(1963,1964)introducedthewell-knowncapitalassetpricingmodel(CAPM).TheCAPMiswidelyusedbyinvestorstoestimatethereturnorthemovingbehaviourofthestock,whereastheMarkowitzmodelisaimedatportfoliodiversification(Leeetal.,2016).AfterthedevelopmentofCAPM,researchandportfoliotheoryhaveprogressedinvariousdirections,suchasbehaviouralportfoliotheory,non-utilityportfoliotheory,styleportfoliotheory,portfoliotheorywithliquidity,portfoliotheorywithcontinuouslong-term,andvalueatrisk(VaR)portfoliotheory(Zhang,2019).Portfoliotheoryisawell-knownmethodineconomicresearch,inassetallocationsandthepotentialbenefitsofdiversificationforrisk-averseagents.Particularlyinterestingistheapplicationoftheprin-ciplesofportfoliotheoryinenvironmentalresearch.Portfoliotheoryprovidesflexibletoolstosupportnaturalresourcedecision-making(Alvarezetal.,2017).Researchaddressesland-usemanagement,diversificationandtrade-offdynamics,sinceportfoliotheoryhasprovedtobeusefulforitsapplicationinenvironmentalresearchquestions(Matthiesetal.,2019).CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

501Portfoliotheory483PurchasingandSupplyManagementandSupplyChainManagementPortfoliotheoryprovidesthecommonfoundationforthedevelopmentofpurchasingportfoliomodels,althoughtheapplicationinthepurchasingandsupplydomainrequiresthatmodelsaretailor-madetoincludedomain-specificcontent(Luzzinietal.,2012).Byusingportfoliomodels,purchasingmanagersareforcedtobeawareofthebalancebetweenrisksandreturns.Portfoliotheoryisbasedontheprincipleofefficientallocationoflimitedresources.Theimplicationisthatinvestorshavetoselectoptionsandstrategies,optimizingreturnsandreduc-ingrisks,whichisverysimilartotheworkofpurchasingmanagerswhohavetoselect(asetofdifferentiated)purchasingandsupplierstrategies.StrategicManagementInseekinganswerstoquestionsofstrategicplanningforthediversifiedorganization,manage-menthasastrongneedfortoolsthatassistinallocatingresourcesamongbusinessunitsand/orproducts.Anumberofportfoliomodelshavebeenproposedforthispurpose.ThefirstandbestknownistheBostonConsultingGroup’sgrowthsharematrix(Henderson,1970,1972,1973).Theinitialintentofthegrowthsharematrixwastoevaluatebusinessunits,butthesameevaluationcanbemadeforproductlinesoranyothercash-generatingentities.InadditiontotheBCGframework,otherscholarsandpractitionershavedevelopedmultifactorportfoliomodelsthatusecompositedimensionstodesignatethematrixaxes.Well-knownexamplesaretheGeneralElectricBusinessScreen,theShelldirectionalpolicymatrix,andthestrategicconditionmatrix.Justasthepurchasingportfoliomodels,theportfoliomodelsinthedomainofstrategicmanagementhavetheirrootsinportfoliotheory.Companiesusuallyhavetomanagesimultaneouslyandcontinuouslyarangeofmultipleconcurrentprojects(portfolios).Althougheachprojectmightbeindependent,collectivelytheyareinterdependent.Inthiscontext,projectportfolioriskmanagementemerged(Hofmanetal.,2017;TellerandKock,2013),whichresultedinabodyofliterature‘providingknowl-edgeandunderstandingaboutobjectives,features,andtheimpactsofprojectportfolioriskmanagement’(Micánetal.,2020,p.68).Portfoliomodelsinstrategicmanagementproviderecommendationsconcerningstrategicbusinessunits:whichtoinvestin,whichtoselloff,andwhichtoshutdown.Inotherwords,theyhelpcompaniesinhowtodistributetheirlimitedavailableresources(KaderandHossain,2020).Foralongtime,companiesintheprivatesectorhaveusedportfoliomanagementasatoolforstrategicmanagementofmulti-businessportfolios.Onlyrecentlyhaveresearchandapplicationexpandedtoorganizationsinthepublicsector(BaškaradaandHanlon,2018).Commonlyusedcriteria(forexample,growthpotentialandmarketshare)aregenerallynotapplicableinpublicsectororganizations.Anotherdevelopmentistheuseofthegreyportfolioanalysismethod.Thismethodiscomplementarytothewell-knownBCGmatrix,enablingmanagerstomakeadynamicportfolioanalysisfordatawithahighlevelofuncertainty(Nowaketal.,2020).MarketingManagementThemostcommonportfoliomodelsinmarketingmanagementcanbeclassifiedintothreegroups:modelsfornewproductsorresearchanddevelopmentprojects,product(line)portfo-CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

502484Handbookoftheoriesforpurchasing,supplychainandmanagementresearchliomodels,andcustomerportfoliomodels(Gelderman,2003).Theinnovationportfoliocon-sistsofpotentialfutureproducts,whiletheproductportfoliobothinformsinnovationstrategyandprovidesinputstofutureinnovationefforts(BrasilandEggers,2019).Productportfoliomodelstendtofocusonresourceallocation:whichprojectsshouldbeinvestedin,andwhichproductsareexpectedtoproduceeconomicvalue?Portfoliomodelsinthemarketingdomainshowmuchresemblancetothoseforselectingafinancialportfolioofinvestments.Theliteratureshowsalargenumberofcomparablecustomerportfoliomodels(Fiocca,1982;Shapiroetal.,1987;HomburgandDaum,1997;Netzeretal.,2008;Homburgetal.,2009).Thesemodelsarepreoccupiedwithcustomerprofitability,balancingcostsandfinan-cialbenefits.Customerportfoliomodelsmostcommonlycalculateexpectedreturnsfromcustomers’purchasinghistory(Holmetal.,2012).Theyconsideronlycurrentcustomersandfocusonreturnsintheshortterm.NotableexceptionsarethemodelsasdevelopedbyJohnsonandSelnes(2004)andMcAlisterandSinha(2021).Companieswillonlysurviveiftheysucceednotmerelyinkeepingcustomers,butalsoinattractingnewentry-levelcustomerswhoareturnedintoloyalcustomers.Recently,withthedevelopmentofbigdataanalytics,companiesneedanduseadvancedsoftwaretoolsandplatforms.Advancedmethodsofdataanalyticshavebeenintroducedintheworldofcustomerportfolioanalysis.AnexampleisprovidedbyMonalisaetal.(2019)whoclusteredcustomersontheircustomer’slifevalue(CLV),usingsophisticatedquantitativetechniques;forexample,aFuzzyC-meansalgorithm,theanalyticalhierarchyprocess(AHP)andthepartitioncoefficientindex(PCI).HOWHAVEPURCHASINGPORTFOLIOMODELSBEENUSED?PurchasingandSupplyManagementandSupplyChainManagementInthepurchasingandsupplychainmanagementliterature,purchasingportfoliomodelshavebeenusedforthreedifferentpurposes.First,purchasingportfoliomodelshavebeenusedinmanystudiesthatinvestigatedthedevelopmentandapplicationofpurchasingandsupplierstrategies.Thesestudiesmostcommonlyfocusedonaspecificcontext:company,industryortopic;forinstance,casestudiesatanoilcompany(GeldermanandMacDonald,2008),achem-icalcompany(GeldermanandVanWeele,2002)andahospital(MedeirosandFerreira,2018).Examplesofspecificindustriesarethedefencesector(Ekströmetal.,2021),theconstructionindustry(Ghanbarizadehetal.,2019),theboilerindustry(GangurdeandChavan,2016)andthemanufacturingindustry(CaniëlsandGelderman,2007).Examplesofspecifictopicsaremanagingaglobalsupplybase(GeldermanandSemeijn,2006),managingaportfolioofrelationships(OlsenandEllram,1997;Bensaou,1999),supplierinvolvementinproductdevelopment(WynstraandTenPierick,2000),leanandagilepurchasing(Drakeetal.,2013),componentpurchasing(LeeandDrake,2010)andcommoditybuying(Padhietal.,2012).Second,purchasingportfoliomodelshaveinspiredmanyscholarstoadjustandrefinethetraditionalKraljicmatrix.Morespecifically,scholarshaveaddressedwhatisbelievedtobeoneofthegreatestweaknessesofpurchasingportfoliomodels:thelimitsinoperationalizingandmeasuringvariables(GeldermanandVanWeele,2005;Luzzinietal.,2012).Purchasingportfoliomodelshavebeencriticizedfortherathersubjectivemethodsforweightingandposi-tioningobjectsinamatrix(Montgomeryetal.,2018).ExamplesofquantitativeapproachesCeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

503Portfoliotheory485aretheanalytichierarchyprocess(AHP)(Drakeetal.,2013;Bianchinietal.,2019),themulti-objectivedecisionanalysis(Montgomeryetal.,2018),thedecisionmakingtrialandevaluationlaboratory(DEMATEL)(Ghanbarizadehetal.,2019);fuzzysettheory(FST)(Aloinietal.,2019)andthebestworstmethod(BWM)(RezaeiandLajimi,2019).However,otherscholarshavealternativelyembracedthequalitativecharacterofportfoliouse(SteeleandCourt,1996).Theyappreciatetheflexibilityofthetool,allowingforcustomizationandadaptiontotheneedsandrequirementsofusers.Ekströmetal.(2021)proposedtouseaDelphimethodinthecontextofdefenceprocurement.Somecompaniesuseaconsensus-basedmethodwhichispredominantlybasedonaprocessofreasoninganddiscussionbyinvolvedstakeholders(GeldermanandVanWeele,2002).Gelderman(2003)foundinhiscasestudiesthatthepositioningofitemsinthequadrants(themeasurement)hadtobefollowedbyaprocessofreviewingthepositionsinthematrix,andaprocessofreflectionontheconse-quences.Whatevermethodwasselected,therearealwayssubjectivechoices,limitationsandelementsthatinfluencetheactualpositioninginthematrix.Third,portfoliomodelshaveprovedtobeparticularlyusefulinresearchthattakesintoconsiderationdifferencesacrosspurchasingcategoriesandpurchasingsituations.TheKraljicmatrixisoftenusedtoservethispurpose(Dabhilkaretal.,2016).AnexampleisthestudyofKnightetal.(2014)thatinvestigatedhowknowledgeandskillsvaryacrossaportfolioofpurchases.Obviously,effectivepurchasingrequiresadifferentiatedapproach,tailoredtotherequiredskillsfortheprocurementofspecificproducts.Inarelatedstudy,Dabhilkaretal.(2016)investigatedtheeffectivenessofpurchasingcapabilitieswithinthecontextofsustain-ability.Tailoredapproacheswererecommendedfordifferentpurchasingstrategies.Anotherpromisingstreamofresearchisstudiesthatalignpurchasingportfoliomanagementwithnegotiationstyles.Dependingonthespecificbuyer‒supplierrelationshipathand,differenttechnical,commercial,legalandprice/costissueswillbeputontheagenda(Geiger,2017).ThenegotiationcontextintermsofpositionsintheKraljicmatrixislikelytoimpactuponnegotiationtopics,tacticsandoutcomes(Lambrechtsetal.,2019).Purchasingprofessionalsadapttheirnegotiationstyleacrossthedifferentquadrantsoftheportfoliomatrix(Kangetal.,2018).OUTLOOKONFUTURERESEARCHOPPORTUNITIESPurchasingportfoliomodelshavebeencriticizedfortheirlimitationsandweaknesses.Theseopenissuescanbeconsideredinvitationsforfutureresearchopportunities(Aloinietal.,2019).Themostpressingissuesappeartobe:1.Theselectionandmeasurementofvariables,sinceallpurchasingportfoliomodelsaresensitivetothesedesignchoices(GeldermanandVanWeele,2005).2.Theimpactofthecontextinwhichcompanieswork,sincedeepcontextualizationandadhocanalysisareneededforthedevelopmentofeffectivepurchasingstrategies(Aloinietal.,2019).3.Thesimplicityandarbitrarinessoftherecommendations(DuboisandPedersen,2002;Knightetal.,2014),sincesubjectiveinterpretationshaveastrongimpactontheoutcomesofportfolioanalyses.CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

504486Handbookoftheoriesforpurchasing,supplychainandmanagementresearchMoreresearchisalsoneededtounderstandtheeffectivenessofpurchasingportfoliomodels.Futureresearchcouldincludeanempiricalstudyontheactual,directimpactoftheapplicationofaportfolioapproach.Therequiredresearchmethodologyshouldbeginwiththedevelop-mentofperformancemeasures.Adistinctionshouldbemadebetweentheimpactoftheintro-ductionofthetoolincompanies(first-timeuse)andtheimpactofalong-standingapplication(repeateduse).Adoptingaportfolioapproachcouldworkasacatalystforchange,leadingthewaytoamoreprofessional,matureandsophisticatedpurchasingfunction.Immediatesuccessiswarranted,consideringthenewinsightsthataretobeattributedtoportfoliouse.Togainadeeperunderstandingoftheadoptionoftheportfoliotool,werecommendaseriesofactionresearchstudiesaimedatidentifyingnormativeguidelinesfortheimplementationandfortheassessmentofthefullimpactoftheportfolioapproach.Theseactionresearchstudiesshouldinclude‘before’and‘after’measurementofkeyvariablesinordertodetermineaccountablechanges.Anotherpossibilitywouldbetheuseofcriticalincidenttechniquestoshedmorelightoncomplexmanagerialproblemsrelatingtothedevelopmentandimplementationofportfolio-basedpurchasingstrategies.Evenmorechallengingwouldbesomeresearchfocusedontheimpactofrepeateduse,intermsofperformancemeasuresthatcounttotopmanagement.Onlylongitudinalstudiesincompaniescouldprovideinformationaboutthelong-termimpactandusefulnessoftheport-folioapproach.Suchresearchrequiresacomplexdesign.Theresearchershouldovercomethedifficultiesofattributingresultsofportfoliouseandofcomparingtheuseofthetoolindiffer-entcompanies,becauseseveralcompany-specificfactorsarelikelytoinfluencetheimpactandimplementationofportfoliouse.Inaddition,thepersonalityofindividualpurchaserscouldbeincluded,describingandexplainingtheuseandeffectivenessoftheportfolioapproach.REFERENCESÅhman,S.(2002),‘Strategicsourcingofsuppliersinasupplynetwork’,paperpresentedatthe11thInternationalIPSERAConference,Enschede,TheNetherlands,26March.Aloini,D.,Dulmin,R.,Mininno,V.,andP.Zerbino(2019),‘Leveragingprocurement-relatedknowledgethroughafuzzy-basedDSS:arefinementofpurchasingportfoliomodels’,JournalofKnowledgeManagement,23(6),1077–1104.Alvarez,S.,Larkin,S.L.,andA.Ropicki(2017),‘Optimizingprovisionofecosystemservicesusingmodernportfoliotheory’,EcosystemServices,27,25–37.Baškarada,S.,andB.Hanlon(2018),‘Corporateportfoliomanagementinthepublicsector’,JournalofManagementDevelopment,37(4),333‒340.Bensaou,M.(1999),‘Portfoliosofbuyer–supplierrelationships’,SloanManagementReview,40(4),35–44.Bianchini,A.,Benci,A.,Pellegrini,M.,andJ.Rossi(2019),‘Supplychainredesignforlead-timereductionthroughKraljicpurchasingportfolioandAHPintegration’,Benchmarking:AnInternationalJournal,26(4),1194–1209.Bildsten,L.(2014),‘Buyer–supplierrelationshipsinindustrializedbuilding’,ConstructionManagementandEconomics,32(1–2),146–159.Blenkhorn,D.L.,andH.F.Mackenzie(1994),‘Theimportanceofbuyer–sellerdependenceinrelation-shipmarketing’,paperpresentedattheSecondResearchConferenceonRelationshipMarketing,EmoryUniversity,Atlanta,USA,11June.Brasil,V.C.,andJ.P.Eggers(2019),‘Productandinnovationportfoliomanagement’,inAldag,R.J.(ed.),OxfordResearchEncyclopaediaofBusinessandManagement.OxfordUniversityPress,1–31.doi:10.1093/acrefore/9780190224851.013.28.CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

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506488Handbookoftheoriesforpurchasing,supplychainandmanagementresearchHartmann,E.,Ritter,T.,andH.Gemuenden(2001),‘Determiningthepurchasesituation:cornerstoneofsupplierrelationshipmanagement’,paperpresentedatthe17thIMPInternationalConference,Oslo.Henderson,B.D.(1970),‘Theproductportfolio’,(Perspectives).Boston,MA:BostonConsultingGroup.Henderson,B.D.(1972),‘Cashtraps’,(Perspectives).Boston,MA:BostonConsultingGroup.Henderson,B.D.(1973),‘Theexperiencecurvereviewed:IV.TheGrowthShareMatrixoftheproductportfolio’,(Perspectives,No.135).Boston,MA:BostonConsultingGroup.Hofman,M.,Spalek,S.,andG.Grela(2017),‘Sheddingnewlightonprojectportfolioriskmanagement’,Sustainability,9(10),1798–1816.Holm,M.,Kumar,V.,andC.Rohde(2012),‘Measuringcustomerprofitabilityincomplexenviron-ments:aninterdisciplinarycontingencyframework’,JournaloftheAcademyofMarketingScience,40(3),387–401.Homburg,C.(1995),‘Singlesourcing,doublesourcing,multiplesourcing…?EinökonomischerErklärungsansatz.ZeitschriftfürBetriebswirtschaft,65(8),813–834(‘Singlesourcing,doublesourc-ing,multiplesourcing…?Aneconomicexplanation’).Homburg,C.andD.Daum(1997),‘DieKundenstrukturalsControllingHerausforderung’,Controlling,Heft6,November/Dezember,394–404(‘Thecustomerstructureasacontrollingchallenge’).Homburg,C.,Steiner,V.V.,andD.Totzek(2009),‘Managingdynamicsinacustomerportfolio’,JournalofMarketing,73(5),70–89.Johnson,M.D.,andF.Selnes(2004),‘Customerportfoliomanagement:towardadynamictheoryofexchangerelationships’,JournalofMarketing,68(2),1–17.Kader,M.A.,andH.Hossain(2020),‘AnanalysisonBCGgrowthsharingmatrix’,InternationalJournalofEconomics,BusinessandAccountingResearch,4(1),245–252.Kamann,D.J.F.(2000),‘Kraljickrijgtextradimensie’,TijdschriftvoorInkoop&Logistiek,16(4),8–12(‘Kraljicgetsanextradimension’).Kang,M.,Hong,P.,Bartnik,R.Park,Y.andC.Ko(2018),‘Aligningpurchasingportfoliomanagementwithsourcingnegotiationstyles’,ManagementDecision,56(11),2341–2356.Kang,M.,Wu,X.,Hong,P.,andY.Park(2012),‘Aligningorganizationalcontrolpracticeswithcompet-itiveoutsourcingperformance’,JournalofBusinessResearch,65(8),1195–1201.Knight,L.,Tu,Y.H.,andJ.Preston(2014),‘Integratingpurchasingskillsprofilingandpurchasingportfoliomanagement:anopportunityforbuildingpurchasingcapability’,InternationalJournalofProductionEconomics,147,271–283.Kraljic,P.(1977),‘NeueWegeimBeschaffungsmarketing’,BeschaffungAktuell,December,20–26(‘Newwaysinprocurementmarketing’).Kraljic,P.(1983),‘Purchasingmustbecomesupplymanagement’,HarvardBusinessReview,61(5),109–117.Kumar,N.(1996),‘Thepoweroftrustinmanufacturerrelationships’,HarvardBusinessReview,74(6),93–106.Lambrechts,W.,Gelderman,C.J.,Weelink,R.,andJ.Semeijn(2019),‘Howdobuyersactuallynegotiatewiththeirleverageandstrategicsuppliers?Analysisofnegotiationtopics,tacticsandoutcomes’,paperpresentedatthe28thInternationalIPSERAconference,Milan.Lee,D.M.,andP.R.Drake(2010),‘AportfoliomodelforcomponentpurchasingstrategyandthecasestudyoftwoSouthKoreanElevatorManufacturers’,InternationalJournalofProductionResearch,48(22),6651–6682.Lee,H.S.,Sheng,F.F.,andC.S.Chuan(2016),‘MarkowitzportfoliotheoryandcapitalassetpricingmodelforKualaLumpurstockexchange:acaserevisited’,InternationalJournalofEconomicsandFinancialIssues,6(3),59–65.Lilliecreutz,J.,andL.Ydreskog(1999),‘Supplierclassificationasanenablerforadifferentiatedpur-chasingstrategy’,GlobalPurchasingandSupplyChainManagement,11,66–74.Luzzini,D.,Caniato,F.,Ronchi,S.,andG.Spina(2012),‘Atransactioncostsapproachtopurchasingportfoliomanagement’,InternationalJournalofOperationsandProductionManagement,32(9),1015–1042.Markowitz,H.(1952),‘Portfolioselection’,JournalofFinance,7(March),77–91.Matthies,B.D.,Jacobsen,J.B.,Knoke,T.,Paul,C.,andL.Valsta(2019),‘Utilisingportfoliotheoryinenvironmentalresearch–newperspectivesandconsiderations’,JournalofEnvironmentalManagement,231,926–939.CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

507Portfoliotheory489McAlister,L.,andS.Sinha(2021),‘Acustomerportfoliomanagementmodelthatrelatescompany’smarketingtoitslong-termsurvival’,JournaloftheAcademyofMarketingScience,49,584–600.Medeiros,M.andL.Ferreira(2018),‘Developmentofapurchasingportfoliomodel:anempiricalstudyinaBrazilianhospital’,ProductionPlanningandControl,29(7),571–585.Micán,C.,Fernandes,G.andM.Araújo(2020),‘Projectportfolioriskmanagement:astructuredliter-aturereviewwithfuturedirectionsforresearch’,InternationalJournalofInformationSystemsandProjectManagement,8(3),67–84.Monalisa,S.,P.NadyaandR.Novita(2019),‘AnalysisforcustomerlifetimevaluecategorizationwithRFMmodel’,ProcediaComputerScience,161,834–840.Montgomery,R.T.,J.A.OgdenandB.C.Boehmke(2018),‘AquantifiedKraljicportfoliomatrix:usingdecisionanalysisforstrategicpurchasing’,JournalofPurchasingandSupplyManagement,24(3),192–203.Nellore,R.andK.Söderquist(2000),‘Portfolioapproachestoprocurement–Analysingthemissinglinktospecifications’,LongRangePlanning,33(2),245–267.Netzer,O.,J.M.LattinandS.Srinivasan(2008),‘AhiddenMarkovmodelofcustomerrelationshipdynamics’,MarketingScience,27(2),185–204.Nicholson,A.(1993),‘Strategicmanagementforthepurchasingprofessional’,PurchasingandSupplyManagement,27,32–32.Nowak,M.,Mierzwiak,R.,Wojciechowski,H.,andC.Delcea(2020),‘Greyportfolioanalysismethod’,GreySystems:TheoryandApplications,10(4),439–454.Olsen,R.F.andL.M.Ellram(1997),‘Aportfolioapproachtosupplierrelationships’,IndustrialMarketingManagement,26(2),101–113.Padhi,S.S.,Wagner,S.,andV.Aggarwal(2012),‘PositioningofcommoditiesusingtheKraljicportfoliomatrix’,JournalofPurchasingandSupplyManagement,18(1),1–8.Pagell,M.,Wu,Z.,andM.E.Wasserman(2010),‘Thinkingdifferentlyaboutpurchasingportfolios:anassessmentofsustainablesourcing’,JournalofSupplyChainManagement,46(1),57–73.Pfeffer,J.andG.R.Salancik(1978),TheExternalControlofOrganizations–AResourceDependencePerspective.NewYork:Harper&RowPublishers.Ramsay,J.(1996).‘Thecaseagainstpurchasingpartnerships’,InternationalJournalofPurchasingandMaterialsManagement,32(4),13–19.Reilly,F.KandE.A.Norton(2017),OutlinesandHighlightsforInvestments,7thedn.Orlando,FL:DrydenPress.Rezaei,J.,andH.FallahLajimi(2019),‘Segmentingsuppliesandsuppliers:bringingtogetherthepurchasingportfoliomatrixandthesupplierpotentialmatrix’,InternationalJournalofLogisticsResearchandApplications,22(4),419–436.Ritter,T.(2000),‘Aframeworkforanalyzinginterconnectednessofrelationships’,IndustrialMarketingManagement,29(4),317–26.Shapiro,B.P.,Rangan,K.V.,Moriarty,R.T.,andRoss,E.B.(1987),‘Managecustomersforprofits(notjustsales)’,HarvardBusinessReview,65(5),101–108.Sharpe,W.F.(1963),‘Asimplifiedmodelforportfolioanalysis’,ManagementScience,9(2),277–293.Sharpe,W.F.(1964),‘Capitalassetprices:atheoryofmarketequilibriumunderconditionsofrisk’,JournalofFinance,19(3),425–442.Smeltzer,L.R.andS.P.Siferd(1998),‘Proactivesupplymanagement:themanagementofrisk’,InternationalJournalofPurchasingandMaterialsManagement,34(4),38–45.Steele,P.T.andB.H.Court(1996),ProfitablePurchasingStrategies:AManager’sGuideforImprovingOrganizationalCompetitivenessthroughtheSkillsofPurchasing.London:McGraw-Hill.Syson,R.(1992),ImprovePurchasePerformance.London:PitmanPublishing.Teller,J.,andA.Kock(2013),‘Anempiricalinvestigationonhowportfolioriskmanagementinfluencesprojectportfoliosuccess’,InternationalJournalofProjectManagement,31(6),817–829.Turnbull,P.W.(1990),‘Areviewofportfolioplanningmodelsforindustrialmarketingandpurchasingmanagement’,EuropeanJournalofMarketing,24,7–22.Wagner,S.M.,andJohnson,J.L.(2004),‘Configuringandmanagingstrategicsupplierportfolios’,IndustrialMarketingManagement,33(8),717–730.Wynstra,F.,andE.TenPierick(2000),‘Managingsupplierinvolvementinnewproductdevelopment:aportfolioapproach’,EuropeanJournalofPurchasingandSupplyManagement,6(1),49–57.CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

508490Handbookoftheoriesforpurchasing,supplychainandmanagementresearchYorke,D.A.(1984),‘Aninteractionapproachtothemanagementofaportfolioofcustomeropportuni-ties’,MarketIntelligenceandPlanning,2(3),5–22.Yorke,D.A.,andG.Droussiotis(1994),‘Theuseofcustomerportfoliotheory:anempiricalsurvey’,JournalofBusinessandIndustrialMarketing,9(3),6–18.Young,L.C.,andI.F.Wilkinson(1997),‘Thespacebetween:towardsatypologyofinterfirmrelations’,JournalofBusiness-to-BusinessMarketing,4(2),53–97.Zhang,L.(2019),‘Researchstatusandprogressofportfoliotheory’,paperpresentedattheFirstInternationalSymposiumonEconomics,Management,andSustainableDevelopment,Hangzhou,China.CeesJ.Gelderman-9781839104503DownloadedfromPubFactoryat05/28/202209:11:30AMviaColumbiaUniversityLibrary

50931.Supplychainsasdynamicsocio-technicalsystemsJohnGattornaandWilliamPasmoreINTRODUCTIONSupplychainsaredynamicsocio-technicalsystems.Theyaresocio-technicalsystemsbecausetheyemploypeople(social)allalongthechainwhousetechnology(technical)aspartofaworksysteminwhichdecisionsmadeabouthowworkisdesignedcangreatlyaffectmoti-vationandresults.Theyaredynamicbecausetheymustadaptconstantlytothechangingcon-textswithinwhichtheyoperate.Consequently,humanandtechnicalconfigurationsmustbedesignedinanoptimalfashionandbeflexiblesothattheycanevolveatapacecommensuratewiththesechanges.Thistruthdefineswhatsupplychainsare,buttellsuslittleaboutwhatmakesagivensupplychainefficientorinefficient,staticordynamic,resilientorfragile.Inthischapter,wecombinetheperspectivesprovidedbysocio-technicalsystemstheoryandtheideasincorporatedindynamicsupplychainalignmenttoofferguidanceaboutthedesignofsupplychainsinadis-ruptedworld.Weofferspecificinsightsintotheactionsrequiredtotransformasupplychainfromitscurrentstaticstatetooneofmoreresilientanddynamichighperformance.KEYVARIABLESANDDEFINITIONSThefocusofdynamicsocio-technicalsystemsupplydesignistocreatesupplychainsthatperformatthehighestpossiblelevelovertimeinthefaceofturbulencebroughtaboutbychangesinthebusinessenvironment.Theoutcomevariablesofinterestarethreefold:(1)efficiencyandeffectiveness;(2)employeemotivation;and(3)adaptability.Keycontributionstothedevelopmentofdynamicsocio-technicalsystemsupplychaindesignincludeTristandBamforth(1951),Emery(1959,1963),Miller(1959),Tristetal.(1963),EmeryandTrist(1965),Hill(1971),Cherns(1976),Pasmore(1988)andGattorna(2010).Thekeyvariablesinvolvedinthedesignofdynamicsocio-technicalsystemsupplychainsare:(1)technicalarrangements;(2)socialarrangements;(3)worksystemdesign;and(4)dynamicalignment.Thesefourelements,whencombinedwithaviewtowardtheirinterdependenceininfluencinghowthesupplychainfunctionsandreactstochange,determinetheoverallgoodnessofsupplychaindesign.Wedefineeachinthefollowingsubsections.TechnicalSystemSupplychainsutilizeavarietyoftechnologiestoaccomplishthetasksinvolvedinimporting,storinganddistributinggoodsandinformation.Thesetechnologiesincludebothequipmentofvariouskindsandsoftwareorplatformsthatcoordinate,trackandmanageinventory.As491JohnGattornaandWilliamPasmore-9781839104503DownloadedfromPubFactoryat05/28/202209:11:40AMviaColumbiaUniversityLibrary

510492Handbookoftheoriesforpurchasing,supplychainandmanagementresearchnotedbyMiller(1959)andEmery(1959,1963),organizationshaveawidearrayofchoiceswhenitcomestotechnologies.Supplychaintechnologiesareevolvingrapidly,drivenbysuchconcernsasefficiency,cost,control,speed,reliability,andtheabilitytogaingreaterinsightsintothelocationandflowofgoods.Sincetheearliestexaminationsoftheeffectsoftechnologyonthedesignofworksystems,researchershavecalledattentiontothefactthatleadersoforganizationshavechoicesregard-ingboththetechnologytheychoosetoemployandthewaysinwhichtheydesignthejobsofemployeestooperatewhatevertechnologiesareutilized(Tristetal.,1963).Theco-equalimportanceofchoicesaroundtechnologyandthedesignofworksystemsisemphasizedinvariousstudies(EmeryandThorsrud,1969;Hill,1971;Rice,1958;Walton,1972).Theallureoftechnologiesthatpromisegreaterefficiency,higheroutputorincreasedcontrolcancauseleaderstomakeinvestmentsintechnologythatlimitboththemotivationalaspectsofjobsandtheabilityofemployeestointervenewhenthetechnologymalfunctions.Issuescausedbychoosingtechnologicalarrangementsthatmakeitdifficulttocorrectunanticipateddeviationsandalienateworkersarewelldocumented(Perrow,2011;TristandBamforth,1951).SocialSystemSupplychainsdependonpeopletoplayimportantrolesinsupplychainactivities,fromhandlinginventory,toplanningdemandsforgoods,todetermininghowthesupplychainshouldoperate.Asinthecaseoftechnicalsystems,leaderscanchoosewhoworksintheirorganizationaswellasthejobstheyareaskedtodo.Leadersalsohavechoicesabouthowtheyrewardpeople,whetherlabourissuppliedinternallyorexternally,whetherpeopleworkaloneorinteams,traininganddevelopment,thedeterminationofpolicies,theemployeevaluepropositionandorganizationculture.Quiteoften,thoseinchargeofselectingtechnologiesandsettingupworkflowsarenotthesamepeopleinchargeofthinkingaboutthemanychoicesinfluencingsocialsystemdynamics.Ineffectivesocio-technicalsystems,thecapabilitiesofemployeesarewellsuitedtothetaskstheyareaskedtoperform,andtheworkemployeesareaskedtodoismotivatingandfulfilling(HackmanandOldham,1980).Whencarefulattentionispaidtotheimpactthattechnicalsystemdesignchoiceshaveonsocialsystemfunctioning,theoverallworksystemissaidtohaveachievedjointoptimization(Cherns,1976).TheWorkSystemTheworksystemistheresultofchoicesmadeaboutboththetechnicalsystemandthesocialsystem.Thedesignofworksystemscanvaryfromlackingconsiderationoftheneedforjointoptimizationtoembracingthatneed.Whenworksystemsaredesignedpoorly,theycanunder-performevenwiththelatest,mostefficienttechnologies.Signsofpoorsocialsystemdesignincludetheinabilityofpeopletoperformthetaskstheyareassignedproperly,theinabilityofpeopletokeepupwiththedemandsofthetechnicalsystem,accidents,systemsoutofcontrol,qualityissues,highabsenteeismandturnover,lowmotivation,sabotage,unionization,andresistancetochange.Onlywhenjointoptimizationtakesplacecanthesystemreachitspeakoutputandsustainthatlevelofperformanceovertime.Asaresultofdecadesofexperimenta-tionandresearch,citedpreviously,wenowknow,forexample,thatpeoplemusthavecontrolovertheworktheydosothattheycanidentifyandrespondtoproblemsastheyarise,ratherthanawaitinghelpthatmaynevercome.WehavelearnedthatjointoptimizationrequiresJohnGattornaandWilliamPasmore-9781839104503DownloadedfromPubFactoryat05/28/202209:11:40AMviaColumbiaUniversityLibrary

511Supplychainsasdynamicsocio-technicalsystems493Table31.1Definitionsofdynamicsocio-technicalsystemsvariablesKeyvariables/termsExplanationSupportingreferencesTechnicalsystemThetechnologiesusedinsupplychainwork,includingMiller,1959;Emery,1959,1963;Burnsandbothequipmentandsoftware.Stalker,1961;Hirschhorn,1986SocialsystemHumanbeingsandtheirinfluenceontheoutcomesofBucklow,1966;KatzandKahn,1966;work.Keyconceptsincludemotivation,commitment,Thompson,1967;HackmanandOldham,1980;loyalty,interpersonalrelationships,teamwork,Walton,1985;Crestani,2018collaboration,problemsolving,creativity,innovation,learning,knowledgework,adultdevelopment,capabilities,staffing,adaptability,resistancetochange.WorksystemThedesignoftheorganization,workandculturethatTristandBamforth,1951;Rice,1958;Tristetbringstechnologyandpeopletogetherinsearchofal.,1963;EmeryandThorsrud,1969;Engelstad,jointoptimization.Keyconceptsincludejobdesign,1970;Hill,1971;Cherns,1976;Pasmoreandworkdesign,layout,variances,variancecontrol,Sherwood,1978;DavisandTaylor,1979;efficiency,effectiveness,costs,flexibility,control,Pava,1983;Pasmore,1988;Purseretal.,1992;risk,safety,speed,degreeofinterdependenceamongPerrow,2011;Zarkaetal.,2019technicaloperationsandunits;timing,length,andphysicallocationofoperations;in-houseorcontracted;softwareplatforms.DynamicalignmentTheprocessofidentifyingchangesthataffectdesiredVonBertalanffy,1950;EmeryandTrist,1965;operationalcharacteristicsofthesupplychainandLawrenceandLorsch,1967;Jayaram,1976;buildsinthecapacityofthesupplychaintoadapttoGattorna,1978,2010,2015;Chorn,1987;thesechanges;basedonopensystemstheory.GattornaandEllis,2020thathumanneedsaremet,demandsuponworkersarehumane,peoplehavetheknowledgetheyneedtocontroltechnologyandareempoweredtodoso,wholetasksaremanagedbymultiskilledteamsorinterdependentunits,andpeoplearecompensatedforthevaluetheybring,notjustthetimetheyspend.Asnewtechnologiesareintroduced,peopleshouldbeinvolvedinchoicesaboutwhichtechnologiesareadoptedandhowtheworkofsupportingthosetechnologiesisdesigned.Overall,theorganizationshouldbedesignedtomaximizecommitmentandadaptabilitytochange.DynamicAlignmentWefirstpresentedtheDynamicAlignmentTMmodelin1990tolinktheincreasingvolatilityoftheexternalmarketcontexttospecificdecisionsthatneedtobemaderegardingtheinternalculture,leadershipandoperationalstrategies(Chornetal.,1990).AdditionalinformationonthemodelisavailableinGattorna(2015)andGattornaandEllis(2020).Essentially,themodelsoughttoconnectthebusinesswiththemarketplace,includingcustomers,usingoperationalstrategyasthebridgebetweenthetwoentities,alltiedtogetherwithprocesses,systemsandinfrastructure.Upuntilthistime,andunfortunatelystillthisistruetoday,businesseshavetendedtotakean‘inside-out’viewoftheworld,wheretheymakeassumptionsabouttheirtargetmarket,andthenproceedtobuildmarketing,salesandsupplychainstrategiestosupportthoseassumptions.Thisgoestotheheartoftheproblem,andonethatthenewmodelsoughttocorrect:thatis,tofindadirectlinkbetweencustomers’expectations,andusetheinsightsgainedtoreverseengineerthebusiness,includingthenecessaryprocesses,technology,infra-JohnGattornaandWilliamPasmore-9781839104503DownloadedfromPubFactoryat05/28/202209:11:40AMviaColumbiaUniversityLibrary

512494Handbookoftheoriesforpurchasing,supplychainandmanagementresearchstructureandorganizationstructure.Wecallthis‘outside-in’thinking,whichisveryconsistentwiththedesignthinkingconceptsespousedbyRogerMartin(2009)sometwodecadeslater.Intheyearssincetheearlyexplorationsintothesocio-technicaldesignofworksystems,therehasbeenarecognitionthat‘onesizefitsall’solutionsdonotexist.Instead,wenowknowthatasthebusinesscontextchanges,resultinginnewcustomerdemands,andastechnologycontinuestoevolve,offeringnewopportunitiestoincreaseefficiencyandeffectiveness,‘onesizefitsall’thinkingmustgivewaytodevelopingworksystemsthatconstantlyadapttothesechanges.Wecallsupplychainsthataredesignedinthisfashiondynamicsocio-technicalsystems.Table31.1andFigure31.1helptodefinethevariablesandtheirrelationshipstooutcomesofinterest.Figure31.1Overviewofdynamicsocio-technicalsystemselementsJohnGattornaandWilliamPasmore-9781839104503DownloadedfromPubFactoryat05/28/202209:11:40AMviaColumbiaUniversityLibrary

513Supplychainsasdynamicsocio-technicalsystems495DOMAINWHERETHETHEORYAPPLIESTheprimarydomainwherethetheoryappliesisinthedesignofsupplychainsforanorganiza-tionalentity.Ofcourse,someorganizationscontainmultiplesupplychainsfordifferentprod-ucts,servicesorgeographies,andthetheorycanbeappliedtomultiplesupplychainsaswellastosinglesupplychains.Otherorganizationsserveasdistributors;thescopeofthesupplychainforthoseorganizationsshouldincludesuppliers/vendorsaswell.Inthemodernera,customersandtheirsuppliersareincreasinglylikelytosharelinkedsupplychainplatforms,makinginteroperabilityeasier;inthesecases,thetheoryshouldbeappliedtothedesignoftheentiresupplychain.AswitnessedduringtheCovid-19pandemic,unlessrawmaterialsuppliersaretakenintoconsideration,designingtherestofthesupplychainforoptimalperformancemaynothelp.RELATIONSHIPSBETWEENTHEVARIABLESTwenty-first-centurysupplychainsdependheavilyonadvancedtechnologies,includinginfor-mationtechnologyplatforms,universalproductcodes,robotics,automatedmaterialhandlingsystems,materialrequirementsplanningsystems,sensornetworks,blockchainapplications,flexiblemanufacturingsystems,three-dimensional(3D)printingandartificialintelligence.However,nomatterhowadvancedthetechnologies,asupplychainremainsfirstandforemostasocio-technicalsystem.Supplychainsshouldbedesignedtotakemaximumadvantageofbothtechnologicalandhumancontributions.Becausehumansareessentialtotheimmediateadaptationandongoingevolutionofthesystemtomeetchangingdemands,thesupplychainshouldbedesignedtoallowoperatorstounderstandandtakepartinimprovingtechnologicalchoicesandworkmethods.Allowinghumanstoplayameaningfulrolealsoenhancestheircommitmenttothewell-beingoftheoverallsystem.Thejointoptimizationofsocialandtechnicalsystemstakesplaceinabusinesscontextthatproducesever-changingcustomerdemands.Asthecomplexityandinterconnectednessofourworldcontinuestoincrease,manysupplychaindesignerswillfeeltheneedtoincreasetheflexibilityandresilienceofsupplychainarrangements.WhiletheCovid-19viruspandemicexposedthevulnerabilityoftheexistingsupplychainsinanumberofcriticalindustries,thekindofextremeunexpectedshockweexperiencedasaresultwillsurelynotbeourlast.Thesourcesoffutureshocksmaybedifferent:climatechange,technologicaldisruption,actsofterrorism,globalconflictsormassivepopulationmigrationscouldaltertheworldinanirrevo-cablefashion.Itisnotanoverstatementtosaythatthelivesofmillionsdependonthethoughtweputintothedesignofourfuturesupplychains.Weneedtodesignsupplychainscapableofsustainedperformance,albeitinvolatileoperatingenvironments.Theabilityofanorganizationtosurviveovertimedependsonitsbuilt-incapacitytoadapttochange.Thegreatertherateofchangeintheenvironment,themorecapabilityandflexibil-itytheorganizationmustpossess.Becausetechnologycannotadaptwithouthumanassistance,andbecauseenvironmentshavebecomeincreasinglycomplexandturbulent,ahigherlevelofhumaninterventionisrequiredtoadjustthewaytheorganizationgoesaboutwhatitdoestomeetexternaldemands.Moreover,becauseadaptationdependsonthealignmentandcommit-mentofhumanactorsacrossthesystem,itisimperativethatthesocialsystembeengaged,JohnGattornaandWilliamPasmore-9781839104503DownloadedfromPubFactoryat05/28/202209:11:40AMviaColumbiaUniversityLibrary

514496Handbookoftheoriesforpurchasing,supplychainandmanagementresearchsupportiveandcapableofhelpingthesystemtoadapt.Thisrequiresanengagingstyleofleadershipratherthanthehierarchicalapproachorcommand-and-controlstyle.Italsorequiresasocialsystemthathassufficientcapabilitytoadapttothelevelandcomplexityofchangethatisoccurring,whichinturnsrequiresthehiringandcontinueddevelopmentofknowledgeable,skilledworkersandleaders.Theseworkersandleadersmustpossesstheauthorityneededtoacttochangethesystemasrequiredandnotbeconstrainedunnecessarilybybureaucraticcontrol.Toaddresstheneedforadaptability,wefirstpresentedtheDynamicAlignmentTMmodelin1990tolinktheincreasingvolatilityoftheexternalmarketcontexttospecificdecisionsthatneedtobemaderegardingtheinternalculture,leadership,andoperationalstrategies(Chornetal.,1990).AdditionalinformationonthemodelisavailableinGattorna(2015)andGattornaandEllis(2020).ThisstartingpositiondrewonthedoctoralresearchofbothGattorna(1978),andChorn(1987).Theresultwasaconceptualframeworkthatweinitiallycalledthestrategicalignmentmodel,butsubsequentlychangedtoDynamicAlignment™modelsomeyearslater,whenitbecameobviousfromourfieldresearchthatthemodelhadtowithstandchangingconditionsinthemarketplace,asdepictedinFigure31.2.Source:AdaptedfromGattorna(2015,p.25).Figure31.2TheDynamicAlignment™businessmodelEssentially,themodelseekstoconnectthebusiness,madeupoflevels3(culturalcapabil-ity)and4(leadershipstyle),withlevel1(themarketplace,includingcustomers),usingopera-tionalstrategy(level2)asthebridgebetweenthetwoentities,alltiedtogetherwithprocesses,systemsandinfrastructure.Soevenatthisearlystageinourthinkingwerecognizedthatthereweresocialandtechnicalcomponentsinvolved.Thewaythemodelworksisasfollows.Researchisconductedinthetargetmarkettorevealtherangeofexpectationscustomershaveforthewaytheyprefertobuyspecificproduct/servicecategories.Oncethisisknown,itisrel-JohnGattornaandWilliamPasmore-9781839104503DownloadedfromPubFactoryat05/28/202209:11:40AMviaColumbiaUniversityLibrary

515Supplychainsasdynamicsocio-technicalsystems497ativelyeasytodevelopamatchingrangeofvaluepropositionsandcorrespondingoperationalstrategies.Thencomesthehardpart.Armedwithasetofintendedstrategies,wehavetolookdeeplyintotheorganization(Level3)toshapethesubculturesinsuchawaythattheysupportandactivelyunderpinandpropelthesestrategiestowardsthetargetmarketsegmentsalreadyidentified.AsChornhadprevi-ouslyshown,itisthisinterfacebetweentheorganizationalcultureandstrategywherethereisseriousslippage,totheextentthat40‒60percentofintendedstrategiesareneverdelivered,primarilybecauseofinternalculturalresistancetochange.Andsadly,thisisstilllargelytruetoday,irrespectiveofthenewertechnologiesavailabletousnow.So,theearlierpointaboutsystemsandpeopleworkingtogetherisstillveryvalid,andanecessaryconditionforsuccess.Thefinallevel(level4),leadership,comesintoplayasthetopteam,withoneeyeonthemarketplace,takesactiontoshapethesubculturesinsidethebusinessinsuchawayastoalignwiththeoperationalstrategiesthathavebeendevised.Thebetterthealignmentbetweenwhatishappeninginthemarketplace,intermsofcustomerexpectations,withthecorrespondingstrategies,internalsubculturesandleadershipstyles,thebettertheenterprisewillperformasitdeliversvaluepropositionstocustomersthataremostappropriate,avoidingcostlyover-andunderservicing.Thekeyhereisprecisionalignment.THEORETICALPREDICTIONSOverthecourseofthelast25years,wehaverelentlesslycontinuedourfieldresearchinanefforttomaketheoriginal‘alignment’conceptmoregranular,andthereforemorepractical.Byconductingnumerouspiecesofmarketresearch,inmanydifferentindustries,acrossmul-tiplegeographies,wecametorecognizepatternsinthecustomerbuyingbehavioursobserved.ConsistentwiththeworkofAdizes(1979[1985])andFaust(1979),wefoundatotalof16archetypesofbehaviour,whichtheoreticallypointedtotheneedforupto16matchingsupplychainconfigurations.Clearlythisisimpracticableinaday-to-dayoperationalsense.However,furtherworkconvincedusthatthisnumbercouldberesolveddowntofourorfiveinordertoachieveaverycredible80percentcoverageofagiventargetmarket,andatthesametimebeworkableintermsofhowthebusinessorganizeditselfinternallytosupportsuchaportfolioofsupplychainconfigurations.Indeed,wewillgofurtherandsaythataportfoliooffoursupplychainconfigurations(collaborative,lean,campaignandagile)issufficienttocoverthebusiness-as-usual(BAU)demandsinmostproduct/marketcombinations.Inotherwords,thesefourconfigurations,hard-wiredintothebusiness,aredesignedtoservicedemandwhichcanrangefromstable(representingsay0‒40percentCoV1),throughtoasignificantlyvolatiledemand(50‒100percentCoV).Operationswithintheselimitsweconsidertobebusiness-as-usual.Beyondthat,intimesofextremeandunexpecteddisruption,suchasduringtheCovid-19crisis,wearelikelytowitnessmuchhigherfluctuationsindemand,withCoVscorrespond-inglymuchhigher,forexampleover200percent.Thisistheworldofthefullyflexiblesupplychain.Indeed,thedifferencebetweenBAUandextremedisruptionislikemanaginginapar-alleluniverse,andwehavetoprepareforboth,accordingly.Thefocus,technology/informationtechnology(IT)systemsandsocio-culturalcharacter-isticsembeddedinthesedifferentsupplychainworldsaredescribedinFigure31.3.Ascus-tomersdemandmoreagility,movingfromtherelativelystablecollaborativepattern,throughJohnGattornaandWilliamPasmore-9781839104503DownloadedfromPubFactoryat05/28/202209:11:40AMviaColumbiaUniversityLibrary

516498Handbookoftheoriesforpurchasing,supplychainandmanagementresearchSocio-technicalcharacteristicsbysupplychaintypeGattornaAlignmentResearch.Source:Figure31.3JohnGattornaandWilliamPasmore-9781839104503DownloadedfromPubFactoryat05/28/202209:11:40AMviaColumbiaUniversityLibrary

517Supplychainsasdynamicsocio-technicalsystems499toamorevolatilepatternindynamicbuyingbehaviour,andultimatelytoextremedisruptionasseenintheinnovativesolutionssegment,theneedtoincorporatesocio-technicaldesignprinciplesintotheoperationofsupplychainsincreases.Whereascollaborativeandleansupplychainscanbedesignedfortechnicaloptimizationbecausetheyoperateinanenvironmentofcertaintyinarepetitivefashion,theoppositeistrueoffullyflexiblesupplychains.HOWHASTHETHEORYBEENUSED?CompaniessuchasZara,Li&Fung,Semco,VFCorporation,TheDecathlonGroup,AeraEnergyandAdidashavebeeninthevanguard,usingdifferentconfigurationsoftheself-adaptiveteam.SeeGattorna(2015,Ch.6)forafullreviewofthedifferentorganizationstructuresexperimentedwithtodate.Inourview,thebestandmostpracticalorganizationconfigurationtoservicefast-movingcontemporarymarketsistoretaintheverticalfunctionalspecialisms,butcomplementthesewithmultidisciplinaryteamstodrivethehorizontalcross-functionalflowsthroughtospecificcustomersegments.Thisdualstructurewouldbeservicedbyasharedservicesplatformofhumanresources(HR),ITandfinance.ExamplesofthisconfigurationaresetoutinGattorna(2015,Chs7‒11).OUTLOOKONFUTURERESEARCHPOSSIBILITIESThegoalsofintroducingdynamicsocio-technicalsystemstheoryintosupplychainresearcharetwofold:(1)tolearnhowtominimizedesignfeaturesthatproduceless-than-optimalsupplychainoperations;and(2)toinvestigatedesignfeaturesthatallowmorereadyadapta-tiontoturbulentbusinessconditions.Additionalresearchonthedesignofsupplychainsthatoperateunderconditionsofextremevolatilitywouldaddtoourunderstandingofthefactorsthataremostimportanttoconsideraswewitnesstheever-increasingturbulenceandconnectednessofglobalbusinessconditions.Asnewtechnologieshaveemerged,andinparticularthosebasedonartificialintelligence(AI),therehavebeenseriousdebatesonwhetherAIwillbeaboonorathreattohumanity.Astechnologyplaysagreaterroleinsupplychaincontrol,thequestioniswhetheremployeeswillseetheaddedassistanceassupplementingordiminishingthemeaningfulnessofwork.Investigationintotheeffectsofnewsupplychaintechnologiesonperformanceandmotivationwouldbemostwelcome.Assupplychainsbecomemorecomplex,tyingtogetheragreaternumberofactorswhooncemadedecisionsindependently,thereisagreaterneedforpartiestoadoptthesameplatformsandoperationalarrangements.Indoingso,thesheerscopeofconnectedoperationscoulddefeatthegoalofmaintainingflexibilitytoallowforadaptation.Researchintomethodstobothconnectandrapidlychangesupplychaindesignwillbeneededtoguidedesignerswhowantthebestofboth.Asnewgenerationsofworkersenterorganizations,itisnotclearthatthesameneedsthatproducedjointoptimizationinthepastwilldosointhefuture.Understandinghowneedsareevolvingatworkisnecessarytodesignappropriateworksystemsfortomorrow’sworkforce.JohnGattornaandWilliamPasmore-9781839104503DownloadedfromPubFactoryat05/28/202209:11:40AMviaColumbiaUniversityLibrary

518500Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFinally,witnessingthedisruptiontosupplychainsbroughtaboutbyCovid-19,itisclearthatsupplychaindesignneedstoexaminehowtoprepareforextremedisruption,thesourceandnatureofwhichcannotbepredicted.NOTE1.CoV,orcoefficientofvariation,isaratioofstandarddeviationoverthemean.TherelativesizeoftheCoViswhatisimportantinassessingdemandpatterns.REFERENCESAdizes,I.(1979[1985]),HowtoSolvetheMismanagementCrisis,1stprinting,Dow-Jones-Irwin;(1985)5thprinting,SantaMonica,CA:AdizesInstitute.Bucklow,M.(1966),‘Anewrolefortheworkgroup’,AdministrativeScienceQuarterly,59–78.Burns,T.,andStalker,G.(1961),TheManagementofInnovation.London:TavistockInstitute.Cherns,A.(1976),‘Theprinciplesofsocio-technicaldesign’,HumanRelations,29(8),783–792.Chorn,N.H.(1987),‘Therelationshipbetweenbusiness-levelstrategyandorganizationalculture’,unpublishedPhDthesis,WitwatersrandUniversity,Johannesburg.Chorn,N.,Myres,K.,andGattorna,J.(1990),‘Bridgingstrategyformulationandimplementation’,paperpresentedtothe10thAnnualInternationalConferenceoftheStrategicManagementSociety,Stockholm.Crestani,I.(2018),‘Feelingvalued:Theroleofcommunicationinpreparingemployeesforchange’,unpublishedPhDThesis,Australia:CharlesSturtUniversity.Davis,L.,andTaylor,J.(1979).DesignofJobs,SantaMonica,CA:Goodyear.Emery,F.(1959).Characteristicsofsocio-technicalsystems.Document#527,London:TavistockInstituteforHumanRelations.Emery,F.(1963),Somehypothesesaboutthewayinwhichtasksmaybemoreeffectivelyputtogethertodesignjobs.Document#T176,London:TavistockInstituteforHumanRelations.Emery,F.,andThorsrud,E.(1969),FormandContentinIndustrialDemocracy,London:TavistockInstitute.Emery,F.,andTrist,E.(1965),‘Thecausaltextureoforganizationalenvironments’,HumanRelations,18(1),21–32.Engelstad,P.(1970),‘Socio-technicalapproachtotheproblemsofprocesscontrol’,inF.Bolan(ed.)Papermakingsystemsandtheircontrol.BritishPaperandBoardMakersAssociation.Faust,G.W.(1979),President,FaustManagementCorp.,Poway,CA(previouslyPresidentoftheAdizesInstitute).Gattorna,J.L.(1978),‘Theeffectsofinnovationonchannelsofdistribution’,unpublishedPhDthesis,CranfieldUniversity.Gattorna,John(2010),2ndedn.,DynamicSupplyChains:DeliveringValuethroughPeople,Harlow,UK:FTPublishing.Gattorna,J.(2015),3rdedn.,DynamicSupplyChains:HowtoDesign,BuildandManagePeople-centricValueNetworks,Harlow,UK:FTPublishing.Gattorna,J.,andEllis,D.(2020),TransformingSupplyChains:RealignYourBusinesstoBetterServeCustomersinaDisruptiveWorld.Harlow,UK:FTPublishing.Hackman,R.,andOldham,G.(1980),WorkRedesign,Reading,MA:Addison-Wesley.Hill,P.(1971),TowardsaNewPhilosophyofManagement,NewYork:BarnesandNoble.Hirschhorn,L.(1986),BeyondMechanization,NewYork:BarnesandNoble.Jayaram,J.(1976),Opensystemsplanning,inW.Bennis,K.Benne,R.ChinandK.Corey(Eds.),ThePlanningofChange,NewYork:Holt,Rinehart&Winston.Katz,D.,andKahn,R.(1966),TheSocialPsychologyofOrganizations,NewYork:Wiley&Sons.JohnGattornaandWilliamPasmore-9781839104503DownloadedfromPubFactoryat05/28/202209:11:40AMviaColumbiaUniversityLibrary

519Supplychainsasdynamicsocio-technicalsystems501Lawrence,P.,andLorsch,J.(1967),OrganizationandEnvironment,Cambridge,MA:HarvardUniversityPress.Martin,R.(2009),TheDesignofBusiness:WhyDesignThinkingistheNextCompetitiveAdvantage,Boston,MA:HarvardBusinessPress.Miller,E.(1959),‘Technology,territoryandtime:Theinternaldifferentiationofcomplexproductionsystems’,HumanRelations,17(12),245–272.Pasmore,W.(1988),DesigningEffectiveOrganizations:TheSocio-technicalSystemsPerspective,NewYork:Wiley&Sons.Pasmore,W.,andSherwood,J.(1978),Socio-technicalSystems:ASourcebook,LaJolla,CA:UniversityAssociates.Pava,C.(1983),ManagingNewOfficeTechnology:AnOrganizationalStrategy,NewYork:FreePress.Perrow,C.(2011),NormalAccidents:LivingwithHighRiskTechnologies–UpdatedEdition,PrincetonUniversityPress.Purser,R.,Pasmore,W.,andTenkasi,R.(1992),‘Theinfluenceofdeliberationsonlearninginnewproductdevelopmentteams’,JournalofEngineeringandTechnologyManagement,9(1),1–28.Rice,A.(1958),ProductivityandSocialOrganization:TheAhmedabadExperiment,LondonTavistockInstitute.Thompson,J.(1967),OrganizationsinAction,NewYork:McGrawHill.Trist,E.L.,andBamforth,K.W.(1951),‘Somesocialandpsychologicalconsequencesofthelongwallmethodofcoal-getting:Anexaminationofthepsychologicalsituationanddefencesofaworkgroupinrelationtothesocialstructureandtechnologicalcontentoftheworksystem’,HumanRelations,4(1),3–38.Trist,E.,Higgin,C.Murray,H.,andPollock,A.(1963).OrganizationalChoice.London:TavistockInstitute.VonBertalanffy,L.(1950),‘Thetheoryofopensystemsinphysicsandbiology’,Science,111,23–29.Walton,R.(1972),‘Fromcontroltocommitment:Howtocounteralienationintheplant’,HarvardBusinessReview,50(6),70-81.Walton,R.(1985),‘Fromcontroltocommitmentintheworkplace’,HarvardBusinessReview,March–April,77–84.Zarka,M.,Kochanovskaya,E.,andPasmore,W.(2019),BraidedOrganizations:DesigningAugmentedHuman-CentricProcessestoEnhancePerformanceandInnovation,Charlotte,NC:InformationAgePublishing.JohnGattornaandWilliamPasmore-9781839104503DownloadedfromPubFactoryat05/28/202209:11:40AMviaColumbiaUniversityLibrary

52032.PanarchytheoryAmandaBilleandAndreasWielandINTRODUCTIONSupplychainmanagement(SCM)hasdevelopedrapidlyoverthelastdecades.Amultitudeoftheorieshavebeenusedtoilluminatesupplychainphenomena,anditiscleartoseehowourviewonSCMisundergoingconstanttransformation.Backin2001,Mentzeretal.presentedafamousconceptualizationofthesupplychain.Theydemonstratedhowthesupplychainwasmorethanasimplebuyer–supplierrelationship.Withtheir‘ultimatesupplychain’,theseauthorswidenedourviewofthesupplychainandincludedactorsthathadpreviouslybeenleftoutofsupplychainmatters(Mentzeretal.2001).However,thesupplychainwasstillconceptualizedasaclosedsystem.Yearsafter,theviewonSCMhaschangedremarkably.Authorsintroducedthenotionofa‘visibilityhorizon’aroundfocalfirmsaswellasadistinc-tionbetweenthephysicalandthesupportsupplychain.Thishighlightedthatitisnotpossibletofullyunderstandtheentiresupplychain–wecanonlymanagealimitedpartthereof(Carteretal.2015).Theseauthorsnowconceptualizedthesupplychainasanopensystem.Inthischapter,panarchytheorywillbeintroducedasanovelapproachtoSCM.Itwillshowhowpanarchytheorycanbeusedasyetanotherconceptualizationofthesupplychain,wheretheworldisinterpretedasacomplexsystemofwhichthesupplychainisapart.Formanyyears,ecologistshavedemonstratedthestrengthsofseeingthecomplexnatureofecologicalsystemsthroughthelensofpanarchytheory.Buildingonthistheorytointerpretthechangesofprocessesandstructuresinecologicalsystems(forexample,rainforests)hasproventobeparticularlyusefultounderstandhowsuchsystemsdevelopandpotentiallycol-lapse(HollingandGunderson2002).Withpanarchytheory,ecologistshavedevelopedatoolthatallowsanalysisofhowlargeandcomplexsystemsbehaveatsmallerlevelswithoutisolat-ingthemfromthelargercontext(Holling2001).Ateachlevel,thedevelopmentofthesystemcanbedescribedasanadaptivecycle(Holling2001).Thus,panarchytheorycanbeespeciallyusefulwhenitcomestoaddressingissuesatthecrossroadsofeconomicsuccess,sustainabilityandinnovation,asitcanprovideananalyticaltoolforunderstandingwhysomesystemsfailatcopingwithsuchissues(Hollingetal.2002).Engineeringscholarsviewresilienceasacon-stantstrivingtoreturntoanormalandstablestateofbeing(Sheffi2005),whereaspanarchytheoryinterpretsresilienceasaflexible,dynamicconceptofconstantbecomingthatrequiresadaptionandtransformation;notmanagementbycontrol(Davoudi2012).InWieland(2021)thislogichasbeentransferredtothecontextofSCM.Thereasonswhypanarchytheoryisattractivetosocialscientists,suchasSCMscholars,aremany.Panarchytheoryallowsforamanageableanalysisofcomplexmattersinawaythatisrarelyseeninotherprevailingtheoreticalapproaches.SuchanapproachthatembracescomplexityhasbeenarguedtobewhatisnecessarytobringSCMintothetwenty-firstcentury(seeNilsson2019).Thisispossiblebecausepanarchytheorysimplifiestheanalysiswithoutreducingtheunitofanalysis.Insteadofviewingthesupplychainasastable,‘engineerable’entity,interpretingthesupplychainasbeingapartofasocial-ecologicalsystem,represented502AmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

521Panarchytheory503byapanarchy,willrequireSCMscholarstoacknowledgethatsupplychainsaresubjecttoconstantchange(Wieland2021).Thus,apanarchyisasuitabletoolforacknowledgingtheworld’sphenomenologicalcomplexitywhileatthesametimedepictingthisinastructuredway.Itisnotnovelpersetoapplypanarchytheorytosystemsoutsideecology.Researcherswithinfieldssuchasurbanplanninghaveshownthatitisinfactpossibletotranslatepanarchytheorytoasocialsetting,wheretheyhaveanalysedcitiesassocial-ecologicalsystemsthatarepartlyunplannableandunpredictableintheirnature,makingitimpossibletostayincompletecontroloftheirdevelopment(Evans2011).Onthebasisofthistheoreticaldevelopment,thischapterlooksintothepossibilitiesofusingapanarchicallensonSCM(seeWieland2021).First,athoroughdefinitionofkeyelementsanddefinitionsrelatedtopanarchytheoryareprovidedwiththepurposeofdevelopingasolidunderstandingofhowpanarchytheoryareconstructed.Next,theassumptionsabouthumannaturelyingbehindpanarchytheoryareoutlined.Thechapterthenlooksintohowpanarchytheoryhaspreviouslybeenusedwithinecology.Thepossibilitiesandpreviousattemptsofapplyingpanarchytheorytoamanagementsettingaretheninvestigatedanddiscussed.ThechapterconcludeswithadiscussionofhowtofurtherdeveloppanarchytheoryasananalyticaltoolinSCM.KEYELEMENTSANDDEFINITIONSThemaindriverbehinddevelopingpanarchytheorywastocreateamodelthatwouldprovideastructuredunderstandingofcomplexphenomenawithoutoversimplifyingthem.Panarchytheoryenablesustomakesenseofecologicalsystemsinadynamicandprescriptiveway,wherewecangainabetterunderstandingoftheuncertainandunpredictablenatureofthesystemsinquestion(Holling2001).Table32.1summarizeskeydefinitionsinpanarchytheory.TheAdaptiveCyclePanarchytheorytakesitspointofdepartureintheadaptivecycle,whichisusedtoexplaintheevolvingnatureofsocial-ecologicalsystems(Allenetal.2014).Social-ecologicalsystemsarespecialcasesofcomplexadaptivesystemsthatfocusonsocialactorsandelementsofnature.Theadaptivecycleisdrivenbythreedifferentvariables:potential,connectednessandresil-ience.Thepotentialofasystem,its‘wealth’,describeshowmuchasystemcanchangeandprovidesinsightintothedifferentwaysinwhichthesystemmightenduplookinginthefuture.Theconnectednessdenoteshowmuchthesystemisabletocontrolwhatitwilllooklikeinthefuture.Thesecontrolscaneitherbeflexibleorrigid,andcanbemoreorlesssensitivetodeviations.Finally,resiliencemeasuresthevulnerabilityofthesystemtounexpectedshocks(Holling2001).ItisimportanttonotethattheecologicaldefinitionofresiliencediffersfromthetraditionaldefinitionofresilienceusedinmostSCMliterature.InanSCMcontext,resilienceoftenfollowstherootsofamechanical-engineeringperspective,wherethegoalistore-establishtheoriginalstructureafteradisruption,returningtothestableandwell-knowndynamicsfrombeforethechange(seeSheffi2005).Ecologicalresilience,ontheotherhand,acknowledgesthatdisruptionsandcollapseshappen,andthatthesystemwillnotnecessarilybeabletoreturntoitsoriginalshape(Holling1996).Thus,ecologicalresiliencereflectstheunpredictableAmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

522504Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable32.1KeydefinitionsinpanarchytheoryElementExplanationSupportingreferencesUnitofanalysisAcomplexadaptivesystemofnatureandpeople,thatis,Holling(2001);HollingandGundersonasocial-ecologicalsystem.(2002);Wieland(2021)LevelofanalysisOftenonamacro/global/ecologicalsystemlevel,butCashetal.(2006);Dreveretal.(2006);withthepossibilityofzoominginonandoutofvariousHolling(2001)elements.KeydefinitionsAdaptivecycleApanarchyconsistsofvariousadaptivecyclesdefinedAllenetal.(2014);Holling(2001)bythreefactors:potential,connectednessandresilience.PhasesofadaptivecyclesAlladaptivecyclesmovethroughfourdifferentphasesAllenetal.(2014);Biggsetal.(2010);‒exploitation,conservation,releaseandreorganizationHolling(2001);HollingandGunderson‒atdifferentpaces.(2002)ScalesScalessuchasspatial,temporal,quantitativeorCashetal.(2006);Gibsonetal.(2000);analyticalareusedtodescribethegranularityofagivenWestleyetal.(2002)levelwithinapanarchy.LevelsTheunitofanalysislocatedatacertainpositiononCashetal.(2006);Gibsonetal.(2000)ascale.Onsomelevels,changesareslower;onotherstheyarefaster.Cross-scaleandcross-levelAdaptivecyclesareinterconnectedacrossscalesandBerkesandRoss(2016);Cashetal.linkageslevels,forexamplethrough‘revolt’and‘remember’(2006);Hollingetal.(2002)linkages.AssumptionsabouthumannatureMeaningSocialsystemsarecharacterizedbytrust,interpersonalWestleyetal.(2002)relationsandsymbols.ForesightandintentionHumanbeingsareabletopredictdevelopmentsoftheHollingetal.(2002);Westleyetal.(2002)panarchybetterthananimalsandplants.TransferandstorageofUsingcommunication,experiencecanbestoredandHollingetal.(2002)experiencetransferred.TechnologyHumanbeingscanusetechnologytotriggerHollingetal.(2002)transformations.andunplannablenatureofecologicalsystems(Evans2011)andthenecessityforadaptation;aviewthatcanbetransferredtosocial-ecologicalsystems(forinstance,supplychains)byaddinghumans’abilitytoforeseechanges(Westleyetal.2002;Wieland2021).Resilienceisthenconsideredtobeadynamic,ever-changingprocess,requiringadaptationandtransforma-tionandnotmanagementbycontrol(Davoudi2012;HollingandGunderson2002).Takingallthreeinterpretationsintoaccount,supplychainresiliencecanthenbedefinedas‘thecapacityofasupplychaintopersist,adaptortransforminthefaceofchange’(WielandandDurach2021).PhasesofAdaptiveCyclesThepotential,connectednessandresilienceofasystemallowfordefiningthefourphasesofanadaptivecycle:exploitation(r),conservation(K),release(Ω)andreorganization(α)(Holling1986).Thewayinwhichtheadaptivecyclemovesfromonefunctiontoanotherisdefinedbythedegreeofpotential,connectednessandresilience.AsdepictedinFigure32.1,AmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

523Panarchytheory505thecycleconsistsofafrontloopandabackloop,eachofwhichrepresentsthedevelopmentandsurvivalofthesystem(Allenetal.2014;Holling2001;HollingandGunderson2002).Source:Wieland(2021),basedonHolling(1986,2001).Figure32.1ThefourphasesoftheadaptivecycleSystemsoftenmoveslowly.WhenmovingfromrtoK,thesystemgoesthroughaslowprocessofaccumulationofresources;aprocessthatbecomesmoreandmorepredictableasthesystemdevelopsovertime(Holling2001).Inthisfrontloop,connectednessbecomesincreasinglyhigh,andthesystembecomesincreasinglyrigidandexposedtosurprisesanddisruptions(HollingandGunderson2002).Inasupplychaincontext,thisrigiditymaymeanthattheculturalandcontractualcontrolofthesupplychainmanagersbecomesoverwhelming(Wieland2021).Sometimes,systemssuddenlymovefast,forexamplewhenasystemcollapses.Thisleadsintothereleasephase,asaresultfrommovingfromKtoΩ.Thereleasephasereferstoaprocessofcreativedestruction,wherearapidreleaseofresourcesdestroystheoverwhelm-AmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

524506Handbookoftheoriesforpurchasing,supplychainandmanagementresearchingrigidityinK,meaningthattheoldsystemcannolongerbemaintainedunderthegivenconditions(Allenetal.2014;Holling2001).Itmaybethatanovelbusinessmodeloranewtechnologyisdeveloped,forcingchangeuponthesupplychain(Wieland2021).ThiscreativedestructioninΩallowsforthesystemtoenterthebackloop,asitmovesfromΩtoα.Unlikethefrontloop,thebackloopishighlyunpredictable,asthesystemisquicklyreorganizingthecomponentsleftafterthemassivereleaseofresourcesinΩ.Thesupplychainmaynoweitherreorganizeitsprocessesandstructureinawaythatresemblestheoldstructurefromthepre-viousfrontloop,oritmaydevelopentirelynewprocessesandstructuresthatchangethewayinwhichthesupplychainoperates.Someinnovationswillfail,andotherswillsurviveandcarryoninthenewfrontloopfromrtoK,whereyetagainresourcesareslowlyaccumulated,leadingtonewrigidity(Holling2001;HollingandGunderson2002).Theadaptivecycledoesnotnecessarilymoveassmoothly,asdescribedabove.Twotrapshavebeenproposedtooccurinanadaptivecycle:arigiditytrapandapovertytrap.TherigiditytrapoccurswhenthecyclegetsstuckinK,theconservationphase.Asresourcesareaccumulatedandconnectednessincreases,thesystem–inthiscase,thesupplychain–cansometimesbecomesorigidthatitisimpossibletobreakoutofthefrontloopandentertheprocessofcreativedestruction(Biggsetal.2010).Movingfurtheralonginthecycle,thesystemmayalsogetstuckinα,thereorganizationphase,leadingtoapovertytrap.Thismaybebecausethesystemismissinginnovativeforceandlackstheabilitytodevelopnewstructuresthatwillmovethesystemfromthechaoticandunpredictablebacklooptothesafeandstablefrontloop(ibid.).Thus,thesetrapscounterakeyfeatureofanadaptivecycletoconstantlybalancebetweencreativity(backloop)andconservation(frontloop),leadingtoongoingdevelopmentandtransformationofthesystem(Holling2001).TheScalesofaPanarchyApanarchycanbeunderstoodthroughtheuseofdifferentscalesasameanstostudythesysteminquestion.Suchascalecanbespatial,temporal,quantitativeoranalytical,dependingonthepurposeofthestudyandthetypeofsysteminquestion(Gibsonetal.2000).Whenstudyingsystemsofnature‒thatis,ecologicalsystems‒itmay,forinstance,beusefultobeguidedbyspatialandtemporalscalesallowingtheresearchertoinvestigatebothsmalladap-tivecycles(forinstance,describingthedevelopmentandtransformationofaleaf)andlargecycles(forinstance,describinganentirerainforestoreventheplanet).Inasocial-ecologicalsystem(forinstance,asupplychain),asymbolicscalemustbeincludedinordertoreflecthumans’abilitytoforeseechangesintermsofnewmeanings,visionsandnarratives(Westleyetal.2002;Wieland2021).TheLevelsofaPanarchySystemsrarelyoperateontheirownwithoutanyimpactfromothersystemsthatoperateatotherlevels.ThisiswhyresearcherssuchasHollingetal.(2002)arguethatanestedsetofcomplexsystemscanbebestdescribedbyapanarchy.Unlikeinatraditionalhierarchy,wherethesystemisofteninfluencedbyrigid,top-downmanagement,apanarchyconsistsofvariousinterconnectedadaptivecyclesthatrepresentthemovementsofsystems.Theseinterconnectedadaptivecyclesoperateatdifferentlevelsonscalesoftime,spaceandsymbolicmeaning;thatis,theadaptivecyclesoperateatdifferentpacesandwithdifferentdynamics.SomecyclesAmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

525Panarchytheory507aresmall,fast,andarebasedonasimplenarrative–othersarelarge,slow,andareboldinmeaning(seeFigure32.2)(GundersonandHolling2002).Source:AdaptedfromWieland(2021),basedonGundersonandHolling(2002).Figure32.2Apanarchywithtwocross-levellinkagesIntheory,itcanbeimaginedthatthesupplychainpanarchyincludesawidevarietyoflevels.InWieland(2021),apanarchyispresentedthatincludesthreelevels:thesupplychain,political-economicandplanetarylevels.Moregenerally,thegroup,functional,organizational,supplychain,political-economic,socio-culturalandplanetarylevelscanserveasstartingpointstoidentifyasuitablesetoflevels(Wieland,2021).Thus,panarchytheoryprovidesaflexibleapproachtosupplychainmanagement,wherethestructureofapanarchyhastobeadaptedtothecontextinwhichthesupplychainoperates.Onecould,forinstance,imaginelevelsofworkercommunities,consumercommunitiesand,perhaps,alevelthatrepresentsthemedialandscape.AmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

526508Handbookoftheoriesforpurchasing,supplychainandmanagementresearchCross-ScaleandCross-LevelLinkagesWhereFigure32.2showsaneatlyorderedpanarchythatrepresentsasupplychainlevel,apolitical-economiclevelandaplanetarylevel,panarchiesusuallyneedtointegratemoregranularityintermsofadditionallevels.Actorsmaybebothhorizontallyandverticallylinkedacrossthepanarchy(BerkesandRoss2016).Theslowerandlargeradaptivecyclesdeterminetheconditionsunderwhichthesmallercyclesoperate;andthesmalleronescaninfluencethelargeronesthroughoverwhelmingcreativedestruction(Holling2001).Thisisonlypossiblebecauseofthecross-levellinkagesthatconnecttheadaptivecyclesnestedinapanarchy.Twotypesofsuchlinkageshavereceivedaparticularlylargeamountofattentioninthepanarchyliterature:revoltandremember(seeFigure32.2).Therevoltlinkagedescribeshowinnovationsandeventsatsmallandfastlevelsimpactorevenoverwhelmthoseoccurringatlargerlevels(Holling2001).ThiscanbeobservedwhenthesmallercyclemovesintoΩ,triggeringcreativedestruction.Insomecases,itmaybethatthecreativedestructioninΩbecomessomassivethatittriggersacrisisatlargerandslowerlevelsoperatingaboveit(Hollingetal.2002).SucharevoltconnectionwouldresultintheadaptivecycleatalargerlevelbeingforcedtoenterΩ,evenifnoresourceshavebeenaccumulatedinKyet(Allenetal.2014;Holling2001).TakinganSCMperspectiveonthis,itmaybe,forinstance,thatacompanydevelopsanewproductortechnologywhichcompletelydisruptsthemarket.Thishasaneffectonthepolitical-economiclevel,assuchanovelinventionmayrequiredifferentlegislationthanwaspreviouslythecase.Anothercross-levellinkageisthe‘remember’linkage,whichcanbeobservedwhencyclesonlargerandslowerlevelsimpactcyclesthatoperateatsmallerandfasterlevelsthroughmemoryandexperiencesofpreviousprocessesofcreativedestruction(Allenetal.2014).The‘remember’linkageistriggeredwhenanadaptivecycleatalargerlevelisatthepeakofK.Theknowledgeofthiscyclethentricklesdowntothesmallercycles’α,wherenewandinnovativeprocesseswillbedeveloped.Thesmallercycleswillbeabletomakeuseofthewisdomfromthelargercycleswhenitcomestodelimitingthepotentialoptionsfordevelopingnewprocesses,ratherthanenteringintoacompletelynewregimetobetestedinr(Allenetal.2014;Holling2001).Anexampleofsuchalinkagecanbefoundwhenlegislatorsatthepolitical-economiclevelbecomeawareofthelargercrisesoftheplanetarysystem,leadingthemtopasseco-friendlysupplychainlaws.ASSUMPTIONSABOUTHUMANACTORSSincepanarchytheorywasoriginallydevelopedwiththeintentionofbetterunderstandingsystemsofnature,itisimportanttoacknowledgethatsystemsofpeopleandnaturebehavedifferently.Therefore,followingbothecologistsandsocialscientistsusingpanarchy,certainassumptionscanbemadeabouthumanactors.Hollingetal.(2002)identifythreekeypointswherehumansystemsdifferfromecologicalsystems.First,foresightandintentiondistinguishhumansfromtrees,algaeandevenotheranimals,ashumanbeingsarecapableofpredictingdevelopmentsofthepanarchyfarbetterthananimalsevercould.Supplychainmanagersmaybeabletoforeseetrendsanddisruptions,andguidetransformationsofthesupplychainsinthefaceoffuturechallenges.Second,humansarecapableoftransferringandstoringexpe-rienceusingcommunication.ThisisvaluablewhenitcomestoreorganizingandstabilizingAmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

527Panarchytheory509thesystemafteracrisishasoccurred.FollowingacrisissuchasCOVID-19,managersareabletoreflectonthechangesinnormsandadjusttheirwayofworkingtofitanewnormal.Finally,humansareabletousetechnologytotransformthesystem,andoftenadvancementintechnologyisexactlywhattriggersthemovementfromKtoΩ(Hollingetal.2002).Mostofthesesocialfactorstendtobecontext-orevenculture-specific,makingitimportanttobeawareofnormsandvalueswhenitcomestoapplyingpanarchytosocialsystems(BerkesandRoss2016).Addingtothis,Westleyetal.(2002)callforanevenstrongerdistinctionbetweenapplyingpanarchytosystemsofnature,andtosystemsofnatureandpeople.Sincehumanbeingsarewhattheauthorsdefineas‘sense-making’animals,theapplicationofpanarchytosocialset-tingsshouldreflectthis.Theyarguethatwheresystemsofnatureareguidedbytimeandspaceonly,socialsystemsarealsocharacterizedbymeaning,since,forinstance,supplychainsarecharacterizedbytrust,interpersonalrelationsandsymbols.Ultimately,socialsystemsaremoreresilienttodisturbanceslocally,butatthesametimeitbecomesmoredifficultforhumanstorespondtodisruptions.Atagloballevel,however,humanbeingsbecomecapableofanticipatinglong-termchanges(forexample,environmentalchanges)muchfaster,givingsocialsystemsthepossibilitytoreorganizebeforeacrisisoccurs.Thisisduetosociallawsbeingwhattheauthorscall‘mutable’,unlikeoftenunchangeablenaturallaws(Westleyetal.2002).Onthebasisoftheseassumptionsabouthumannature,itisarguedthatwhenviewingsupplychainsinthelightofpanarchytheory,humansacknowledgethattheyareapartofacomplexreality;arealitythatcannotbeframedassimplecause–effectrelationships.Theymightnotberationaldecisionmakers,sincetheiractionswillbecharacterizedbymeaningasdefinedbyWestleyetal.(2002).Thereby,usingpanarchytheorycallsforasomewhatinter-pretivereadingofsupplychainmanagement(seeDarbyetal.2019),asmanagers,forinstance,aretakingpartinanongoingsense-makingprocess.THEUSEOFPANARCHYTHEORYINECOLOGYRESEARCHThenotionofpanarchyhasinitselfbeenrevolutionaryforthefieldofecology.Beforeitsintroductiontothefield,ecologicalsystemswereinterpretedasclosedsystemsthataremeasurableandfullyunderstandable.Thishadsubstantialconsequencesforhowecologistsaddressedmanagingecologicalsystems.Previously,ecologistsarguedthat,onceunderstood,itwouldbepossibletocontrolandmaintainecologicalsystemsinanoptimalstate(Biggsetal.2010).Standinginclearoppositiontothis,panarchytheoryviewsecologicalsystemsascomplex,evolvingandopensystems(ibid.)thatcannevertrulybeunderstoodandpredicted;butabetterunderstandingcanbegainedofwhenandwherethesystemisvulnerable(Holling2001).Sincepanarchytheoryoriginatesfromthefieldofecology,thepanarchicalapproachhasfoundnumerousapplicationswithinecologicalcontexts.Insteadofinterpretingecologicalsystemsassomethingstable,panarchytheoryhashelpedecologistsingainingimmenseknowledgeaboutthevariouslevelsandscalesinordertounderstandtheadaptivecyclesandtheirdynamics(Dreveretal.2006).Dreveretal.(2006)furtherarguethatunderstandingthepanarchywillallowforestmanagerstonoticethesignsofpotentialdisruptionsbeforetheyAmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

528510Handbookoftheoriesforpurchasing,supplychainandmanagementresearchoccur,andtounderstandthelong-termimpacttheiractionsmayhavenotjustonthecyclebeingmanaged,butontheentirepanarchy.APPLICATIONSOFPANARCHYTHEORYTOMANAGEMENTISSUESWhenapplyingpanarchytheorytosocialsystems,itisimportanttorememberthecharacteris-ticsofhumannature,astheywillimpactuponthewayinwhichthesystemdevelops(Hollingetal.2002).Inordertoreflectthis,Westley(2002)arguesthatasasupplementtomakingsystem-levelanalyses,asarguedbyHollingandGunderson(2002)andseveralothers,itmayberelevanttofocusonprovidingrichanddeepanalysesofasingleactorwhenunderstandingcomplexsocialsystems,whichisinlinewithrecentcallsinSCMformoreinterpretativeresearch(Darbyetal.2019).Specifically,Westleyetal.(2002)usedthecaseofonemanagertoinvestigatehowtomanageadaptivelyovertime.Byinvestigatingtheadaptivenatureofasingleactor,theseauthorsarguethatitbecomespossibletotrulyunderstandthecomplexdynamicswithinthepanarchy.Suchresearchbecomeshighlycontextualized,makingitpossi-bletoreflectthewebofvaluesandnormsthatinfluencesthepanarchy(Westley2002).Stayingclosetoecologicalphenomena,Brunckhorst(2002)showshowitisnecessaryforasocietyanditsinstitutionstounderstandtheirroleswhenitcomestoenhancingresiliencerelatedto,forinstance,theclimatecrisis.Onthebasisofpanarchytheory,theauthorarguesthattherehastobeamuchstrongerintegrationbetweensocialfunctionsandnaturalfunctionsifwewanttoensuresustainability;namely,institutionshavetolearnhowtoadaptbettertochanges(Brunckhorst2002).Similarly,LinnenlueckeandGriffiths(2010)investigateorgani-zationaladaptationassociatedwithweatherextremes.Inordertoadapttothecomplexissues,itwillbenecessaryfororganizationsandsocial-ecologicalsystemsingeneralnotjusttocreatestrategiestoavoiddisasters;managerswillhavetoimposestructuresthatwillallowthemtobuilduplong-termresiliencethatmaymakeiteasiertocopewithfutureevents(LinnenlueckeandGriffiths2010).Inadditiontothis,researchalsosuggeststhatusingapanarchicalapproachtomanagementdoesnotjustmeanadaptingtoecologicalchanges;organizationscanplayanimportantroleinpreventingsuchchanges(King1995)andcansteersubstantialchanges,shiftingadaptivetotransformativemanagement(seeWielandandDurach2021).Wheretheresearchonadaptivemanagementrelatedtoecologicalissuesisquiteextensive,theamountofresearchconductedonothertypesofmanagementissuesremainsscarce.InadditiontotheaccountofpanarchytheoryinSCMinvestigatedinWieland(2021),whichisusedthroughoutthischapter,Williamsetal.(2019)presenttheirownviewonhowpanarchytheorycanservetoinvestigateSCMphenomena.TakingapointofdepartureinUnilever’ssupplychain,theseauthorsinvestigatehowchangesintheBorneorainforestaffectUnilever,andviceversa.Theirpanarchycomprisestwoadaptivecycles:onethatisecologicalinnature(representingthechangesintherainforest)andonethatissocial-ecologicalinnature(repre-sentingthoseinthesupplychain).WheretraditionalresilienceapproacheswouldhavetackledElNiñoeventsinisolationandfocusedonhowUnilevermightdealwithspecificsupplierrisksrelatedtothedisruption,theseauthorsmoveonestepfurtherinanalysingthecross-levelimpactthatchangesinBorneohaveonUnilever’ssupplychain;theyarguethatthedisruptioninBorneowillleadtoadisruptioninUnilever’sactivitieseveninothergeographicalregions.AmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

529Panarchytheory511Thisapproachstandsinsharpcontrasttothetraditionalorganizationalresilienceapproachesthatmanagershavebeenguidedby(Williamsetal.2019).Williamsetal.(2019)arguethatatoonarrowfocusonoptimizingorganizationalresilienceinternallymayinfactundercutmanagementinitiativeswithincreasingresilience.Instead,managersoughttotakeaholisticanddynamicperspectiveonresilience,meaningthatinthecaseofUnilever’ssupplychain,managersshouldfocusnotjustonmitigatingriskwithinthissupplychainbutalsoonstrengtheningthestabilityandagilityoftheBorneorainforest.Inlinewiththesearguments,Cashetal.(2006)arguefortheuseofamultitudeofscales,suchasjurisdictional,institutional,managementandnetworkscales,whenitcomestoaddressingcomplexissues.Followingpanarchytheory,thosewhoareabletomanagetheirorganiza-tionwithgreatattentiontocross-scaleandcross-levellinkageswillbebetteratidentifyingpotentialdisruptionsacrossthesystemandidentifyingpoliticalandecologicallysustainablesolutionstosuchissues(Cashetal.2006).OUTLOOKONFUTURERESEARCHOPPORTUNITIESPreviousresearchhasdemonstratedthatpanarchytheoryisparticularlywellequippedfortacklingcomplexities,andthereisgreatpotentialindevelopingpanarchytheoryasatooltostudymanagerialphenomena.Thosecomplexitiescan,forinstance,berelatedtoecologicalissuessuchasthebiodiversityandclimatecrisesaswellasforestfires(see,forinstance,HollingandGunderson2002;LinnenlueckeandGriffiths2010),butasdemonstratedbyWilliamsetal.(2019)andWieland(2021),awiderrangeofissuesmayinfactbenefitfrompanarchicalapproaches.ThisbecomesapparentforSCM,whereglobalsupplychainissuesareroutinelyverycomplexinnature,requiringholisticexplanationsthatgobeyondthelevelofthefocalfirm(Nilsson2019).Eventsinonepartoftheworldmayleadtomassiveshocksinotherpartsoftheworld,activatingbothcross-scaleandcross-levellinkages,makingitdifficultforindividualmanagerstoemploytheirconventionalsupplychainriskmanagementstrategies(seeBapujietal.2020).Managersmayparticularlybenefitfromtheholisticanddynamicviewofpanarchytheorywhenmanagingwithanawarenessofsustainability-relatedissues:issuesthathavepreviouslybeendifficulttograsporthathaveevenbeenoverlookedduetotheircomplexnature(Ashbyetal.2012;Quarshieetal.2016).Applyingpanarchytheorytosustainability-relatedissues,wherecross-scaleandcross-levellinkagesareindubitablypresent,willallowSCMresearcherstoinvestigatepossibleglobaldevelopmentsandtrackhowthepanarchybehavesintheeventofadisruption.AsarguedbyHollingetal.(2002)andWestleyetal.(2002),thisisexactlywhatcharacterizeshumansystems:thatoneisabletousehistoricknowledgeandexperiencetopredictfuturechanges,andbepreparedforhowtopreventcrisesfromhappening.Thatisalsowhy‘dancing’isusedinWieland(2021)asametaphorofapanarchicalinterpretationofmanagement:humansareabletoplanthenextsteps,buttheyarenotdancingalone.ByusingapanarchicalapproachtoSCM,scholarsinourdisciplinewillbeabletobetterequipmanag-ersforfuturedisruptionsinadynamicandholisticway,whichiswhatmanyhavearguedisnecessaryinordertostrengthencontemporarySCM(see,forinstance,PagellandShevchenko2014).Theholisticanddynamicnatureofpanarchiesrequiresanextensionofthemethodologicaltoolset,andeventoquestiontheparadigmaticassumptionsofSCMresearch.Particularly,itisAmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

530512Handbookoftheoriesforpurchasing,supplychainandmanagementresearchnecessarytochange–orasaminimum,reflecton–theunitofanalysisofmostSCMresearch,asthiswillimpactupontheoutcomeoftheresearch(Allenetal.2014).Sincepanarchytheorydoesnothaveapredefinedsetofscalesorlevels(Cashetal.2006;Westleyetal.2002),itwillbeuptotheindividualresearchertodetermine:(1)thenumberofscalestobeincluded;and(2)thenumberoflevelstobeincluded.Ontheonehand,thisgivestheresearcherahighlevelofcreativefreedom,allowingforamultitudeofinterpretationsofthescenarioinwhichthefirmoperates,whichwillpotentiallymakeitpossibletoreflectonthecomplexitiesofourworld(Nilsson2019).Ontheotherhand,itwillbetheresponsibilityoftheresearchertothoroughlyargueforwhythosespecificscalesandlevelshavebeenincludedand,evenmoreimportantly,whyothershavebeenleftout(Wieland2021).Itseemsreasonabletoarguethatwithinmanagementstudiespanarchytheorycallsforeitherqualitativeapproaches(forexample,non-positivistcasestudies)orthosequantitativeapproachesthatexplicitlyembracecomplexity(forexample,systemdynamics,machinelearning).Itisinitselfnotpossibletodelimitthemethodologicalscopeofpanarchicalresearchtoonlyasmallsetofapproaches,sincemanydifferentapproachesmaybeabletoinformtheapplicationofpanarchytheorytoSCM.Tonameafewexamples,Williamsetal.(2019)usequalitativedocumentdatatoconstructthetwoadaptivecycles,andwithinasocialsciencesetting,Westley(2002)conductsanin-depthqualitativestudyofasinglemanagertoreflectonthepanarchicalnatureofthemanager’swork.However,panarchytheorypointstowardsnon-positivistresearchthatallowstheresearchertoreflectonprevious,currentandpossibledevelopmentsofthesystem.FollowingtheargumentsofWestley(2002),employinganinterpretiveperspectiveonpanarchytheory,theSCMscholarwillthenbeabletotakeapointofdepartureinonemanageroroneteam,investigatingthesubjectiveviewonthepanarchy,thatis,thedominatingnarrativesoperatingatthelevelsunderstudy.Thiswouldprovideprac-titionerswithknowledgeonhowtoadjusttheirmanagementeffortstotakecross-scaleandcross-levellinkagesintoaccount.Similarly,followingacriticalrealistpointofview,panarchytheorycouldbeusedtoinvestigatethearenainwhichcorporationsoperatetoday.Acontex-tualizedexplanatorycasestudy(seeWelchetal.2011)willmakeitpossibletotheorizethechangingroleofcorporationsaswellashowmanagersshouldinteractwithactorsdirectlyorindirectlyassociatedwiththeirsupplychain.Tosummarize,therearemultipleareaswhereSCMscholarscanworkwithpanarchytheoryinthefuture:●First,panarchytheorymayprovideuswithnewknowledgeonhowtomanagesupplychainsinthetwenty-firstcentury,wherecomplexissuesareputtingmanagersunderpressure.●Second,SCMresearchersarecalledtoinvestigatethepossibilitiesofusingpanarchytheoryasameanstoaddresssustainabilityissues.●Third,itoughttoberesearchedhowtodeterminethenumberofscalesandlevelsnecessarywhenusingpanarchytheoryinSCM.●Fourth,researchersshouldbecreativeintheirapplicationofdifferentmethodologicalapproachesandtheiruseofpanarchytheoryinSCM.AmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

531Panarchytheory513REFERENCESAllen,C.R.,D.G.Angeler,A.S.Garmestani,L.H.GundersonandC.S.Holling(2014),‘Panarchy:theoryandapplication’,Ecosystems,17(4),578–589.Ashby,A.,M.LeatandM.Hudson‐Smith(2012),‘Makingconnections:areviewofsupplychainman-agementandsustainabilityliterature’,SupplyChainManagement:AnInternationalJournal,17(5),497–516.Bapuji,H.,F.G.A.deBakker,J.A.Brown,C.Higgins,K.RehbeinandA.Spicer(2020),‘BusinessandsocietyresearchintimesoftheCoronacrisis’,BusinessandSociety,59(6),1067–1078.Berkes,F.andH.Ross(2016),‘Panarchyandcommunityresilience:sustainabilityscienceandpolicyimplications’,EnvironmentalScienceandPolicy,61,185–193.Biggs,R.,F.R.WestleyandS.R.Carpenter(2010),‘Navigatingthebackloop:fosteringsocialinnova-tionandtransformationinecosystemmanagement’,EcologyandSociety,15(2).https://doi.org/10.5751/ES-03411-150209.Brunckhorst,D.J.(2002),‘Institutionstosustainecologicalandsocialsystems’,EcologicalManagementandRestoration,3(2),108–116.Carter,C.R.,D.S.RogersandT.Y.Choi(2015),‘Towardthetheoryofthesupplychain’,JournalofSupplyChainManagement,51(2),89–97.Cash,D.W.,W.N.Adger,F.Berkes,P.Garden,L.Lebel,etal.(2006),‘Scaleandcross-scaledynamics:governanceandinformationinamultilevelworld’,EcologyandSociety,11(2).https://doi.org/10.5751/es-01759-110208.Darby,J.L.,B.S.FugateandJ.B.Murray(2019),‘Interpretiveresearch:acomplementaryapproachtoseekingknowledgeinsupplychainmanagement’,InternationalJournalofLogisticsManagement,30(2),395–413.Davoudi,S.(2012),‘Resilience:abridgingconceptoradeadend?’,PlanningTheoryandPractice,13(2),299–333.Drever,C.R.,G.Peterson,C.Messier,Y.BergeronandM.Flannigan(2006),‘Canforestmanagementbasedonnaturaldisturbancesmaintainecologicalresilience?’,CanadianJournalofForestResearch,36,2285–2299.Evans,J.P.(2011),‘Resilience,ecologyandadaptationintheexperimentalcity’,TransactionsoftheInstituteofBritishGeographers,36,223–237.Gibson,C.C.,E.OstromandT.K.Ahn(2000),‘Theconceptofscaleandthehumandimensionsofglobalchange:asurvey’,EcologicalEconomics,32,217–239.Gunderson,L.H.andC.S.Holling(2002),Panarchy:UnderstandingTransformationsinSystemsofHumansandNature,Washington,DC:IslandPress.Holling,C.S.(1986),‘Theresilienceofterrestrialecosystems:localsurpriseandglobalchange’,inW.C.ClarkandR.E.Munn(eds),SustainableDevelopmentoftheBiosphere,Cambridge:CambridgeUniversityPress,pp.292‒317.Holling,C.S.(1996),‘Engineeringresilienceversusecologicalresilience’,inNationalAcademyofEngineeringandP.Schulze(eds),EngineeringwithinEcologicalConstraints,Washington,DC:NationalAcademiesPress,pp.31–43.Holling,C.S.(2001),‘Understandingthecomplexityofeconomic,ecological,andsocialsystems’,Ecosystems,4,390–405.Holling,C.S.andL.H.Gunderson(2002),‘Resilienceandadaptivecycles’,inL.GundersonandC.Holling(eds),Panarchy:UnderstandingTransformationsinHumanandNaturalSystems,Washington,DC:IslandPress,pp.25–62.Holling,C.S.,L.H.GundersonandG.D.Peterson(2002),‘Sustainabilityandpanarchies’,inL.GundersonandC.Holling(eds),Panarchy:UnderstandingTransformationsinHumanandNaturalSystems,Washington,DC:IslandPress,pp.63‒102.King,A.(1995),‘Avoidingecologicalsurprise:lessonsfromlong-standingcommunities’,AcademyofManagementReview,20(4),961–985.Linnenluecke,M.andA.Griffiths(2010),‘Beyondadaptation:resilienceforbusinessinlightofclimatechangeandweatherextremes’,BusinessandSociety,49(3),477–511.Mentzer,J.T.,W.DeWitt,J.S.Keebler,S.Min,N.W.Nix,etal.(2001),‘Definingsupplychainmanage-ment’,JournalofBusinessLogistics,22(2),1–25.AmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

532514Handbookoftheoriesforpurchasing,supplychainandmanagementresearchNilsson,F.R.(2019),‘Acomplexityperspectiveonlogisticsmanagement:rethinkingassumptionsforthesustainabilityera’,InternationalJournalofLogisticsManagement,30(3),681–698.Pagell,M.andA.Shevchenko(2014),‘Whyresearchinsustainablesupplychainmanagementshouldhavenofuture’,JournalofSupplyChainManagement,50(1),44–55.Quarshie,A.M.,A.SalmiandR.Leuschner(2016),‘Sustainabilityandcorporatesocialresponsibilityinsupplychains:thestateofresearchinsupplychainmanagementandbusinessethicsjournals’,JournalofPurchasingandSupplyManagement,22,82–97.Sheffi,Y.(2005),‘Preparingforthebigone(supplychainmanagement)’,ManufacturingEngineer,84(5),12–15.Welch,C.,R.Piekkari,E.PlakoyiannakiandE.Paavilainen-Mäntymäki(2011),‘Theorisingfromcasestudies:towardsapluralistfutureforinternationalbusinessresearch’,JournalofInternationalBusinessStudies,42(5),740–762.Westley,F.(2002),‘Thedevilinthedynamics’,inL.H.GundersonandC.Holling(eds),Panarchy:UnderstandingTransformationsinHumanandNaturalSystems,Washington,DC:IslandPress,pp.333–360.Westley,F.,S.R.Carpenter,W.A.Brock,C.S.HollingandL.H.Gunderson(2002),‘Whysystemsofpeopleandnatureandnotjustsocialandecologicalsystems’,inL.H.GundersonandC.Holling(eds),Panarchy:UnderstandingTransformationsinHumanandNaturalSystems,Washington,DC:IslandPress,pp.103–119.Wieland,A.(2021),‘Dancingthesupplychain:towardtransformativesupplychainmanagement’,JournalofSupplyChainManagement,75(1),58–73.Wieland,A.andC.F.Durach(2021),‘Twoperspectivesonsupplychainresilience’,JournalofBusinessLogistics,42(3),1–8.Williams,A.,G.WhitemanandS.Kennedy(2019),‘Cross-scalesystemicresilience:implicationsfororganizationstudies’,BusinessandSociety,60(1),1–30.SUGGESTEDFURTHERREADINGThedynamicsofpanarchytheory:Allen,C.R.,D.G.Angeler,A.S.Garmestani,L.H.GundersonandC.S.Holling(2014),‘Panarchy:theoryandapplication’,Ecosystems,17(4),578–89.Holling,C.S.(2001),‘Understandingthecomplexityofeconomic,ecological,andsocialsystems’,Ecosystems,4(5),390–405.Howtoapplypanarchytheorytosocialsystems:Westley,F.,S.R.Carpenter,W.A.Brock,C.S.HollingandL.H.Gunderson(2002),‘Whysystemsofpeopleandnatureandnotjustsocialandecologicalsystems’,inL.H.GundersonandC.Holling(eds),Panarchy:UnderstandingTransformationsinHumanandNaturalSystems,Washington,DC:IslandPress,pp.103–119.Applyingpanarchytheorytomanagementissues:Westley,F.(2002),‘Thedevilinthedynamics’,inL.H.GundersonandC.Holling(eds),Panarchy:UnderstandingTransformationsinHumanandNaturalSystems,Washington,DC:IslandPress,pp.333–360.Wieland,A.(2021),‘DancingtheSupplyChain:TowardTransformativeSupplyChainManagement’,JournalofSupplyChainManagement,75(1),58–73.AmandaBilleandAndreasWieland-9781839104503DownloadedfromPubFactoryat05/28/202209:11:42AMviaColumbiaUniversityLibrary

53333.Preferredcustomertheory:benefitingfrompreferentialtreatmentfromsuppliersthroughmeasuresonbuyerattractivenessandsuppliersatisfactionHolgerSchieleHISTORY:REVERSEMARKETINGBEGINNINGSCOMPLEMENTEDBYATHEORYThefundamentalquestionthatpreferredcustomertheoryaddressesis:Howcanbuyingfirmsgaincompetitiveadvantagebygettingbetteraccesstosuppliersthantheircompetitors?Foralongtime,thisquestionmighthavebeenlessrelevant,anddidnotgetmuchattention.Also,termsandconceptstodescribethesituationofgettingaccesstosupplierresourcesandprovidesolutionswerenotabundant.Thepreferredcustomertheoryfillsthisgap,suggestingsolutionsfororganizationsfacingfactormarketrivalry,thatis,whichcompetewithrivalbuyingorgan-izationsfortheattentionofthesamesuppliers.Thebasicconceptofpreferredcustomertheoryistheneedofthebuyingfirmtobeattrac-tivetoitssuppliers,inordertoensureprivilegedaccesstotheirresourcesandhenceachievecompetitiveadvantageoverrivalorganizationswhichrelyonthesamesuppliers.Suchideasof‘reversemarketing’(invertingthetraditionalviewbyaskingbuyerstobeattractivetosellers,ratherthantheotherwayaround)havesporadicallyappearedinscience,butdidnotdevelopintoaresearchstreamuntilaboutadecadeago.ThesporadicoccurrencesofpreferredcustomerthinkingincludethesimulationstudybyHottenstein(1970),whichmarginallytouchesupontheideaoffirmsusingpreferredcustomerliststomakedecisionsonprioritisingcustomers.AlsotheworkofBrokawandDavisson(1978)suggeststhatpurchasersshouldapplymarketingtoolstoselltheirfirmtothesupplier.Tenyearslatertheideaof‘reversemarketing’wasagainpickedupbyLeendersandBlenkhorn(1988),thoughtheyuseadifferentframe;whileWilliamson(1991)andMoody(1992),basedontheircasestudyexperience,emphasizetheimportanceofafirmbeinga‘good’customer.Whatisnoticeableisthatthesesporadicpublicationsdonotseemtorefertoeachother,norhavetheybeennoticedbymanyotherresearchers.In2002,ChristiansenandMaltzpresentedamodelonhowfirmswithoutleveragecouldbecome‘interesting’customers.Afewyearslater,SteinleandSchieleextensivelydiscussedthepreferredcustomeridea,reportingonacasestudy(SteinleandSchiele,2008).Ayearlater,Haldetal.(2009)developedan‘attrac-tiontheory’,whichforthefirsttimetriedtolinkthislineofthoughttosocialexchangetheory.Howevertheydidnotfocusdirectlyonpreferredcustomership,butonageneralideaofhowtobecomeaninterestingorattractivecustomer.Themainbodyofpreferredcustomertheory–about50papersnowpublished–however,emergedaroundandfollowingaspecialissueonthetopic,editedin2012(Schieleetal.,2012).Againrootedinsocialexchangetheoryandstrategicmanagementtheory,the‘cycletheoryofpreferredcustomership’wasestablished,515HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

534516Handbookoftheoriesforpurchasing,supplychainandmanagementresearcharguingthatbecomingacustomerofchoicerequiressatisfiedsuppliers,whichhaveinthefirstinstancedecidedtoworkwiththisbuyerbecausetheyperceiveittobesufficientlyattractive.Hence,preferredcustomershiprequiresamulti-stageapproach.PREFERREDCUSTOMERTHEORY:THECYCLEOFATTRACTIVENESS,SUPPLIERSATISFACTIONANDPREFERREDCUSTOMERSHIPBeforediscussingthetheoreticalmodelassuch,itsunderlyingassumptionshavetobeexposed.Initsattempttoexplainandprovideguidelinestothebuyingcompanyonhowtogetprivilegedresourceaccesstoitssuppliers‒thatis,generatingacompetitiveadvantagethroughpurchasing‒preferredcustomertheorybuildsuponseveralassumptions.Assumptionstwotofour,sharedwithsocialexchangetheory,aresummarizedas‘conditionsforequalexchange’(Zeitz,1980),thelasttwoconditions,linkedtoresource-basedtheory,wouldbethe‘strategicconditions’(Ramsay,2001):1.Imageofman.TheunderlyingassumptionisthathumannaturefollowswhatMcGregor(1966)called‘TheoryY’:humanbeingsareactive,responsible,benevolentandabletofolloworganizationalobjectives.Basedonsuchaview,collaborativerelationshipsformutualbenefitareconceivable.2.Legalequality/voluntaryexchange.Partiesneedtohaveequallegalrightsand,assuch,entertheexchangeonavoluntarybasis.Thequestionofprivilegedresourceaccessisonlyrelevantifthesupplierwouldnotbeobligedtodeliver;or,respectively,thebuyerwouldnotbeobligedtoacceptthesupplieranditsconditions,forinstancebecauseofgovernmentregulations.3.Awarenessofcost‒benefit.Inordertoassessbenefitsandtodecideonentering,continuingordiscontinuingavoluntaryexchangerelationship,thepartiesneedtobeabletounderstandtheircost‒benefitposition(DiDomenicoetal.,2009).Inthecaseofbusiness-to-businessrelations,withprofessionalsonbothsides,itisassumedthattheyareabletoestimatethevalueoftherelationship,thatis,‘therewardsreceivedversusdirectandopportunitycosts’(Ellisetal.,2012,p.1260);which,again,isneededtomakeanon-arbitrarydecisionupontherelationship.Ifasupplierisunabletoestimatethevalueofabusinessrelationship,orifitisnotpossibletodifferentiatebetweencustomersbecausealldeliverexactlythesamebenefit,preferredcustomertheoryisnotapplicable.4.Mutualbenefit.Freepartiesenterintoanexchangeif(andonlyif),basedonacost‒benefitanalysis,bothpartiesperceivethattheexchangewillbenefitthem;thatis,eachendsupbetteroffwiththanwithoutthedeal.Notethatthesizeandtheequalityofdistributionofthebenefitisnotpartoftheassumption;onlythatforeachitmusthaveapositivevalue.5.Resourceheterogeneity.Whereinputfactors‒thatis,supplygoods‒areperfectlyequal(oratleastthedifferencesamongthemareirrelevant),intermsofbothproductandcon-ditionsofexchangesuchasprice,delivery,andsoon,preferredcustomertheorydoesnotapply.Insuchfactormarketsnostrategicadvantagecanbederivedfromsupplieraccess(DierickxandCool,1989).Acondition,then,isthattheremustbedifferencesamongthesuppliersandtheirproducts,someofthembeingsuperiortoothers.HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

535Preferredcustomertheory5176.Resourcescarcity.Finally,butmostimportantly,theremustbeafinitenumberofsuppliersforpreferredcustomertheorytoberelevant;thatis,noperfectfactormobility.Ifeachcus-tomercouldhavefullaccesstoallsuppliersonequalterms,nofactormarketrivalrywouldemerge,andnoattemptsneedtobemadetogainprivilegedaccesstoanyoftheseabundantsuppliers.Scarcityoccursinnon-atomisticmarkets,wherethedecisionofsupplierstoserveonecustomerhasadirectinfluenceonitscapacitytoserveanothercustomer(Pullesetal.,2019).Alimitednumberofproducts,difficultiesinsubstitutingthem,andafiniteamountofplayersonthemarket,thusdescribeasituationwhereachievingpreferredcus-tomerstatusiscrucial.Theconditionsofvoluntaryequalexchangeandofstrategicresourcescarcitycanbeconsid-eredasnecessaryconditionstoapplypreferredcustomertheory.Preferredcustomertheory,then,isnotauniversaltheoryofexchangeorauniversalsupplytheory,becauseitsdomainislimitedtotheconditionslistedabove.Therearesourcingsituationsinwhicha(quasi-)unlim-itedamountofhomogenoussuppliersisavailable,orsituationsinwhichbuyerandsuppliersareregulatedintheirchoices.Insuchcases,preferredcustomertheorydoesnotcontribute;or,moreprecisely,itscontributionisnotrelevant.However,inthecaseofavoluntaryexchangewithfactorscarcity,preferredcustomertheoryisapplicable,andoffersexplanationandguide-linesforaction.Preferredcustomertheoryhastwotheoreticalroots(Schieleetal.,2012):instrategicman-agementtheory,theresource-basedviewofthefirm,moreprecisely:therelationalview,initselaborationoncompetitiveadvantagethroughsuperiorresourcecommand(Barney,1991;DyerandSingh,1998;SanchezandHeene,1997;Steinleetal.,1998);andinsocialexchangetheory(Lambeetal.,2001;Pullesetal.,2019;Reichenbachsetal.,2017),thoughitisnotidenticaltothelatter.Socialexchangetheoryoriginallydealtwithinterpersonalrelationships,buthasbeenfoundtobeverysuitabletoexplaininterorganizationalrelationshipsaswell,andassuchcontributestotheformationofpreferredcustomertheory(AndersonandNarus,1984;Harrisetal.,2003;KellyandHageman,1999;Lambeetal.,2001).Socialexchangetheoryscholarsintroducedtheideaofexpectationsleadingtoexchanges.Beforeanactorexplorestheoptiontoenterintoanexchange,thepotentialpartnermightneedtopresentabasiclevelofattractiveness.Oncetheexchangehasstarted,thatexchangeisthenevaluatedagainstastandard(leadingtosuppliersatisfaction,inthecaseofthebuyer’sper-formancematchingthestandardappliedbythesupplier).Then,socialexchangetheoryintro-ducesthe‘comparisonlevelofalternatives’,arguingthatthecontinuationofarelationshipnotonlydependsongeneralsatisfaction,butisalsocontingentontheavailabilityofalternatives(leadingtoaclassificationofabuyingorganizationbeingapreferredcustomer,ifoutperform-ingtheothercustomersofasupplier)(Schieleetal.,2012;ThibautandKelley,1959).Itisimportanttohighlightthatpreferredcustomertheory,whilerelyingonsocialexchangetheoryasanexplanatorymechanism,hasabroaderscope.Inclassicalsocialexchangetheory,‘Valuecreation,viewedassocialexchange,isalwaysnon-contractual,emphasizingreciprocityandrelyingontrust’(Tanskanen,2015,p.578).FromaBlauiansocialexchangetheoryperspective(Blau,1964),thescopeofexchangeis,thus,avoluntary,non-contractualreciprocalexchange,whichwould,forinstance,explainprivilegedcollaborationininnovationprocesses,butwouldnotextendtocontractuallysettleddeliveryorpriceconditions.Preferredcustomertheory,however,doesnotonlyintendtoexplainpreferentialtreatmentinasocialexchange,but–evenmorefromapurchaser’sperspective–alsoencompassesthepreferentialHolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

536518Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtreatmentexpressedincontractualrelations.Infact,gettingbettercontractsisonetarget.Preferredcustomertheoryexpectstheprocessofachievingsuchdealstofollowthesamestepsasthosewhichmightleadtoamoreinformalpreferentialtreatment.Thefollowingconceptualcoreelementscanbegroupedtoformthe‘cycleofpreferredcustomership’,offeringanexpla-nationforprivilegedtreatment.Beforeanorganizationdecidestoenterabusinessrelationshipwithanother(ortointensifyanexistingrelationship),itassessesthepartnerathandanddevelopsexpectationsonthecost‒benefitrelationtheexchangemayincur.Thisdeterminescustomerattractiveness.Tostarta(business)relationship,theexchangepartnerneedstobesufficientlyattractive;otherwise,nointerestinexchangeisexpressed.Intheworstcaseforapurchaser,noofferismade;specif-ically,nobidissubmittedbythesupplierinresponsetoarequestforaquotation.Basedontheinitialexpectationsofthesuppliertowardstheexchangerelationship,thebuyer‒supplierrelationshipisestablished,andtheexchangeisexecuted(asimilarargumentmayapplytothebuyer,ofcourse,althoughthesupplier’sperspectiveishighlightedinthesubsequentdiscussion).Inthenextstep,afteranexchangetakesplace(deliveryofproducts,co-developmentofinnovations,andsoon),theoutcomeofthatexchangeisjudgedagainstbasicsatisfactionfactorsandthe‘comparisonlevel’,reflectingtheexpectationstowardsthisrelationship.Inthecaseofabuyer‒supplierrelationship,thesupplierconsiderswhetherthisparticularexchangeissatisfactory.Pleasenotethatinsocialexchangetheorysometimesitisdifferentiatedbetweengeneralnormativeelementsofsatisfaction(‘socialnorms’)andindividualaspects(called‘cognitive’)(McDonald,1981;Sabatelli,1988).Inabuyer‒supplierrelationship,forinstance,ageneralnormativecriterionofsatisfactionmightbeproperpayment.Ontopofthis,asuppliermighthaveindividualtargetswithaparticularcustomer;forexample,marketaccesstoapar-ticularcountry.Assuch,satisfactioncanbecomposedofgeneralsatisfactionfactorsandrelation-specificexpectations,jointlycomposingthecomparisonlevel.Thisevaluationresultsinsatisfactionwiththerelationshiponcetheminimumcriteriaaresurpassed.Suppliersatisfactionisimportantonanoperativelevel,inordertoreceivegoodservicefromthesupplier.Followingsocialexchangemodels,preferredcustomertheory,however,considerssuppliersatisfactiononlyasanecessary,butnotasufficientconditionexplainingbusinesscontinuity.Thethirdbuildingblockisbasedontheso-called‘comparisonlevelofalternatives’(Cl),altthatis,theassumptionthatactorswillusenotonlyabsolute(satisfaction)butalsorelativecriteria(namely,comparingthisrelationtootherpotentialrelations),inordertoevaluatetheoutcomeofanexchangerelationshiptoeventuallyoptforcontinuationortermination(ThibautandKelley,1959).Asanextstep,theavailabilityofalternativeshasamoderatingeffectonacustomer’sfinalclassificationbythesupplieraspreferredorregular,orintheextremecaseasan‘exitcustomer’:abuyerthatthesupplierwillnolongerserve(Helmetal.,2006).Dependingonthepresenceandthequalityofalternatives,suppliersclassifytheircustomers.Hence,whilesatisfactioncomparestoanabsolutestandard,‘status’isarelativeconcept,reflectingthepositioninaranking(PiazzaandCastellucci,2014).Apreferredcustomerscoreshigherthanothercustomersinthepreferencerankingofasupplier.Assuch,preferredcustomerstatusalsoisdifferentfromabuyingorganization’sreputation.Manyorganizationsmighthaveagoodreputation(anabsolutevalue),butfacingothercompetitiveactors,thisdoesnottranslateintoahighrankorder.HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

537Preferredcustomertheory519Eventually,acustomerenjoyingpreferredstatuswillreceivepreferentialtreatmentbythesupplier‒thatis,getbetterservicesthanothercustomersofthatsupplier‒and,assuch,achievescompetitiveadvantages.Insum:buyingfirmsneedtobeattractiveforasuppliertostartengaginginarelationship.Onceestablished,thesupplierneedstobesatisfied.Ifthevendorismoresatisfiedwiththisrelationshipthanwithothers,itmayawardpreferredcustomerstatusand,eventually,offerprivilegedservices,whichprovidecompetitiveadvantagestothebuyingfirm.Whyistherelationshipbetweenthethreecoreconceptsofattractiveness,suppliersatisfac-tionandpreferredcustomerstatusseenascyclical(Nolletetal.,2012;Schieleetal.,2012)?Inbusiness-to-business(B2B)markets,recurrentbusinessrelationshipsarecommon.Theevaluationofonetransactioninfluencestheexpectationtowardsfutureexchanges(Anderson,1989):‘Ifgoodoutcomesareexperiencedininitialcontactsorifthesecontactsleadthepersonstoanticipategoodoutcomesinthefuture,theinteractionislikelytoberepeated’(ThibautandKelley,1959,p.20).Provisionofaservicebyoneactorprecedesreciprocationbytheother,whichcanleadtoamutuallyenforcingcircle(Ellisetal.,2012;Hald,2012;LaRoccaandSnehota,2021).Tóthetal.eventalkabout‘relationalattractiveness’tostressthemulti-period,interactivecharacterofattractivenessdevelopment(Tóthetal.,2015).Thestatusacustomerisawardedbythesupplierinfluencesitsexpectations,andaffectstheattractivenessofthatcustomerintheviewofthesupplier.Evenmore,itispositionedthatthecommitmenttoanexistingrelationshipwilllowertheexpectationstowardsothers,becauseofthepositiveexperiencescreated(CookandEmerson,1978;Dwyeretal.,1987;LeikandLeik,1977;Scanzoni,1979).Therefore,preferredcustomertheoryassumesaviciouscircle,insteadofalinearrelation.Interpretingthecyclefromareciprocityruleperspective,oneparty’sactionsarecontingentontheother’sbehaviour.Inthisway,interdependencereducesriskandincreasescollabora-tion.Theprocessbeginswhenatleastoneactortakesastep,andtheotherpartyrecognizesthisandreciprocates.Oncetheprocessisinmotion,eachactioncancreateaconstantlystrongerself-reinforcingcycle(CropanzanoandMitchell,2005).However,thiscircleisnotcompletelyendogenous,asitissubjecttoexternalinfluences,namelytheavailabilityandcharacteristicsofthealternativepartners.Therelativenatureofpreferredcustomersstatuscanleadtosit-uationsoffrustrationforfirmswhichmighthaveinvestedalotandachievedhighlevelsofsuppliersatisfaction,butstilldonotbenefitfrompreferentialtreatment,becausetheirrivalsonthesupplymarketscoredevenbetter.Ontheotherhand,asuppliermightnotleavearelation,becauseofbeingdependentonthissingleorlargestcustomer,eventhoughnotachievingfullrelationalsatisfaction.Importantly,thethreestages–attractiveness,suppliersatisfactionandpreferredcustomerstatus–havebeenempiricallydemonstrated(Pullesetal.,2016).Hence,asapreconditiontoachievingpreferredcustomerstatusandtheassociatedbenefits,abuyingorganizationneedstocareabouthavingsatisfiedsuppliersandmustmakeitselfknownto(potential)vendors,ratherthanwaitingtobefound.Inotherwords,thebuyingorganizationbenefitsfrompracticingreverse(or‘upstream’)marketing,understoodastheactivepromotionofthebuyingcompanytoits(potential)suppliers,whichencompassesbothpositioningthecompanyinthesupplymarketasamarketingactivity,anddirectlycontactingpotentialsuppliers.Thepreferredcustomertheorycanbeenrichedbysomecompatiblemodels,includingHaldetal.’s(2009)attractivenesstheoryandPullesetal.’s(2019)resourcemobilizationframework.Haldetal.focusonthefirststepofthemodel,attractiveness,andassuchcanbeHolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

538520Handbookoftheoriesforpurchasing,supplychainandmanagementresearchconnectedtothecycleofpreferredcustomershipinordertobetterexplaincustomerattractive-nessinthefirstinstance.Theysummarizetheirmodelasfollows:‘Wediscussattractionastheforcedrawingsocialexchangeactorstogetherandproposeanexpressionderivedfromsocialexchangetheorydescribingattractionascomposedofthreecomponents:Expectedvalue,trust,anddependence’(Haldetal.,2009,p.961)Followingalongtraditionseeingdependenceasanegativeattribute,becauseitcanputthelessdependentpartyinthepositionofextractingadditionalrentsfromthemoredependentexchangeactor,Hald’sattractiontheorypositionstheexpectationofdependenceasanattraction-reducingmechanism.Ontheotherhand,sup-pliersmayhaveanexpectationoftrustingthecustomernottoabuseitsposition,whichwouldincreasethiscustomer’sattractiveness.Interdependencemayarise.Finally,theexpectedvalue(salesvolume,growth,innovation,andsoon;inshort,whatisseenasimportant)hasapositiveinfluenceonattractiveness.Haldetal.emphasizeacomprehensivevaluedefinition,involvingthebuyerperception,thesupplierperceptionanddyadperceptionsonvaluecreation.WhileHaldetal.focusonthefirstphaseofthecycle,Pullesetal.(2019)complementmainlyinthe‘last’partofthecycle.Theysuggesttoexpandthecycleofpreferredcustom-ershipbythreefurtherelements.First,issuppliersegmentation,asataskforthebuyertodif-ferentiatevendors,soastobeabletoconcentrateonimprovingsuppliersatisfaction.Further,theyintroduce,betweenachievingpreferredcustomerstatusandrestartofthecyclewithattractivenessconsiderations,theexplicitsteps‘engageinsupplierorientedactions’,suchassupplierdevelopment,and‘integratesupplierresources’,includingestablishingthenecessaryabsorptivecapacityinthebuyingorganization.Thesupplier-orientedactions–asaformofreciprocalactionbythebuyer,onceperceivingbeingawardedpreferredcustomerstatusbythesupplier–canfurtherincreasethevendor’sperceptionofthatcustomerasbeingattractiveand,assuch,closethecycle.EMPIRICALFINDINGSINCLUDINGBENEFITSOFPREFERREDCUSTOMERSTATUSInrecentyears,initialempiricalfindingstesting(atleastpartof)thecycleofpreferredcus-tomershiphavebeenpublished.WhilesomestudiesonpreferredcustomerstatushavebeencarriedoutinsuchdiversecountriesasGhana(Glavee-Geo,2019)andtheUnitedStates(Ellisetal.,2012),thebulkofempiricalfindingscomefromtwolinesofresearchconductedinIndiaandinEurope.Someoftherecentstudiesreportedfromthe‘Indianschool’analysestructuralrelationshipsbetweenthepreferredcustomerenablers(KumarandRoutroy,2016a),deter-mineamanufacturer’spreferredcustomerstatuswithsuppliers(KumarandRoutroy,2016),andmeasurepreferredsupplierstatuswithinmanufacturing(HudnurkarandAmbekar,2019;KumarandRoutroy,2016)andserviceindustries(Prakash,2011).Europeanstudieshavefocusedonsuppliersatisfaction‒evolvingaroundtheimportanceofgrowth,profitability,relationalbehaviourandoperativeexcellence(EssigandAmann,2009;Vosetal.,2016)‒anditsconsequence,preferredcustomerstatus,bothinprivate(Hüttingeretal.,2012;Pullesetal.,2016)aswellasinpublicenvironments(Glas,2018;Schiele,2020).Theimportanceofdistinguishingbetweenpreferredcustomerstatusanditsantecedent,suppliersatisfaction,hasbeenempiricallyevidenced.Suppliersatisfactionisanecessarybutnotsufficientconditionforachievingpreferredcustomerstatus(Piechotaetal.,2021;Pullesetal.,2016).Pullesetal.HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

539Preferredcustomertheory521(2019)advanceacomprehensivesummaryonthecurrentstateoftheempiricalliteratureoncustomerattractiveness,suppliersatisfactionandpreferredcustomerstatus.Complementaryempiricalfindingshighlightthebenefitsfirmsgainfromhavingachievedpreferredcustomerstatus;thatis,findingsthatstresstherelevanceofresearchonthistheory.Here,researchhasprovidedinsightsfromverydifferentfields.Forinstance,infinance,preferredcustomersreceivedearlierearningsforecastrevisionsbyanalyststhanthestandardcustomers(EkholmandvonNandelstadh,2009).Ininformationtechology,preferredcustom-ersareservedfirstandenjoyspecialservercapacitytosatisfythem(Goesetal.,2010).Anenergyplantaccepteddifferentfailureratesfordifferentcustomers:forstandardcustomers,amaximumofeighthoursorthreeinterruptions;whereasforpreferredcustomers,thetargetwaslowerthanonehourortwointerruptions(Holmetal.,2009).Thislistcouldcontinue,butthemessageisclear:dependingonwhatisimportanttotheparticularbusiness,preferredcustomersreceivedprivilegedservicefromtheirsuppliers.Togeneralize,preferredcustomerscanreceive:1.particularbenefitsrelatedtotheproductathand;2.contractualcostandpricingbenefits(Haldetal.,2009;Hennig-Thurauetal.,2002;Moody,1992;Patruccoetal.,2019;Schieleetal.,2011)thathavebeenestimatedat2–4percent(Bew,2007)butmaybeashighas5–30percent(BlenkhornandBanting,1991);3.innovationaccessbenefits(Ellisetal.,2012;Patruccoetal.,2019;Schieleetal.,2011);and4.deliverypriorities(Bemelmansetal.,2015);thatis,operativebenefits,includingriskreductions(Reichenbachsetal.,2017).Itisworthremarkingthatthesebenefitsarealwaysrelativetotheservicesorproductsreceivedbyothercustomersofthesamesupplier.Theunitofanalysisisasinglesupplierthatservesseveralcustomers.Hence,achievingpreferredcustomerstatushasastrategiccomponent,becauseitisaboutobtainingbettersupplierresourceaccessthancompetingcompanies(Pullesetal.,2016).EVALUATINGPREFERREDCUSTOMERTHEORYINLIGHTOFWACKER’STHEORYCRITERIAProvidingatheoreticalexplanationforatestablephenomenon,thepreferredcustomertheorysumsupasavalidtheoryaccordingtoWacker’s(2008,p.13)modeloftheorybuilding,whichrequiresvalidtheorytodefineitsdomain,depictassumedrelationshipsandderivepredictions.Toclarify,Table33.1listsconstructsandtheirdefinitionsandcontributestoamodelofrelationships(Figure33.1),whichmaketestablepredictions,arguingthathigherpreferredcus-tomerstatuspredictsthesupplier’scontributiontoinnovation,benevolentpricing,privilegeddeliveryandspecialbenefits.Consideringthecircularnatureofthemodelatestnotofparts,buttheentirecycle,mayrequirealongitudinalstudy,whileitsbuildingblocks(suchaspredictingsuppliersatisfaction)canbemoreeasilytested.Intermsofdefinitions,Wackercautionsagainstrenamingexistingconcepts.Preferredcustomertheorytriesnottorenamealldefinitions,butwheneverpossibletriestokeeptheoriginal.Thisisthecasewiththecomparison-levelconcept,knownfromsocialexchangetheory.Hence,thequestioncouldariseifpreferredcustomertheoryisnotjustHolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

540522Handbookoftheoriesforpurchasing,supplychainandmanagementresearchTable33.1DefinitionoftermsConceptDefinitionSourceCustomerattractiveness‘Acustomerisperceivedasattractivebyasupplierifthesupplierin(Schieleetal.,2012,p.1180)questionhasapositiveexpectationtowardstherelationshipwiththiscustomer.Theconditionsforthisperceptionofthesupplierincludeanawarenessoftheexistenceofthecustomerandknowledgeofthecustomer’sneeds.’CustomerattractivenessThefactorsthatdeterminetheevaluationoftheattractivenessofthefactorscustomerbythesupplier.Comparisonlevel‘Thecomparisonlevelisthestandardagainstwhichthemember(ThibautandKelley,1959,p.21)evaluates…therelationshiporhowsatisfactoryitis.’Suppliersatisfaction‘Suppliersatisfactionisaconditionthatisachievedifthequalityof(Schieleetal.,2012,p.1181)outcomesfromabuyer‒supplierrelationshipmeetsorexceedsthesupplier'sexpectations.’ComparisonlevelofThecomparisonlevelofalternativesreflectstheevaluationofthe(ThibautandKelley,1959;alternativerelationshipinlightofpotentialalternativesanddeterminesthefutureSchieleetal.,2012)statusoftherelationship.Preferredcustomer‘Afirmhaspreferredcustomerstatuswithasupplier,ifthesupplier(SteinleandSchiele,2008,p.11)offersthebuyerpreferentialresourceallocation.’asupplychainapplicationofsocialexchangetheory.Ontheonehand,thescopeofpreferredcustomertheoryextendsbeyondpuresocialexchange,butalsoincludescontractuallyframedexchanges.Twooftheassumptionscomefromstrategicmanagement,thesecondrootofpreferredcustomertheory.Andthereforethedefinitionof‘comparisonlevelofalternative’cannotdirectlybetakenoverfromThibautandKelley’soriginal,becausetheyexplicitlyareinterestedonlyincontinuationordiscontinuationofarelationship.Importantly,herepreferredcustomertheorydifferentiatesbetweendiscontinuationontheonehand,andcon-Figure33.1ThecycleofpreferredcustomershipHolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

541Preferredcustomertheory523tinuationasstandardcustomerorpreferredcustomer,andassuchgoesbeyondtheclassicalsocialexchangetheoryquestion(Schieleetal.,2012).Itisthecontributionfromstrategicmanagementwhichanalyseshowfirmscangainsustainablecompetitiveadvantage;thatis,bebetterthantheircompetitors,notjustkeepoperationsrunning(Barney,1991).Socialexchangetheoryitselfhastworoots,andusestheconceptsofrewardsandcosts(whichwasborrowedfrompsychology)andresources(whichwasadoptedfromeconomics)todeveloppropositionsontheexchangerelationshipbetweentwoparties.Likewise,preferredcustomertheoryusesconceptsfromsocialexchangetheoryandfromstrategicmanagementinordertoexplainbuyer‒supplierrelationshipsandfactormarketrivalry.Findingsfromsocialexchangetheory-basedworktendtobecompatiblewithpreferredcustomertheory;thosefromothertheorieswithdifferentunderlyingassumptions–forexample,TheoryX-basedprincipal‒agenttheory–wouldbelessso.AfurthertheoreticalcriterionproposedbyWackeristhatatheoryshoulddefineitsdomainveryspecifically:thatis,whenandwhereitapplies.Thisisthecasewithpreferredcustomertheory,whichclearlydelineatesthedomain,basedontheconditionsforequalexchangeandthestrategicconditions,whichspecifyitsscopetovoluntary,market-basedinteractionswithfinitenumbersofheterogenousplayers.Finally,Wackersuggeststhattheoryshouldmotivatenewareastoexplore;thatis,itsfecun-dity.Preferredcustomertheoryisastrategicmanagementtheory,asitprovidesanexplanationonhowfirmscangainsustainablecompetitiveadvantagesthroughsourcing;moreprecisely,itoffersatheoryofhowtosolvetheproblemoffactormarketrivalryandoutperformcompet-itorswithinfactormarkets(Ellrametal.,2013;Markmanetal.,2009).Assuch,itaddressesanewfieldwhichhaspreviouslybeenneglected.Ithasoftenbeenarguedthatpurchasingisastrategicfunctionsimplybecauseofthemonetaryvolumeitisresponsiblefor.Butlargeandimportantdoesnotequaltostrategicallyrelevant.Thelatterisonlysoifasustainablecompet-itiveadvantagecanbeachieved(Barney,1991).Whileclassicalresource-basedtheorywouldsearchforresourcesinternaltothefirm,extensionsofthistheorylikewiseconsiderexternalresources,suchassuppliers,assourcesofcompetitiveadvantage,providedtheycanbetiedtothecompanyathand(DyerandSingh,1998;SanchezandHeene,1997;Steinleetal.,1998).Becomingapreferredcustomerofleadingsuppliersisawaytoestablishsustainablebondswithexternalresources,andinthiswayachievecompetitiveadvantage.CONCLUSION,PURCHASINGIMPLICATIONSANDFUTURERESEARCHPreferredcustomertheoryexplainshowfirmscangainsustainablecompetitiveadvantagebybecomingapreferredcustomersofsuppliers,whichisaccomplishedbyensuringthesesuppli-ers’satisfactionwiththerelationshipandinitiallybeinganattractivecustomer.Thebondingmechanismisunderstoodasareinforcingcycle,thecycleofpreferredcustomership.Preferredcustomerlogichasseveralimplicationsforsupplymanagement.Firstofall,itisclearthatitisnotsufficienttoconceiveabuyer‒supplierrelationshipasaone-to-oneaffair;rather,accordingtopreferredcustomertheory,alternativebusinesspartnersmustalsobetakenintoconsideration.Further,suppliersatisfactionisanabsolutestandard,butitisonlyaneces-sary,notasufficientconditiontoachievepreferredcustomerstatus.Thelatterdependsonthecomparisonlevelofalternatives;arelativecomparison.ThesameabsolutelevelofsupplierHolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

542524Handbookoftheoriesforpurchasing,supplychainandmanagementresearchsatisfactionmayormaynotleadtothesupplierawardingpreferredstatus;thisdependsonthesetofavailablealternatives.Forpurchasingmanagersthisimplies,inpractice,thattheybenefitfromhavingagoodunderstandingoftheothercustomerswhichtheirsuppliersserve,andhowthevendorregardsthem.Buyingcompaniesbenefitfromactivelypositioningtheirorganizationpositivelyinthefactormarkets,inareversemarketingapproach(BlenkhornandBanting,1991).Preferredcustomertheorypredicts,withintherespectivelegalsituationofeachcountryandindustry,abuyerwillgetpreferentialpriceswithasupplierawardingpreferredcustomerstatus,asthesupplierwantstostayintherelationship,andalsorelationaluncertaintyisreduced.Suchasupplierwillalsoacceptdependenciesthatitwouldotherwisetrytoavoid;forexample,byassumingbilateraldependenciesthatemergeintherelationship.Assuch,aconditionforjointinnovationisestablishedwhichrequiresclosecollaborationandinevi-tablycreatesdependencies.Followingthislogic,preferredcustomertheoryarguesthatforabuyingfirmmakingsourcingchoices,itisnotalwaysthe‘best’‒forexample,thetech-nicallymostadvanced‒supplierinthemarketthatisthebestsupplierforaparticularfirm,ifitdoesnotawarditwithpreferredcustomerstatus.Fromthebuyingfirm’sperspective,itisnothelpfulifasuppliercouldprovideaparticularserviceorproduct,butinthisparticularsituationdoesnotactuallydoso.Hence,oneofthekeytake-awaysfrompreferredcustomertheoryistocareaboutunderstandinghowthebuyingcompanyisregardedbythesupplier,andtofocusonlyonthoserelationshipswherepreferenceisreciprocal.Whatismore,firmspursuingadifferentiationstrategyneedtobepreferredcustomersoftheleadingsuppliersfortheirstrategicpurchases,otherwisetheyarepredictedtofailtocompeteininnovation,incaseswheretheyareincreasinglydependentuponsuppliercontributions.Here,wehavethecaseofapurchasing-inducedstrategydetermination:ifafirmtriestopursueadifferentiationstrategy,andforthatreliesonitssupplier’scontributiontoinnovation,itcannotsuccessfullyimplementsuchastrategywithoutensuringprivilegedaccesstothesecrucialsuppliers.Butalsoinsupplychainoperationsanddelivery,preferredcustomertheorypredictsasig-nificantdifference,withthepreferredcustomergainingpreferentialdeliveryconditions.Mostpronounced,inallocationsituations,isthatthepreferredcustomerisexpectedtogetsupplies,whilestandardcustomersarenotserved.Notbeingapreferredcustomerwithimportantsuppliersrepresentsastrategicrisk.Dependingonthesupplystructureofafirm,itmightalsobeseenasmorecreditworthybyabank.Acompanythatcanrelyonasupplierstructurecharacterizedbythefactthatthemainsuppliersofferpreferredcustomerstatus,comparedtoonewhichhasaweaksupplybasewhichshiftsloyaltiesatthefirstinstanceandoverchargesthebuyer,isevidentlylessvolatile.Tosummarize,preferredcustomertheoryfocusesonthethreecyclestagesofattractive-ness,satisfactionandpreferredcustomerstatus,andtheirinteraction.Inordertostructurethefieldandclassifyresearch,thecyclestagescanbedepictedasonedimensiononhowtomappreferredcustomerresearch(thetopdimensioninFigure33.2,Z-axis).Atthesametime,thediversebenefitclassesarerelevant:gainingpreferentialresourceallocationfromsuppliersforcostreduction,innovationenhancement,deliverystabilization,orfurtherindustry-orcompany-specificparticularbenefits(depictedasthefrontdimensioninFigure33.2,X-axis).Afinaldimensionwhichcouldbeaddedtosummarizeandsortpreferredcustomerresearch,andlikewisetoidentifyopportunitiesforfutureresearch,isthelevelofanalysis(Schieleetal.,2012):micro(individual;Ellegaard,2012),meso(buyer‒supplier)andmacro(country)(levelsdepictedasY-axisinFigure33.2).HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

543Preferredcustomertheory525Figure33.2TheattractivenesscubeFordescribingthematuringofatheoryandexposingthegapsinempiricalverification,fivestepscanbedifferentiated(Schiele,2020):(1)thephenomenonthatthetheoryaddresseshastobeempiricallyevidenced(here,theexistenceofcustomerdifferentiationanddifferencesintreatment);(2)itsrelevancedepicted(thebenefits/threats);(3)antecedents(themechanismunderstood;here,thecyclestages);(4)actionableimplications(here,thedesignofpreferredcustomermanagementtools);and(5)theidentificationofcontingenciesneedstobeaccom-plished(forinstance,environmental,suchascountries;here,thelevelsofanalysis).First,arecentreviewofcurrentpreferredcustomerresearch(Pullesetal.,2019)revealedthatthephenomenonofdifferentiatedtreatmentofcustomersbytheirsuppliershasbeendescribedveryoften.Itwasfoundtobearecognizablebusinessreality.LessresearchhasbeenconductedintocustomersegmentationinB2Bmarketingwhich,however,couldprovideabetterunderstandingonobjectives,toolsandmechanismsofdifferentiatedtreatment.ThereHolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

544526Handbookoftheoriesforpurchasing,supplychainandmanagementresearchisalsothequestionofpurposefulcustomersegmentationversusintuitivedifferencesintreatment.Consideringthesecondstep,therelevanceofthephenomenon,suchasshownaboveinthesectiononthebenefitsofpreferredcustomershipforbuyers,itisstrikingthattherehasbeenconsiderableempiricalevidencefortherelevanceforinnovationandalsoevidenceforthepricehypothesis(Patruccoetal.,2019;Schieleetal.,2011),butonlylimitedresearchonthedeliveryandriskside.Inanincreasinglyvolatileworld,though,theaspectofseamlessdeliverybecomesmorechallenging.Forinstance,incrises,suchastheoneinducedbytheCovid-19pandemic,preferredcustomerstatusmightplayaparticularroletoovercomesupplyshortages(Schieleetal.,2021).Withthethirdstep,testingthepostulatedmechanismandidentifyingthefactor’santeced-ents,someinitialempiricalresearchhasbeenconductedinthefieldofsuppliersatisfactionandpreferredcustomerstatus,butnotablylimitedresearchhasfocusedonthefirstphaseofthecycle,attractiveness.Atthesametime,thegrowingimportanceofstart-upsintheinnovationprocessstressestheneedforabuyingfirmtobeattractiveinthesupplymarketandsignalitsdemands,muchmorethaninaclassicalbuyer‒supplierproductdevelopmentprocess,whereissuesofsuppliersatisfactionandsubsequentpreferentialallocationofpersonnelandcapacityresourcesarecritical.Anotherissuewhichhasnotyetreceivedmuchempiricalattentionisthemeasurementofthecomparisonlevel.Studiesidentifyagapbetweensuppliersatisfactionandpreferredcustomerstatus,thusindirectlyevidencingthepresenceofmoreattractiverelationships(Piechotaetal.,2021;Pullesetal.,2016).However,howthesecanbeidentified,categorized,andhowthebuyingfirmcaneventuallycounterinordertooutperformtherivalcustomersofagoodsupplier,remainsanopenfieldofstudy.Further,giventhemulti-periodnatureofthecycleofpreferredcustomership,long-termstudiesfocusingonthedevelopmentofsuchbusinessrelationshipseitherinanevolutionaryorinanepisode-drivenwaycouldgreatlyexpandourunderstanding.Here,relyingonsocialexchangetheory’snotionthatthereisamutualadaptationinarelationshipinordertoachieveanactor’sgoals,whichmaydevelopintomutuallyobligedbonds,comesintoplay(Ellisetal.,2012).Fromamanagementperspective(thefourthsteponactionableimplications),afewtoolshavebeenproposedtohelpfirmsimplementpreferredcustomertheory.EarlyonCordónandVollmann(2008)proposed‘tengoldenrulesforbecominganattractivecustomer’,whichincludeinternalorganizationalchangesandchangesintheconducttowardssuppliers.Moresystematically,andbasedontheabovetheory,Nolletetal.(2012)introduceamodelonhowtobecomeapreferredcustomer,onestepatatime.Theycollectaseriesoftacticsthatpurchaserscansystematicallyapplyateachphaseofthecycle.Schiele(2012)introducesthe‘preferredcustomermatrix’,whichononeaxisdepictsthecompetitivenessofasupplier,andontheotheraxisdifferentiatesbetweenstandardandpreferredcustomer.Suchasupplierclassificationmightbetheinputforthesecondstep(‘segmentsuppliers’)inPullesetal.’s(2019)stagemodelofsupplierresourcemobilization.However,itcanbesaidthatdespitesuchattempts,literatureisstillscarceonmanagementapplicationsdesignedfollowingpreferredcustomerlogic.Abroadavenueforfutureresearchalsoemergesaroundupstreamorreversemarketing;thatis,thepurposefulpositioningofthebuyingfirminthesupplymarket.Here,sometimeagoBiemansandBrand(1995)presentedafirstdraftonhowfirmscouldimplementasystematicreversemarketingapproach,essentiallyfocusingontheidentificationofpreferredsuppliersandthentheproactiveapproachtowardsthem.HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

545Preferredcustomertheory527Contingenciesofthetheory,fifthandfinally,haveonlystartedtoberesearched.Forinstance,whilepreferredcustomerresearchhasbeenconductedindiversecountries,acomparisonbetweenthemhasyettobepublished.Giventheunderlyingunderstandingofbuyer-supplierasasocialexchangeprocess,theimportanceofcultureasaninfluencingfactorisalmosttobeexpected.Inparticular,thecountryornationafirmishostedinmighthaveaninfluence,forinstance,ontheperceivedattractivenessofthisbuyerbyinternationalsuppliers.Mostresearch,sofar,hasfocusedonthemesolevel,analysingtherelationshipbetweenfirms.Interpersonalelementsmayalsoinfluencethedecisionorthehabitofasuppliertoawardacustomerwithpreferredstatus(Ellegaard,2012).Preferredcustomertheoryenablespurchasingtoorchestratecompetitiveadvantagesforitsfirmbyensuringbetteraccesstosupplierresourcesthancompetingorganizationshave.Assuch,thistheoryiffullydevelopedcouldbecomethedriverofanextroundincompetition.ACKNOWLEDGEMENTThischapterhasprofitedfromextensivecommentsbyScottEllis.Theremainingpositionsandissuesare,ofcourse,mine.REFERENCESAnderson,E.(1989).Determinantsofcontinuityinconventionalindustrialchanneldyads.MarketingScience,8(4),310–323.Anderson,J.C.,andNarus,J.A.(1984).Amodelofthedistributor’sperspectiveofdistributor‒manufacturerworkingrelationships.JournalofMarketing,48(Fall),62–74.Barney,J.B.(1991).Firmresourcesandsustainedcompetitiveadvantage.JournalofManagement,17(1),99–120.Bemelmans,J.,Voordijk,H.,Vos,B.,andDewulf,G.(2015).Antecedentsandbenefitsofobtainingpreferredcustomerstatus:ExperiencesfromtheDutchconstructionindustry.InternationalJournalofOperationsandProductionManagement,35(2),178–200.doi:10.1108/IJOPM-07-2012-0263.Bew,R.(2007).Thenewcustomerofchoiceimperative:ensuringsupplyavailability,productivitygains,andsupplierinnovation.Paperpresentedatthe92ndAnnualInternationalSupplyManagementConference,LasVegas.Biemans,W.G.,andBrand,M.J.(1995).Reversemarketing:Asynergyofpurchasingandrelationshipmarketing.InternationalJournalofPurchasingandMaterialsManagement,31(2),28–37.doi:10.1111/j.1745-493X.1995.tb00206.x.Blau,P.M.(1964).ExchangeandPowerinSocialLife.NewYork:Wiley.Blenkhorn,D.L.,andBanting,P.M.(1991).Howreversemarketingchangesbuyer–sellerroles.IndustrialMarketingManagement,20(3),185–191.doi:10.1016/0019-8501(91)90016-9Brokaw,A.J.,andDavisson,C.N.(1978).Positioningacompanyasapreferredcustomer.JournalofPurchasingandMaterialsManagement,14(1),9–11.Christiansen,P.E.,andMaltz,A.(2002).Becomingan‘interesting’customer:Procurementstrategiesforbuyerswithoutleverage.InternationalJournalofLogistics:ResearchandApplications,5(2),177–195.Cook,K.S.,andEmerson,R.M.(1978).Power,equityandcommitmentinexchangenetworks.AmericanSociologicalReview,43(5),721–739.Cordón,C.,andVollmann,T.(2008).ThePowerofTwo:HowSmartCompaniesCreateWin–WinCustomer–SupplierPartnershipsthatOutperformtheCompetition.Houndmills:PalgraveMacmillan.Cropanzano,R.,andMitchell,M.S.(2005).Socialexchangetheory:Aninterdisciplinaryreview.JournalofManagement,31(6),874–900.doi:10.1177/0149206305279602.HolgerSchiele-9781839104503DownloadedfromPubFactoryat05/28/202209:11:45AMviaColumbiaUniversityLibrary

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54934.OntheoriesforresearchingsustainabilityThomasE.JohnsenandFedericoCaniatoINTRODUCTIONRecentsystematicliteraturereviewshavemappedtheuseoftheoreticalperspectivesinpur-chasingandsupplychainmanagement(PSCM)research(Chicksandetal.,2012;Spinaetal.,2016).Theseshowthattransactioncosteconomics(TCE)andtheresource-basedview(RBV)arethedominanttheoriesinPSCMresearch,althoughawidearrayoftheoreticalperspectivescanalsobeidentified.However,TCEandtheRBVareoldtheoriesthatwerenotdevelopedtoguideresearchinPSCM,andwewouldquestiontheirsuitabilityforresearchingsustainablePSCMphenomena.Infact,literaturereviewsthatfocusonsustainablePSCM(GimenezandTachizawa,2012;Johnsenetal.,2017;Quarshieetal.,2016)showthatwhenresearcherscarryoutstudiesrelatedtosustainablePSCMtheyaredrivenbyadifferentsetoftheories.InthischapterwediscusswhyresearchersinsustainablePSCMtendtooptfordifferenttheoreticalperspectivestoguidetheirresearch,andwhyTCEandtheRBVarerelativelyrare.WeunpackthereasonswhytheoriesthatareapplicabletoPSCMingeneralmaynotbeeasilytransferrableorappropriatetoresearchthatfocusesonsustainability.Inbrief,wearguethatthereasonsaretwofold.Firstly,theinherentlong-termnatureofsustainability,asopposedto,forexample,theshort-termnatureofbuyer‒supplierexchangesortransactions,requirestheorythatfocusesonlong-termdevelopmentalprocesses.Secondly,thetraditionaltheoriesusedinPSCMresearcharelimitedwhenresearchersseektounderstandsustainabilityfromaninterorganizationalsystems(orecosystems)perspective,focusedonnetworksofactorsorstakeholders.TCEislimitedasatheoreticalperspectivebecauseitispredominantlyappliedtoanalysetransactionsbetweenbuyersandsuppliersastheunitofanalysis,ratherthanlong-termdevel-opmentprocesseswithincomplex,multi-tierednetworks.Furthermore,TCEisill-suitedasatheoreticalperspectivebecausetheboundaryconditions(Busseetal.,2017)becomeprob-lematic:theassumptionsofTCEtheoryofshort-termoptimizationandfirmsbeingdrivenbyprofitmaximizationandcostreduction‒thatis,purelyeconomicgoals‒cannotexplainverywellthelong-termvisionofsustainablePSCM.TheRBVisincreasinglyappliedasatheoreticallensinsustainablePSCMresearch(Johnsenetal.,2017)butalsosuffersfromlimitations.Inparticular,theassumptionintradi-tionalRBVtheory(forexampleBarney,1991;Wernerfelt,1984)isthatstrategicresources,includingcorecompetencies,mustbeinternallycontrolledratherthandistributedacrossmul-tiplefirms(Granstrandetal.,1997).LaterdevelopmentsoftheRBV,includingtheextendedRBV(Lavie,2006)andthenaturalRBV(NRBV)datingbacktotheseminalarticlebyHart(1995),placemoreemphasisontheimportanceofexternalrelationships,andthatthesecaninfactbeasourceofcompetitiveadvantage.Inthischapterwebeginbypresentingfourtheoreticalperspectivesthat,withtheexceptionofourfourthsuggestion,arewidelyappliedinsustainablePSCMresearch.OurfirstproposedtheoryforresearchingsustainabilityisthereforetheNRBV.Hart’s(1995)NRBVisparticu-531ThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

550532Handbookoftheoriesforpurchasing,supplychainandmanagementresearchlarlysuitabletostudyingsustainablePSCMbecauseitassumesthatcompetitiveadvantagecanbeachievedthroughthefirm’srelationshipwiththenaturalenvironment;inturnachievedbymeansofpollutionprevention,productstewardshipandsustainabledevelopment.InadditiontotheNRBV,weproposethreetheoriesthatarecharacterizedbytheirfocusonthedevelop-mentandmanagementofinterorganizationalrelationships.Weproposestakeholdertheory(Freeman,1984)asthesecondalternative.Stakeholdersinclude‘anygrouporindividualwhocanaffect,orisaffectedby,theachievementofacorpo-ration’spurpose’(Freeman,1984,p.vi).StakeholdertheoryisparticularlyusefulinresearchonsustainablePSCMtoidentifyhowvaryingstakeholdersexertpressureoncompaniestoimplementasustainablesupplychain(forexampleDarnalletal.,2008;Ehrgottetal.,2011;HallandMatos,2010;WalkerandBrammer,2009).Suchstakeholdersmightinclude,forexample,regulators,media,non-governmentalorganizations(NGOs)orcustomers.Stakeholdertheoryisthereforewellsuitedtoanalysethequestionofwhycompanieswanttoimplementsustainablesupplychains,ascompaniesareoftendrivenintheirdecisionsbythesestakeholders.Mitchelletal.’s(1997)workisfrequentlyusedtoprovideinsightsintostakeholdersalience,focusingontheconstructsofpower,legitimacyandurgency.Asthethirdalternative,weproposeinstitutionaltheory(forexampleDiMaggioandPowell,1983),whichisalsooftenusedtoidentifydriversofsustainabilityimplementation,butwithanemphasisonwhycompaniesoftenadoptsimilarresponsesandpractices.BorrowingfromWeber’s(1930)useofthe‘ironcage’metaphor,DiMaggioandPowell(1983)emphasizeanegativeviewoftheimportanceofisomorphicinstitutionalpressures;keyconstructswithininstitutionaltheoryincludethecoercive,normativeormimeticnatureofexternalpressuresandinfluences.OurfourthsuggestionistheIndustrialMarketingandPurchasing(IMP)Groupinteractionapproach(‘IMP’)(Håkansson,1982).Comparedwiththeotherthreetheoriesweputforward,IMPhasbeenappliedfarmorerarelyinstudiesofsustainablePSCM.However,asarguedbyJohnsenetal.(2017),IMPisideallysuitedtoresearchingsustainablePSCMgivenitsfocusoninteractionprocesseswithindyadicrelationshipsandthecomplexindustrialnetworksinwhichdyadsareembedded.Similarlytoothernetworktheories,IMPemphasizesthebondsandtiesbetweennetworkactorsandtheresourcestheycontrol,aswellaslinksbetweentheactivitiestheyperform(HåkanssonandSnehota,1995).Unlikesocialnetworktheory,IMPexaminesindustrialnetworksthatinmanywaysresemblesupplychains(withimportantdifferences).ThisHandbookcontainschaptersthatarefullydedicatedtothefourtheories.Wedonotintendtorepeatwhatreaderscanlearnfromtheseotherchapters.InthischapterweexaminewhythesefourtheoreticalperspectivesaresuitableforresearchingsustainablePSCM.Havingpresentedthefourtheoreticalperspectives,weputforthsomemorerecentpromis-ingtheoriesthatintroducesomenewperspectivesthatwouldhelpresearcherstobreaknewground.Thepotentialproblemwithrelyingonthesame‘oldtheories’isthatitisverydifficulttomakenewtheoreticalcontributions.Usingestablishedtheoriestendstoresultinmarginalcontributions,wheretheshiftfromtraditionaltosustainablepurchasingandsupplychainmodelsreallyrequiresdiscontinuousorevenparadigmaticchange(seeWieland,2021).WewouldthereforeurgeambitiousPSCMresearcherstoconsidertheuseofsuchnewtheories;ornewatleastinthecontextofPSCMresearch.Inthischapterwebrieflypresentthefollowing:thesocialresource-basedview(SRBV),complexadaptivesystems(CASs),theecologicallydominantlogic,andpanarchytheory.ThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

551Ontheoriesforresearchingsustainability533Webeginbycomparingthefourmaintheoriesthatwefocuson,discussingtheirstrengthsandlimitationsfromtheperspectiveofsustainablePSCMresearch.Wethenoffersomeguidanceonthetypesofsustainabilitythemesandresearchquestionsthataresuitabletostudythroughtheseperspectives.Attheendofthechapterwebrieflypresentthemorerecenttheories.APPLYINGTHENRBVTORESEARCHONSUSTAINABILITYBackgroundTheRBVwasoriginallyproposedbyWernerfelt(1984)asareactionagainsttheprevailingtheoriesinthe1980sthatfocusedonidentifyingattractivenichesinthemarketplacewithlittleregardtothenecessaryresourceendowmentrequiredtocompeteintheseniches(Wernerfelt,1984).TheRBVfocusedontheheterogeneityofresourcebundlesandcapabilitiesandthefactorsthatmakethesedifficulttoimitateandarenotsimplyavailableon‘strategicfactormarkets’(Barney,1986,1991;DierickxandCool,1989).Theideawasthatthedevelopmentovertimeofdifficult-to-copyandsuperiorresourcescouldbeasourceofsustainedcompeti-tiveadvantage.Barney’s(1991)frameworkshowedthatresourcesneedtobevaluable,rare,inimitableandnon-substitutable.ThefundamentallogicoftheRBVfounditswaytothemindsofthebusinessworldwhenPrahaladandHamel(1990)publishedtheirfamousarticleintheHarvardBusinessReviewoncorecompetences.Theydescribedhowcorecompetencies,ratherthanproductsormarkets,couldbeleveraged,andthatcorecompetenciestendtobeknowledge-basedandinvolvecol-lectivelearning(Peteraf,1993).OffundamentalimportanceisthatcorecompetenciesinturnmustbeprotectedthroughwhatRumelt(1987)calledisolatingmechanisms,thatwillcreatebarrierstoimitation.Resourcesarethusthebasisunitofanalysis.WithinPSCMtheRBVlogichasfounditswayintopractice,notablyininformingthemake-or-buydecisiononthebasicprinciplethatcompaniesmustneveroutsourceresourcesthatarecore(Arnold,2000),astheymustbeinternallynurturedandprotected.Morerecentcontributionsshowhowevenstrategicactivities,suchasmanufacturing,designandlogistics,canbeoutsourced,butRBVanalysiscaninformsuchstrategicdecisions(McIvor,2009).OnethemewithintheRBVconcernstheriskthatcorecompetenciescanbecomecorerigid-itiesascompaniesfocustoomuchonpaststrengthsinsteadofthefuture:theybecomecom-petencytraps(Leonard-Barton,1992).Inarapidlychangingworldcharacterizedbydisruptivetechnologicalchange(Christensen,1997),toomuchfocusonpaststrengthscouldmeanthatincumbentfirmsfallvictimtocompetence-destroyinginnovations(HendersonandClark,1990).Theconceptofdynamiccapabilitieshasbeendevelopedwiththislimitationinmind,definedastheabilitytointegrate,buildandreconfigureinternalandexternalprocessestoaddressrapidlychangingenvironments,wheretheabilitytomaintainandadaptthesecapabili-tiesisthebasisofcompetitiveadvantage(Teeceetal.,1997).Thus,wheretraditionalRBVcanbeinterpretedasa‘sticktoyourknitting’philosophy,dynamiccapabilitytheoryemphasizestheneedforfirmstochangeandinnovate.PrahaladandHamel’s(1994)bookCompetingfortheFuturecapturedthespiritofthisfocusoninnovationandlong-termcompetitiveadvantage,andithasremainedatthecoreofRBVtheorydevelopment.ThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

552534Handbookoftheoriesforpurchasing,supplychainandmanagementresearchFromtheRBVtotheNRBVOnespin-offfromthetraditionalRBVistheNRBV,whichlinksRBVtheorytothesustaina-bilityagenda.WherethetraditionalRBVtheoryplaceslittleemphasisonphysicalresourcesperse,theNRBVgoesintheoppositedirectionbyspecificallyfocusingonnatural(orbio-physical)resources,andthereforedirectlytiesintheresourcedebatewithanenvironmentalagenda(Hart,1995).Moreover,asHart(1995)argues,managementtheoryhistoricallyuses‘anarrowandparochialconceptofenvironmentthatemphasizespolitical,economic,social,andtechnologicalaspectstothevirtualexclusionofthenaturalenvironment’(pp.986‒987).ChangingfromtheRBVtotheNRBVanalysisrequiresbothadynamicandanintercon-nectedviewofresourcesthatemphasizesresourceconnectivity,toincluderelationshipswithexternalstakeholders.NotonlydoestheNRBVtheorynotseeitasadisadvantagetoaccessresourcesthroughinterorganizationalrelationships,butitalsosuggeststhatresourcesgainsociallegitimacythroughstakeholdercollaboration.BeingabletoaccessstrategicresourcesthroughexternalrelationshipsiskeytotheNRBV.Hart’s(1995)conceptualframeworkconsistsofthreeinterconnectedstrategies:sustainabledevelopment,productstewardshipandpollutionprevention;Hart(1995)arguesthattheseconstitutepotentialsourcesofsustainablecompetitiveadvantage.Allthreeofthesestrategiesrequireclosecollaborationwitharangeofexternalstakeholders.AlthoughtraditionalRBVtheorizedaroundlong-termstrategicadvantagesbyreferringtosustainedcompetitiveadvantage,thiswasessentiallyinthesenseofeconomicsustainability,andnottakingintoaccountenvironmentalandsocialsustainability.Whetherornotthesetermsthemselvesindicatearealdifferenceinperspective,traditionalRBVcertainlydidnotconsiderthetriplebottomline(TBL)intheirconcernwithhowtoachieveeconomicrents(seeforexampleBarneyetal.,2011).EvenHart’s(1995)originaltheorydidnotfocusonTBLperformance;theecologicallydominantparadigmproposedbyMontabonetal.(2016)andthesocialRBVproposedbyTateandBals(2018)arerecenttheoreticaldevelopmentsproposinghowtowidenthescopefromeconomictoTBLperformance,andwediscusstheselatestdevel-opmentsinoursectiononthelatesttheoriesforresearchingsustainablePSCM.ResearchThemesandAvenuesfortheNRBVBuildingontheuseoftheNRBVinsupplychainmanagement(SCM),researchershavehighlightedtheinterplaybetweeninternalandexternalcapabilitiesforgreenSCM(LeeandKlassen,2008),afocusoninterorganizationalresourcestostimulatesupplierengagement(forexampleFoerstletal.,2010),andthereinforcingeffectsofcollaboration(VachonandKlassen,2008)andorganizationallearning(Carter,2005).ThereviewbySarkisetal.(2011)highlightstheneedforfurtherdevelopmentoftheNRBVbyfocusingontheinterorganizationallearningelementsanddefinitionofwhatismeantbycompetitivevaluableresourcesinthiscontext.TheNRBVhasbeensuccessfullyappliedtounderpinstudiesintosustainablePSCM.Forexample,Paulraj(2011)showedhowsustainablesupplymanagementcanbeasociallycomplexrelationalcapabilitywithsignificantinfluencenotonlyoneconomicbutalsoonenvi-ronmentalandsocialfirmperformance.Hisresearchthereforetiesintothedebateabouthowsustainabilitymanagementcanconstituteasourceofsustainedcompetitiveadvantage,andhecallsformoreresearchonsustainabilitycompetencytounderstanditsbroaderimportanceinpromotingsustainablePSCM.Inasimilarvein,VachonandKlassen(2006)showedhowThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

553Ontheoriesforresearchingsustainability535knowledgesharingroutinesandcapabilitytointegrateexternalresourcesconstituteresourcesthataredifficulttoreplicateandthusmaygenerateacompetitiveadvantage.Thisremainsanimportantavenueforfutureresearch.ResearchershavealsoappliedtheNRBVtostudytheinterplaybetweeninternalandexter-nalcapabilitiesforgreenSCM(LeeandKlassen,2008),andthisfocusoninterorganizationalresourcesandcollaborationremainsakeytopicforNRBVresearchinSCMresearch(forexampleFoerstletal.,2010).Morerecently,theNRBVhasbeenusedtoresearchcircular(orclosed-loop)supplychains,andthisisaverypromisingresearchopportunityastherearestillveryfewstudiesthathaveattemptedthis.Howardetal.(2016)usedNRBVtheoryasalenstoexplorethedynamiccapabilitiesthatleadtosuccessfulproductstewardshipindevelopingclosed-loopsupplychains.Closed-loopsupplychaindevelopmentinvolvesradicalsupplychainredesignandthereforerequiresdynamiccapabilitiesanddevelopmentofnewstake-holderrelationships.Sarkisetal.(2011)highlightstheneedforfurtherdevelopmentoftheNRBVingreenSCMbyfocusingoninterorganizationallearningelementsandthemeaningofvaluableresourcesandthisremainsaviableresearchavenue.APPLYINGSTAKEHOLDERTHEORYTORESEARCHONSUSTAINABILITYBackgroundTheoriginalworkonstakeholdertheorybyFreeman(1984)canbeseenasanattempttowidentheunderstandingoftherangeofdiversestakeholdersthataffectcorporatedecisions.Wheretraditionalstrategythinkingfocusesprimarilyonshareholders,employees,customersandsuppliersasthemainstakeholdersofcorporations,stakeholdertheoryarguesthattherearemanymorestakeholderstoconsiderincorporatedecisionmaking,suchascommunities,gov-ernmentalbodies,tradeassociations,unions,andsoon.Stakeholdertheorycategorizesthesestakeholdersonthebasisofthe‘principleofwhoorwhatreallycounts’(Mitchelletal.,1997).Primarystakeholdersarethosewithadirectinterestintheorganization,includingcustomers,shareholders,employees,suppliersandregulators;whereassecondarystakeholdersarenotengagedintransactionswiththeorganizationbutcanneverthelessaffect,andbeaffectedby,theorganization,includingacademicinstitutions,NGOs,neighbouringcommunitiesandsocialactivists.Afundamentalpremiseofstakeholdertheoryisthatrelationshipsdonotoccurinavacuumofdyadicties,butasanetworkofinfluencesinvolvingmultiplestakeholders(Rowley,1997),thatinclude‘anygrouporindividualwhocanaffect,orisaffectedby,theachievementofacorporation’spurpose’(Freeman,1984,p.vi).Mitchelletal.(1997)proposedthreeattrib-utestocharacterizethedynamicsofinteractionamongststakeholders:1.Power:theabilityofanadvocatetoinfluence,produceoraffectbehaviours,outcomes,processes,objectivesordirection.2.Legitimacy:inkeepingwithexpectedbehaviours,structures,values,beliefs,normsandrules.3.Urgency:thestakeiscriticaltothestakeholderandtime-sensitive.ThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

554536Handbookoftheoriesforpurchasing,supplychainandmanagementresearchWhereFreeman’s(1984)workoriginallyfocusedonstrategicmanagement,researchersinsustainablePSCMhaveincreasinglyusedstakeholdertheoryasatheoreticallensbecauseithelpstounderstandthepressuresnotonlyfromtraditionalsupplychainactors,suchascus-tomersandsuppliers,butalsofromactors,orstakeholders,thatarenottraditionallyincludedinsupplychainanalysis,butwithpotentiallycriticalinfluencewhenthefocusshiftstosus-tainablesupplychains.ResearchThemesandAvenuesforStakeholderTheoryStakeholdertheoryisthedominantunderpinningtheoreticalperspectiveinsustainablepur-chasingandsupplymanagementresearch,anditspopularitycontinuestoincrease(Johnsenetal.,2017).Thediversityofstakeholdertheoryanditsfacilityforidentifyingandprioritizingconflictingstakeholderpressuresispartoftheappealofstakeholdertheoryinsustainablepur-chasingandsupplymanagement(Johnsenetal.,2017).Manystudies(forexampleHallandMatos,2010;WalkerandBrammer,2009)focusonhowpressuresofprimarystakeholdersandsecondarystakeholdersinducecompaniestoembracesustainablePSCMpractices.Mitchelletal.’s(1997)seminalworkonstakeholdersaliencetheoryisfrequentlyadoptedaspartofresearchintosustainability(forexampleParmagianietal.,2011)whererelationshipattributescombinetheinfluenceofpower,legitimacyandurgency.Forexample,Parmagianietal.(2011,p.221)usethisframeworktoarguethatfirmsmustlearnhowtoengagewithstakeholders:‘addingstakeholdersaliencewithrespecttosocialandenvironmentalissuesmeansthatfirmsmaybenefitfromfocusingonasmallernumberofrichrelationshipswithbothsuppliersandactivists,asitwilltakemoreefforttomanagetheserelationshipscooper-atively’.SchneiderandWallenburg(2012)focusontheroleofpurchasinginimplementingsustainablesourcingandcollaborationwithinternalandexternalstakeholders.Buildingonstakeholdertheory,theyinvestigatestakeholdersaliencetodrivetheimplementationofsus-tainablesourcing,analysingstakeholderpower,legitimacyandurgency.TheappealofstakeholdertheoryforresearchonsustainablePSCMisthereforecloselyrelatedtotheanalysisoftheinfluencesorpressuresthatdifferenttypesofstakeholdersexert,andhowtheseformapowerfulforceinputtingpressureoncompaniestoimplementsustainablepracticeswithintheirsupplychains.Stakeholdertheoryhasthusoftenbeenusedtounderstandwhycompanieswanttoimplementsustainability,butstakeholderscanalsobeinstrumentalinanalysinghowcompaniescanimplementsustainablesupplychains.Gualandrisetal.(2015)proposeamodelforsuppliersustainabilityevaluationandverification.Illustratinghowstakeholderscanperformrolessuchascounsellorsoradvisors,theyshowhowcompaniescanengagewithdiversestakeholderstoaddresstheproblemofaccountability,affectingthelevelsofinclusivity,scopeanddisclosure.Wealignwiththeirsuggestionsthatmoreempiricalresearchisneededtoassesshowdifferentstakeholderscanbeinvolvedinsupplierevaluationandverificationandtheeffectsoninclusivity,scopeanddisclosure.Stakeholdertheoryislimitedinitsfocusonstakeholderpower,legitimacyandurgency.Forthisreason,itisnotsurprisingthatthetheoryisoftenappliedincombinationwithanotherthe-oreticalperspective,andoneofthefrequentcombinationsiswithinstitutionaltheory,whichwediscussinthefollowingsection.ThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

555Ontheoriesforresearchingsustainability537APPLYINGINSTITUTIONALTHEORYTORESEARCHONSUSTAINABILITYBackgroundAfundamentalpremiseofinstitutionaltheoryisthatitexplainswhycompaniesoftenadoptsimilarresponsesandpractices:thestudyofisomorphism.Wherestakeholdertheoryfocusesonstakeholderpressureasadriveroforganizationaldecisionmaking,institutionaltheoryexaminesthreemechanisms,orformsofpressure,thatcancauseinstitutionalisomorphism:coercive,mimeticandnormativepressures(DiMaggioandPowell,1983).Coerciveisomorphismrelatestotheformalandinformalpressuresexertedonorganizationsbyotherorganizationsuponwhichtheyaredependent,andbyexpectationsfromsociety(DiMaggioandPowell,1983).Forexample,apowerfulfirmmayseektocoerceitssupplierstoadoptleanproductionpracticesortocomplywithitssustainabilityrequirements.Thismaynotleadtoefficiencies(Miemczyk,2008)butcanstillincreaselegitimacy.Mimeticisomorphismoccursasaresultofuncertaintythatencouragesimitation(Zsidisinetal.,2005).ConsiderhowtheautomotiveindustryinEuropeandNorthAmericafromthelate1980sbegantoadoptleanproductionpracticesbasedonobservationsofsuperiorJapanesemanufacturers(especiallyToyota),therebymimickingJapaneseproductionandsupplychainstructuresandprocesses;seeforexampleOliverandWilkinson’s(1988)TheJapanizationofBritishIndustry.Normativeisomorphismstemsfromemployeeprofessionalization,definingthecon-ditionsandmethodsoftheirworktoestablishgreaterlegitimacyfortheiroccupation(GopalandGao,2009).DiMaggioandPowell(1983)recognizetwoaspectsofprofessionalizationassourcesofisomorphism:formaleducationandlegitimationinacognitivebaseproducedbyuniversityspecialistsandthegrowthofprofessionalnetworksacrosswhichnewmodelsdiffuse.Institutionaltheorystipulatesthatconformancetoinstitutionalrules,ororganizationalisomorphism,increasesorganizationallegitimacy,soorganizationswilladoptthosepracticesperceivedasmostlegitimate.Whereinstitutionaltheorydiffersfromotherorganizationalthe-oriesisthelogicthatorganizationsadoptstructuresandpracticesnotduetotheeffectivenessorefficiencyoftheseinproducingperformanceoutcomes,butduetothelegitimacythattheiradoptiongrantstotheorganization(AlvessonandSpicer,2019).ResearchThemesandAvenuesforInstitutionalTheoryInstitutionaltheoryhasbeenappliedacrossarangeofSCMresearch,suchasqualitymanage-mentandadoptionofelectronictools(Kauppi,2013),butinrecenttimesinstitutionaltheoryhasbeenusedwidelyinsustainablePSCMresearch(Johnsenetal.,2017).ExamplesoftheapplicationofinstitutionaltheorytoinvestigatesustainablePSCMphenomenaincludeZhuandSarkis’s(2007)researchontheroleofinstitutionalpressuresonemerginggreenSCMandpurchasingpracticesinChinesemanufacturers,wheretheyuseinstitutionaltheorytoiden-tifytheimportanceofmarket(normative),regulatory(coercive)andcompetitive(mimetic)pressure.Zhu’slaterwork(forexampleZhu,2016)hassimilarlyreliedoninstitutionaltheorytoanalysepressuresthatmotivateChinesefirmstoadoptsustainabilitypractices.Similarly,Hoejmoseetal.(2014)drawfrominstitutionaltheorytoarguethatthechoicebetweencoerciveandcooperativeapproachestoimplementgreenSCMdependsoninstitutionalThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

556538Handbookoftheoriesforpurchasing,supplychainandmanagementresearchpressuresaswellasdownstreamcustomerrequirements;theyfindthatinstitutionalpressuressignificantlydeterminecooperativeapproaches,butcustomerpressuremoreoftenresultsinacoerciveapproachinvolving,forexample,suppliermonitoring.Elsewhereinthisbook,Kauppi(seeChapter21)setsoutfutureresearchopportunitiesforinstitutionaltheory.Thisincludesasuggestiontoexaminehowsocialsustainabilityassess-mentinitiativesinstigateanduseinstitutionalpressurestodrivethird-partyaccreditationinsupplychains.Wewouldsuggestthatthismightbebroadenedtoincludeotherwaystomonitorandfostersustainabilityinsupplynetworks,andtherangeofaccreditation(orcer-tification)andverificationthatcanbeperformedbythirdparties(Gualandrisetal.,2015).Kauppi’ssuggestiontouseinstitutionaltheorytounderstandtheextenttowhichtechnologyapplicationsactuallygetadoptedandimpactupondailyoperationsinasupplychainalsopresentsopportunitiesforsustainablePSCMresearch.Forexample,thereismuchhypeabouttheimplementationofblockchaintechnologytosolvetransparencyandevencorruptionissuesinsupplychains,buttodatethereislittleresearchtoevidencethesuccessfuladoptionofblockchaininsupplychains,andwhatdrivessuchefforts.APPLYINGTHEIMPINTERACTIONAPPROACHTORESEARCHONSUSTAINABILITY1BackgroundTheIndustrialMarketingandPurchasing(IMP)Groupinteractionapproachdatesbacktoamajorinternationalresearchproject,whichfocusedonindustrialbuyer‒sellerrelationships(Håkansson,1982;TurnbullandCunningham,1981).Thisresearchresultedintheinteractionmodelthatchangedthewayinwhichbuyer‒sellerrelationshipswereunderstood.Ratherthanpurelyfocusingondiscreteone-offexchangeepisodesortransactions,themodelincorporatedlong-termaspectsofbuyer‒sellerrelationships,mutualadaptationsandinstitutionalizationprocesses.Themodelalsodepictstheinteractionprocessastakingplacewithinanatmospherewhichisdescribedintermsofpower/dependence,conflict/cooperation,closeness/distance,andmutualexpectations(Håkansson,1982,p.20).Themodelalsoincludesanenvironmentallevelsurroundingtheinteractionprocessandtheatmosphere,althoughthispartofthemodelislessdetailed.Thefundamentalassumptionoftheinteractionmodelistheactivenatureofbothbuyerandseller:theprocessofinteraction.Inthecontextofthe1970sand1980s,thisbrokewiththetacitassumptionofearlierstudies,suchasorganizationalbuyingbehaviourtheories(Sheth,1973;WebsterandWind,1972),whereoneactorisactivewhereastheotherismerelypassive.TheIMPinteractionapproachlaterexpandedinthedirectionofindustrialnetworkstoemphasizethat‘nobusinessisanisland’(HåkanssonandSnehota,1990),therebychangingtheunitofanalysisfromthelevelofthedyadicrelationshiptothenetworkinwhichthedyadsareembedded.Thelatermodelknownastheactors‒resources‒activities(ARA)modelpro-videdaconceptualframeworktoanalysethedevelopmentofrelationshipsovertimeastwoactorsbuildupactivitylinks,resourcetiesandactorbonds(HåkanssonandSnehota,1995).Thisshiftedthefocusofanalysistothepositiveornegativeeffectsthatnetworkconnectionscanhaveoninteractionswithindyads(BlankenburgandJohanson,1990).ThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

557Ontheoriesforresearchingsustainability539IMPscholarshavedevelopedahostofmodelssincethecreationoftheinteractionandARAmodels,andthebasicassumptionsofthesemodelsstillapply.However,despitethegreatnumberofstudiesthathavefollowedinthewakeoftheseearlydevelopments(withtheannualIMPconferenceusuallycountinghundredsofparticipants),theIMPinteractionapproachisnotatheoryinthesenseofofferingpredictivepowers:itisan‘approach’.Infact,thefocusappearstohavebeenonprovidingconceptualframeworksandlanguagetobetterunderstandbuyer‒supplierrelationshipsandnetworks(Harlandetal.,2004),butresearchersseekingtoapplyIMPasatheoreticallenswillmostlikelybelookinginvainforproposedorprovencausalrelationshipsonwhichtheycanbuildtheirargumentsandhypotheses.WerecommendthatIMPbeusedforitsspecificconceptualframeworks,notablytheinteractionorARAmodels,andasawayofthinkingaboutbuyer‒supplierinteractions,relationshipsandnetworks.Thiscanusefullybecombinedwithformaltheoriesthatofferpredictivepowersbasedonsimilarassumptionsandtheoreticalconstructs;thesecouldbestakeholderandinsti-tutionaltheories.ResearchThemesandAvenuesforIMPFromtheperspectiveofsustainabilityresearch,theappealoftheIMPinteractionapproach(Håkansson,1982)lieswithinitsfocusoninteractionprocessesandbuyer‒supplierrelation-shipmanagement:relativelyspeaking,institutionalandstakeholdertheorieshavelittletosayaboutrelationshipmanagement,especiallywithinbuyer‒supplier,orsupplychain,relation-ships.Whilebothstakeholderandinstitutionaltheoriesprovideframeworkstoclassifyactors(orstakeholders)throughlevelsofsalience(legitimacy,urgencyandpower)orinstitutionallogics(routines,rules,laws,conventions,paradigms,andsoon),themechanismsofinterac-tionamongstactorsarelargelyignored(Johnsenetal.,2017).Incomparisonwithstakeholderandinstitutionaltheories,theIMPinteractionapproachdoesnothaveafocalfirm-centricviewbut,infact,pointstothelimitationsofafocalfirmperspectiveasitisinconsistentwithaninteractionperspectivewhereitisnotaquestionofthefocalfirmbeingthe(sole)activeactor,butwhereallconnectedactorsareequallyactiveandmaybeactingwithoragainstthefocalfirm(FordandHåkansson,2002).Atthenetworklevelofanalysis,IMPhasadistinctfocusonunderstandingtheinterconnectednessandinterdepend-encyofrelationships,whichisinstrumentalinanalysingsustainabilityatthemulti-tiersupplychainornetworklevel,forexampletostudythediffusionofsustainabilityacrosssupplynetworks(Meqdadietal.,2019;Tateetal.,2013).Consideringtheupsurgeinmulti-tiersustainablesupplynetworkresearch,thisisanoppor-tunityforIMP-basedresearch.HerewemighthighlighttheexemplaryresearchbyVillena(2019),whoinvestigatedhowcompaniesbuildsustainablesupplynetworksbyputtingpres-sureonfirst-tiersupplierstocascadetheirsustainabilityrequirementstolower-tiersuppliers;otherresearcherscouldextendorelaboratethisresearchthroughtheIMPperspectivetoreallyunderstandtheinteractiverolesofsupplynetworkactors.Itfollowsfromthisideathatfuturestudiescouldanalysehowsupplynetworkactorscopewithsustainabilityinitiativeslaunchedbyotherdistantnetworkactors.ThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

558540Handbookoftheoriesforpurchasing,supplychainandmanagementresearchIMPDyadicbuyer‒supplierrelationshipsandbusinessnetworksprocesses.Interactionprocessesinbusiness-to-business(BTB)customer‒supplierrelationships.Adaptationandinstitutionalization.Actors’bonds,resourceties,activitylinks.Networkeffectsandnetworkembeddedness.Interdependency.Understandinghowsustainabilitydiffuses/spreadswithinnetworks.Roleofinteractionwithnetworkactors(directandindirectrelationships),interdependencyorconnectedness,embeddednessandnetworkeffects.InstitutionaltheoryThefirm(asinstitutions),butalsotheinstitutionalenvironmentcomprisingmultipleexternalandinternalinstitutions.Legitimacyisgainedbyrespondingtoinstitutionalpressures.Arguesthattheinstitutionalenvironmentcreatesisomorphism(structuresandpractices)throughcoercive,normativeandmimeticpressures.Pressuresarisefromnon-economicinstitutionssuchasgovernmentandNGOs,butalsoeconomicactorssuchasindustryassociationspromotingsocialstandards.Thesearekeydriversforsustainablesupplypractices.Partnershipswithactorsseenasimportantforlegitimacy.StakeholdertheoryTypicallyafocalfirminrelationshipwithprimaryandsecondarystakeholders.Also,network,whole-systemorsectoranalysis.Identificationofkeyactors.Themotivationoffirms:thatis,power,legitimacy,urgency.Importanceorsalienceofeachactorinrelationtothephenomenaunderinvestigation.Conceptssuchaslegitimacyandurgency,asrepresentedinsustainabilityandstakeholdertheory,maytakeprecedenceinfutureovermoretraditionalnotionssuchaspowerinthesupplyhierarchy.NRBVThefirm:thetraditionalRBVemphasizesinternalresourcesandtheneedtoprotectthese;theNRBVvaluesinterorganizationalrelationshipsandexternalresources.Naturalorbiophysicalresources.Resourceconnectivity.Sustainedcompetitiveadvantagethroughstrategiesofpollutionprevention,productstewardshipandsustainabledevelopment.Competitiveadvantage,throughdifferentiation,canbegainedbysustainabilityactionsifbasedonunique,sociallycomplexresourcesandcapabilitiessuchascollaborativesupplierrelationshipsanddevelopment.ComparingthefourtheoreticalperspectivesTable34.1CharacteristicsUnitofanalysisKeyvariablesSustainablePSCMrelevanceThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

559Ontheoriesforresearchingsustainability541COMPARINGFOURTHEORETICALPERSPECTIVESTable34.1comparesthefourtheorieswehavebrieflydiscussedinthischapter,identifyingthedifferencesinunitsofanalysis,keyvariablesandtherelevanceofthetheoriesforstudyingsustainablePSCM.Theseareallcharacterizedbyafocusoninterorganizationalissuesandshareacommonviewoftheimportanceofinterorganizationalrelationshipsasasourceofsustainablecompetitiveadvantage.However,onlyIMPconsidersrelationshipsandexchangeprocessesastheunitofanalysis,whiletheothersmainlyfocusonindividual(focal)firmsandtheirinteractionswithexternalactors.Therefore,thetheoriesareoftencombinedtobenefitfromthecomplementaryperspectivesthattheycanbringtotheanalysis.Thisismostoftenthecasewithstakeholdertheoryandinstitutionaltheory,sinceeachcomeswithlimitationsbutcanusefullybecombinedtogivemorecomprehensiveunderstandingoftherangeofpressuresormotivationsthatleadorganizationstodevelopsustainability.Othertheorycombinationsarelesscommon,butexamplesareprovidedby,forexample,Shietal.(2012),whostudy‘naturalresourcebasedgreensupplychainmanagement’usinginstitu-tionaltheoryandtheNRBV.Blomeetal.(2014)relyonthesametwotheoriestostudygreenprocurementandgreensupplierdevelopment.TheypointoutthatthedifferencesbetweentheNRBVandinstitutionaltheoryaresubtle:whereinstitutionaltheoryinterpretslegitimizationas‘aprocessofinstitutionalization,wherebyexternalnormsandbeliefsareadoptedwithoutmuchthought(DiMaggioandPowell,1983),theNRBVenvisionslegitimacyasinstrumental,proactiveand,moreimportantly,adeliberatepursuitthatcanultimatelyenhanceexternalbeliefs,therebycreatingnewerandenhancedlevelsoflegitimacy’(Blomeetal.,2014,p.35).Incomparison,IMPresearcherstendtobemorereluctanttocombinetheIMPperspectivewithanyothertheoreticalperspective.ThesomewhatidiosyncraticnatureoftheIMPperspec-tive,includingthelackoffocusonpredictingoutcomes,couldbeanopportunityforfutureresearch.Asexplainedearlier,wethereforerecommendthatIMPbeusedforitsspecificcon-ceptualframeworksandasawayofthinkingaboutbuyer‒supplierinteractions,relationshipsandnetworks,butcombinedwithformaltheoriesthatofferpredictivepowersbasedonsimilarassumptionsandtheoreticalconstructs,includingstakeholderandinstitutionaltheories.NEWPOTENTIALTHEORIESTORESEARCHSUSTAINABILITYSocialResource-BasedView(SRBV)TheNRBVisasanevolutionoftheRBVfocusedonnaturalresourcesandthereforesuitabletoinvestigateenvironmentalsustainability,butneglectsthesocialdimension.Morerecently,TateandBals(2018)proposedafurtherdevelopmenttoalsoincludethesocialdimensionofsustainability,thatis,thesocialresource-basedview(SRBV).TheymaintainedtheelementsoftheRBVandNRBVandaddedsomemore,tocoverthethreedimensionsofthetriplebottomline(TBL).TheSRBVextendstheNRBVbyaddingsocialcapabilities,whichareclassifiedintocommitments(values),connections(inthevaluenetwork)andconsistency(ofbehaviour).Thesesocialcapabilitiesallowtwostrategiccapabilitiestobeachieved‒thatis,themission-drivenapproachandstakeholdermanagement‒whichinturnallowsocialper-formancetobeachieved.TheSRBValsoextendsthenetworkofrelevantstakeholderstobeconsideredandmanaged,includingeconomic,socialandenvironmentalstakeholders.Indeed,ThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

560542Handbookoftheoriesforpurchasing,supplychainandmanagementresearchacriticalcapabilityisvaluechainpartnernetworkdesign,consideringnotonlysuppliers,butalsofinancialproviders,institutions,NGOs,andsoon.TheSRBVissurelyarelevantandpromisingdevelopment,extendingtheRBVtocovertheentirespectrumofTBLperformance.However,itstillassumestheperspectiveofasingleorganizationwhichisembeddedinanetworkandneedstodesign,developandmanagerelationshipswithmultipleandheteroge-neousstakeholders,butstillassumingthepointofviewofone‘focal’actor.ComplexAdaptiveSystems(CASs)Wheresupplychainswereoriginallyseenaslinearsystemsthatwerecontrolledbyacentralfocalfirm,morerecentdevelopmentstheorizesupplychainsascomplexnetworksthataredifficulttopredictandself-organize(Carteretal.,2015).Thecomplexadaptivesystem(CAS)perspectivefocusesonunderstandingsupplynetworksascomplexadaptivesystemsthatemergeandself-organize.Withrootsindifferentdisciplinarybackgrounds,theCASandIMPperspectivesshareacommonunderstandingofnetworksasself-organizingstructuresthatemergeratherthanbeingdeliberatelydesignedandcontrolledbysingularnetworkactors(forexampleFordandHåkansson,2002;HåkanssonandSnehota,1995).Acentralthemeinbothisthereforetheabilityof‒andneedfor‒companiestoattempttocontrolthenetworkinwhichtheyareembedded,andwhetherornotsuchattemptsarefutile.Choietal.(2001)proposethatsupplynetworkcontrolmaybedetrimentaltoflexibilityandinnovation,althoughtheyarguethatbothemergenceandcontrolarenecessary.CASshavebeenusedasatheoreticallenstoguideawiderangeofsupplychainandnetworkstudies.Theseincludemodellingofcomplexityfromatechnicaloroperationalresearch(OR)perspective,suchasHearnshawandWilson(2013)andSuranaetal.(2005).Pathaketal.(2009)useCASstoinvestigatetheevolutionofsupplynetworkpopulationandtopologytoexplorenetworkevolution.CASshavealsobeenusedinempiricalstudies,includingqualitativecasestudyresearch,tostudyissuesofcontrolandemergenceincomplexsupplynetworks,andhowcompaniescanusedifferentstrategiestoreducecomplexityandactorinterdependencies,suchasmodularization(MatosandHall,2010)anddelegationoftasksthroughtiering(Johnsenetal.,2019).Thequestionofsupplynetworkself-organizingversuscontroliscriticallyimportantinsustainablePSCMresearch,becauseitisvirtuallyimpossibleevenforlargeandpowerfulcompaniestocontrolthesustainabilitybehaviourofallsuppliersacrossmultipletiers(VillenaandGioia,2018).UsingCASstostudyenvironmentalinnovationsacrosssupplynetworks,Nairetal.(2016)suggeststhatdeliberateplanningbeappliedwhenenvironmentalinnovationiswithintheboundaryofthedominantfirm,butcombinedwithindirectengagementwhentheinnovationprocessunfoldsinthewidernetwork.Managingsustainabilityacrossmulti-tiersupplynetworkshighlightsuncontrollablechallengesthatcannotbemanagedthroughtradi-tionalSCMapproaches.Thereisclearlyscopeformoreresearchonthequestionsofsupplynetworkcontrolversusself-organizing,especiallyinthecontextofhighlycomplexsupplynet-worksascanbefoundin,forexample,theoilandgas,windpower,andaerospaceindustries.ThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

561Ontheoriesforresearchingsustainability543EcologicallyDominantLogicMuchresearchonsustainablePSCMfocusesonhowsustainablesupplychaindevelopmentsaredrivenbyariskreductionorlegislativeandregulatorycomplianceapproach(Walkeretal.,2008),suchastheuseofsuppliermonitoringapproaches(Meqdadietal.,2020;VachonandKlassen,2006).However,insteadofcreatingtrulysustainablesupplychains,acompli-anceapproachisaboutreducingthedamagethatcompaniesdo.Putdifferently,complianceapproachesarefocusedoncompaniesnotbeingcaughtactingillegallyorbeingexposedinthemediaforunsustainablebehaviour.Thisisaboutdoinglessbad,butnotabouthavingaposi-tiveinfluenceonPSCMpractices(PagellandShevchenko,2014).MarkmanandKrause(2016)arguethatcompaniesneedtomovefrom‘donoharm’think-ingto‘dogood’thinking.Ecologicallydominantlogic(Montabonetal.,2016)takespointofdeparturefromthethreedimensionsorpillarsofsustainability‒thatis,people,planetandprofit‒arguingthatinsteadofsimplybalancingthethreedimensionsofsustainability,com-paniesshouldprioritizeecologyfirst,societysecond,andcommercethird.Inotherwords,theenvironmentcomesbeforesocialconcerns,leavingeconomicsustainabilityasalastpriority.Montabonetal.(2016)contrastecologicallydominantlogicwiththetraditionalinstrumen-tallogic,whichtreatssocialandenvironmentalaspectsdiscretelyandsequentially,asifsuchissuesareemergingdistractions(GaoandBansal,2013,p.241).Whereinstitutionallogicisultimatelyaninside-outviewconcernedwithfocalfirmprofits,theecologicallydominantlogicisanoutside-inview,whichbeginsbyassessmentofeconomicsimpactontheenviron-mentandsociety.Akintothenon-focalnetworkactorviewoftheIMPperspective,ecolog-icallydominantlogictakesawiderviewoftheecosystemwithinthestakeholdernetwork.Findingcompaniesthatpursueanecologicallydominantlogicratherthanatraditionalinstrumentallogicmaybehard.Yetthereareprominentexamplesoftraditionalindustries,suchasautomotive,thathavebeendisruptedbyinnovativenewentrantswithradicallydiffer-entbusinessmodelsthatcentreontransformingtheautomotiveindustrytowardszeroemis-sions,whereincumbentfirmsaremostlyconcernedwithreducingvehicleemissions,thatis,reducingtheharmfulimpactoftheirproducts.ImplementingaswellasresearchingsustainablePSCMfromtheperspectiveofecologicallydominantlogicisthereforeabout(sustainable)innovationandthecreationofnewbusinessmodels;inourviewthisisahighlypromisingavenueoffutureresearch.PanarchyTheoryAsthefinalnewtheory,weproposepanarchytheory(Wieland,2021).Afulltreatmentofthisnewtheoreticaldevelopmentisbeyondthischapter,butthislatestdevelopmentstilldeservesabriefintroduction.Thepanarchytheoryofsupplychainmanagementreinterpretsthesupplychainasasocial-ecologicalsystem,pushingthetraditionalassumptionsofsupplychainmanagementevenmorethanthetheorieswehavepreviouslydiscussed.Rootedinecology,panarchytheoryprovidesastructureforunderstandinghowasystemfollowsthemovementofadaptivecyclesonscalesoftime,spaceandmeaning(Wieland,2021,p.59).Like,forexample,theIMPandCASperspectives,thepanarchytheoryofsupplychainmanagementextendstheunitofanal-ysisnotonlyfromsimplelinearsupplychainstocomplexadaptivesupplynetworks(Carteretal.,2015),butevenfurthertotakeinotherlevelsofstructure,includingpolitical-economicandThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

562544Handbookoftheoriesforpurchasing,supplychainandmanagementresearchplanetarylevels.Forexample,onesuchlevelcouldbetheconsiderationoflocalcommunitiesifstudyingsocialsustainabilityinsupplychains.Apanarchicalapproachtosupplychainmanagementalsodoesawaywiththetraditionalnotionofmanagingsupplychains.Wieland(2021,p.59)arguesthatitis‘timetoreplacethemodernisttropesofdesigning,planning,andoptimizingthesupplychainwithanewmeta-phorthataccountsforthetransformativepowerofmanagement:thatofdancingthesupplychain’.Thus,echoingseveralofthelong-heldargumentsoftheIMPperspective(FordandHåkansson,2002)andCAS(Choietal.,2001),panarchytheorychallengesthefundamentalassumptionsofthesupplychainasaclosedsystemthatcanbecontrolledbyfocalsupplychainfirms,andwhichcanbemodelledandoptimizedbysupplychainresearchersrootedinindustrialengineeringoroperationsresearch.Thesewidelydifferingviewsofsupplychainstieinwithcurrentdebateaboutthedisciplinaryunderpinningsandidentityofpurchasingandsupplychainmanagement(Ellrametal,2020).CONCLUSIONInthischapterwehavediscussedandproposedfourtheoriesasrelevantforresearchingsus-tainablePSCM.TheseincludetheNRBV,stakeholderandinstitutionaltheories,andtheIMPinteractionapproach.Wecanconcludethatthereareimportantdifferencesbetweenstakeholderandinstitu-tionaltheoriesononeside,andIMPandtheNRBVontheother.Theformertwotheoriesassumeexternalactorstoprovidepressurestothefirmandthereforerequirearesponsetogainlegitimacy;sucharesponsecanbemore‘passive’(asassumedbyinstitutionaltheory)or‘active’(asassumedbystakeholdertheory).Incomparison,thelattertwotheoriesfocusmoreontheinterdependentroleoffirms:inthecaseoftheNRBV,thefirmcanaccessandleverageonexternal(natural)resourcestogainsustainablecompetitiveadvantage;whereasinthecaseofIMPfirmsinteractwithinnetworkssocanaffectandbeaffectedbyothernetworkactors.WheretheNRBVisadevelopmentoftraditionalRBVtheorythatfocusesspecificallyonnaturalresourcesandthereforesustainability,thedomainofIMPisgeneralbusiness-to-businessmarketingandpurchasing,andIMPhasnottraditionallybeenusedtoanalysesustainabilityphenomena.Aswehavenoted,IMPisalsodifferentfromtheothersinthatitsfocushasnotbeenondevelopingpredictiveoutcomes,butratheronprovidingconcep-tualframeworkstoaidanalysisofinterorganizationalphenomena.Therefore,futureresearchonsustainabilityinPSCMcouldleverageonthestrengthsofthesetheoriesandtheircombinationinthefollowingways:1.Extendthescopeofanalysistothemultipletiersofthesupplychainandtherelationshipswithrelevantstakeholders,thusbroadeningtheperspectiveofstakeholderandinstitutionaltheoriesbycombiningthemwiththeIMPapproach.2.Identifyandcomparereactiveandproactivestrategiestorespondandmanagethemulti-plepressuresbyactorsandstakeholderstoachievesustainablecompetitiveadvantageatnetworklevel.3.ExtendtheNRBVapproachtoalsoincludesocialandethicalperspectives,tounderstandhowtheycanbecomesourcesofcompetitiveadvantage,whilebroadeningthescopefromThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

563Ontheoriesforresearchingsustainability545focalfirmstothesupplychain/network.TheSRBVisafirstandverypromisingattemptinthisdirection.ThesefourtheoriesthereforenotonlyhaveprovidedusefulandrichinsightsonsustainabilityinPSCMsofar,butalsoprovidehighpotentialforfurtherresearchdevelopmentinthefuture,inparticularbybroadeningtheirscopeandleveragingonacombinationofmultipletheoriestocomplementtheirstrengthsandovercometheirlimitations.Recenttheoreticaldevelopmentshighlighttheneedtoquestionthetraditionalassumptionsofsupplychainmanagement,whicharebecominguntenableespeciallywhenthefocusisonsustainablePSCM.CASs,ecologicallydominantlogicandpanarchytheoryproposeradicallydifferentperspectives,eitherbyproposingasystemic,decentralized,emergentanddynamicviewofnetworks(CASsandpanarchy),orbyadvocatingaradicalrevisionoftheprioritiestobepursued,definingaclearhierarchywithplanetfirst,peoplesecond,andprofitthirdandlast(ecologicallydominantlogic).Asoftenhappens,radicalideasmaybemoredifficulttotransformintopractice,andmay(andshould)bequestioned,butaresurelyaveryimportantstimulusforinnovationanddevelopment;andthereforetheyarenotonlywelcome,butneces-saryandurgentinthesetimesofunprecedentedglobalchallenges.NOTE1.Whatwerefertohereasthe‘IMPinteractionapproach’isalsocalledthe‘industrialnetworkapproach’(seeChapter21).REFERENCESAlvesson,M.,andSpicer,A.(2019).Neo-institutionaltheoryandorganizationstudies:amid-lifecrisis?OrganizationStudies,40(2),199‒218.Arnold,U.(2000).Newdimensionsofoutsourcing:acombinationoftransactioncosteconomicsandthecorecompetenceconcept.EuropeanJournalofPurchasingandSupplyManagement,6(1),23‒29.Barney,J.(1986).Strategicfactormarkets:expectations,luck,andbusinessstrategy.ManagementScience,4(10),1231‒1241.Barney,J.B.(1991).Firmresourcesandsustainedcompetitiveadvantage.JournalofManagement,17(1),99–120.Barney,J.,Ketchen,D.J.,Jr,andWright,M.(2011).Thefutureofresource-basedtheory:revitalizationordecline?JournalofManagement,37(5),1299–1315.Blankenburg,D.,andJohanson,J.(1990).Managingnetworkconnectionsininternationalbusiness.ScandinavianInternationalBusinessReview,1,5‒19.Blome,C.,Hollos,D.,andPaulraj,A.(2014).Greenprocurementandgreensupplierdevelopment:antecedentsandeffectsonsupplierperformance.InternationalJournalofProductionResearch,52(1),32‒49.Busse,C.,Kach,A.P.,andWagner,S.M.(2017).Boundaryconditions:whattheyare,howtoexplorethem,whyweneedthem,andwhentoconsiderthem.OrganizationalResearchMethods,20(4),574‒609.Carter,C.R.(2005).Purchasingsocialresponsibilityandfirmperformance:thekeymediatingrolesoforganizationallearningandsupplierperformance.InternationalJournalofPhysicalDistributionandLogisticsManagement,35(3),177‒194.Carter,C.R.,Rogers,D.S.,andChoi,T.Y.(2015).Towardthetheoryofthesupplychain.JournalofSupplyChainManagement,51(2),89‒97.ThomasE.JohnsenandFedericoCaniato-9781839104503DownloadedfromPubFactoryat05/28/202209:11:49AMviaColumbiaUniversityLibrary

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568Index4-Iframework434assetorchestration169,172,178,182attractiontheory515,520absorptivecapacity,meaningof128attributiontheory52,72abstraction,levelsof16auctiontheory52–3activities‒resources‒actors(ARA)model360,automaker‒supplierrelationships288361,374autonomousmotivation71actor’sstrategy,determinantsof207axialcoding38adaptationandroutine,conceptof428–31adaptivecycle10,502,503–4,508–10,512,543balanceofpower298,473,482phasesof504–6balancetheory,conceptof297–300adaptiveleadership340bandwagoneffect456adaptivelearning431baseofthepyramid(BoP)businessmodels108,administrativeleadership340111AffordableCareAct(US)18behaviouraleconomics17agencycost51behaviouralpsychology297–8,431agencytheory17,29,51,82,159behaviour-basedmanagement,approachforapplicationinmanagingsupplyrisk192buyer‒supplierexchanges187behaviour-orientedcontract186,190inPSMscholarship187metaphorof187–9inbehaviour-orientedcontract187–9BetterLifeIndex317dependentvariablesin187–9‘beyondgreening’strategies111indomainofsupplychainmanagement186bigdata43,103Eisenhardt’sanalysisof187bigdataanalytics,developmentof484futuredirections193–5biodiversityandclimatecrises511independentvariablesinblockchaintechnology10,100,103,150,162goalconflict193boardsofdirectors157–8informationsystems189–91bondvulnerability457,459–60outcomeuncertainty191BostonConsultingGroup483programmability192BostonConsultingGroup(BCG)matrix474relationshiplength192–3bottom-of-the-pyramid(BoP)project227riskaversion191–2boundedrationality,conceptof249meaningof186Bowersox,Donald352inoutcome-orientedcontract187–9brandcompetition,dynamicsof213inpurchasingandsupplymanagementbreach-of-contractpayments41(PSM)187Burin,RojoGallego170stakeholder317businessagentadaptation406–7ecosystems135,417agent,definitionof212ethics311aggregation,conceptof128marketing360alternativeresources,availabilityof155modelinnovation387ambidextrouslearning434–6,438business-as-usual(BAU)497Americaneconomy,centralcostof122businessrisk473analyticalhierarchyprocess(AHP)484seealsoriskmanagementApple’sSupplyChain211business-to-business(B2B)appropriability,conceptof129exchange267,268,279artificialcomplexsystems399applicationofSETto275artificialintelligence495markets519algorithms387relations516assetmanagement175services,procurementof372550WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

569Index551buyer‒buyerrelationships465Coca-Cola285,288–9buyer‒sellerrelationships268,295,371,479–80coercivepressures321–2applicationofSETto275coevolution,phenomenonof403–4indiscretetransactions276cognitiveandbehaviouralcomplexity226hypothesizedrealmof276cognitivecapabilities,constraintsof97managementof279collaborativeinnovation,IMPresearchin373inrelationalexchange276commitment‒trusttheory,ofrelationshipsocialexchange276marketing278buyer‒suppliersrelationships(BSRs)33–4,51,commoditypricevolatility19153,55,82,159,187,213,250,255,256,commonknowledge,notionof127360,370,374,408,471,502,523communicationchannel463inautomotiveindustry462communitiesofinteraction125biddingbehaviour53communitiesofpractice130bonds56comparisonlevelofalternatives(Cl)518altconflicts30,33compensatorymisfittheory255dyadsin146,195,464competence-destroyinginnovations533exchangesin345competitionnetwork302–3managementof56competition,processtheoryof145organizationalintegrationof258competitivedynamicstheory346socialcapital134complementaryresourceendowments285buyer‒supplier‒supplierrelationshiptriad295complexadaptivesystems(CASs)17,30,64,balancedandimbalancedrelationalstateof302,342,532,542299agents,environmentandsystempropertiesbalancetheoryfor297–300of404structuralholetheoryfor297applicationof407tertiusgaudens296tooperationsandsupplychaintertiusiungens296management337theoreticalfoundationof296–300approachforusageof340–41assumptionsregardingreality338–40capabilitydevelopment,processof172characteristicsof399–400case-basedresearch37–9coevolution,phenomenonof403–4ceremonialconformity320conceptualformulationof336–7channeldistribution213definitionsof336,337,400Chaos:MakingofaNewScience(1987)335dissipativemodelofadaption338chaostheory335exampleof339chiefsupplychainofficer(CSCO)259domainwherethetheoryapplies406–7circulareconomy163,292,391,394modelnetwork-leveldynamismandclassicalindustrialeconomics412interdependencies406cleantechnology108,111tostudyadaptation406–7closed-loopsupplychains161,535futureresearchopportunities341–2,407–8clustertheoryandpurchasingsciencekeyvariablesof336–8,400–401benefitingfromworld-leadingdomesticexample337–8suppliers417–21generalconcepts336–7innovation419mappingoftheBransoncaseinto338location418–19meaningof335riskandresilience419NKCmodelof403strategy419–21NKsimulationdrivenby407constitutionalelementsof412organizational337historyof412–14phenomenonofemergenceandinductivetheoryconstructionbasedonself-organisation401–2412–14rugged/fitnesslandscapemodelofmutuallysupportivelocalisedvaluechainsself-organisation402414–17rulesof336strategicmanagement421–2schemasanditsstatusinsupplychaincoalitiontheoryfortriads298research405–6WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

570552Handbookoftheoriesforpurchasing,supplychainandmanagementresearchsupplychainnetworksas405culmination(learningcurve),notionof426supplychainsas399–408customerportfoliomodels484tinkering,conceptof341customerrelationshipmanagementtechnologycomplexityscience399(CRM)128complexmanagementtheory378customersatisfactionandloyalty182consumerbehaviour,characteristicsof142customer’slifevalue(CLV)484consumerpackagedgoods(CPG)148customer‒supplierrelationships360consumershopping144,213Customs‒TradePartnershipAgainstTerrorismcontingencytheory(C-TPAT)32assumptionsabouthumannature249,250cybernetics63–5avenuesforfutureresearch260–61classical250darkdata43conceptoffitof253–4Darwinianlogicofselection402–3configurationalperspectiveof255–6dataenvelopmentanalysis(DEA)302contingencyvariables251–2datamining43effectivenessof253datavirtualization43focalconceptsof250–51datavisualization43relationshipsof251decisionmaking122,210generic248centralized174,252informationprocessingperspective255,256decentralizationof254levelsandunitsofanalysis249–50inmanufacturingandlogisticsenvironmentmanagerialdecisionvariable252–3406meaningof248operational406organizationdesign252–3organizational32,431originsof248risk-neutralhumanbehaviourin457OSCMresearchbuildingon256–61andsupplychainresilience406relationshipsbetweenthevariables254–6decisionmakingtrialandevaluationlaboratoryresearchon(DEMATEL)485genericcontingencyrelationshipsinthedeclarativeknowledge129broaderOSCMcontext259–60decoupling,conceptof323,329genericcontingencyrelationshipsinthedeepsituationalknowledge,processofgeneratingPSMcontext25839organizationdesigninthebroaderdefenceprocurement485OSCMcontext258–9developingtheory,qualitativedatafor41organizationdesigninthePSMcontextdialogicalsensemaking39257difficult-to-replicateenterprise124SARFIT(structuraladaptationtoregainfit)digitalbusinessmodels394model254digitaltransformation,phenomenonof292structural248,254digitizationanddigitalization,ageof463contractbetweenprincipalandagent,analogyofdisastermanagement316186disasterrelief316,407contractenforcement,costsof50disciplinedimagination,theorydevelopmentascooperativegames,overviewof20031corporatedecisionmaking535discourseanalysis40–41corporategovernance311,445,461Drucker,Peter122–3corporatesocialresponsibility(CSR)42,158,311dyadicrelationship3,25,30,55,63,73,146,COVID-19pandemic10,55,63,73,292,305,194,272,274,286,295,361,446,463,353,391,412,433,495,509,526532,538criticalengagedresearch39–40DynamicAlignmentTMbusinessmodel493–4,criticalorientation39496traditionalengagedresearch39dynamiccapabilitiestheorycriticalorientation39–40inbusinessmodelsdomain384–8criticalresourceacquisition,ideaof157chokepoints379criticaltheory15–16,24conceptof378cryptocurrencies10WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

571Index553dynamiccapabilitiesmicrofoundationsandenvironmental‒financialperformancerelationshipkeystructuraldimensionsof114keystructuraldimensions380environmentaluncertainty51maintainingcompetitivenessenvironment‒strategy‒performancerelationshipbyreconfigurationand175transformation379e-procurementpractices253sensingopportunitiesandthreats379e-purchasingtools258shaping/seizingopportunities379ethicalconduct51emergenceof378ethicalsourcingcodes,adoptionof70impactof387evolutionarybiology400formarketandsupplychaintransformationse-wasterecycling146388exanteinformationasymmetry457,458–9microfoundationsof380exantepayofftransparency459overviewof380executivesuccession157relationshipsandpredictions391–4experiencecurve432relationshipsbetweenkeyvariablesand‘experiential’learning428domains392–3explicitknowledge129inresiliencedomainconversionof129resilience380–83exploitativelearning435insupplychainmanagement383–4exploration–exploitationtensions223inSSCMdomain388–90explorativeandexploitativelearning431–2structuraldimensionsof381–2explorativelearning431,435,436expostobservability,ofhiddenqualityattributesearlysupplierinvolvement(ESI)192457,459e-businesstechnologies292expostsignalconfirmation466eco-efficiency163externalgrandtheories(EGTs)80,90–91ecologicalimpacts,onorganizations156useof81ecologicallydominantlogic543ecologicalnetwork372factormarketmyopia(FMM)348ecologicalresilience503–4factormarketrivalry(FMR)515ecologyresearch,useofpanarchytheoryinapplicabilityof350509–10legalandethical354e-commerce175tobridgethegapbetweenmiddle-rangeeconomicandsocialrewards267,274theoryandgeneraltheory351economicinstability320causesof348economicsustainability543characteristicof349economiesofscale95,291conceptof350economyofgoods123conditionstodrive348economyofinformation123contributiontothesupplychain352ecosystemtheory417defencesagainst354educationalorganization428defined346efficientportfolios473deleteriouseffectsof351egonetwork300,304demand-sidecompetition349electronicbidding,processof53domainof346–7emergence,conceptof65dyadic346emergenttheory,buildingblocksof42asfirm-levelphenomenon352emotionalanxiety224firmsutilizingFMRactivitiesasemotionalcomposure224–5acompetitiveweapon349enablingleadership340–41firmsvulnerableto354enforcementcosts96futureresearchdirections353–6engagedscholarship81,83,88–91asageneraltheoryforsupplychainenterpriseresourceplanning(ERP)126,253management349–53entrepreneurialleadership,‘greatmen’theoryofingeneraltheorystatus351417keyvariablesof347relationshipsamongst347–8WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

572554Handbookoftheoriesforpurchasing,supplychainandmanagementresearchmeaningof345andpurchasing,sourcingandsupplychainpredictionsof348–9management212–14scopeandintensityof355reasonsfor208structureof346Stacklebergmodelof213tenetsof345two-playergamepay-offmatrix209factorymanagement63GeneralElectric(GE)354fairtrade(FT)socialenterprises147generalsystemstheory64,335faith-basedorganizations39Gioiamethodology,fordataanalysis38feedbackloops24globalfoodcommerce303withincomplexsystems64globalsupplynetworks30,317FifthDiscipline,The(Senge)435–6managementof40filière413goalconflict,conceptof193financial–socialparadox226‘good’customer,notionof515FinancialTimes340–41goodtheory12–13,24,74,417firm-baseddecisionmaking65grandtheory16–17,24,29–30,33,43firmlifecycle170,173,174–5,179Grant,Robert123–5fitofcontingencytheory,conceptof253–4‘greening’ofsupplychains161flexibilitystrategy,inthemanufacturingcontextstrategiesfor111259greenpurchasing312foodandlogisticsindustries378greensupplychainmanagement72‘fourresources’(4R)framework365,372grouppurchasingorganizations(GPOs)18–21modelsoffocalconstruct23activities‒resources‒actors(ARA)theoreticaldiscourseon21model363–4interactionmodel360,362–3HarvardBusinessReview(HBR)474networkmodel360hierarchyofsystemslevels64originandevolutionof360–61high-techindustries249usageinpurchasingandsupplymanagementHomans,George268research368Homoeconomicus273viewonbusinessmarketingandpurchasinghospital‒supplierintegration291360humancapital108,134fractals335humanitarianlogistics316franchiser‒franchisee‒customerrelationships194humanitariansupplychains,stakeholdertheoryfree-marketeconomy173,421in316fuzzyboundaries364humanresourcemanagement(HRM)253,445,FuzzyC-meansalgorithm484461fuzzysettheory(FST)485humanresourcepractices36humanresources(HR)465,499gametheory49,52humanrights314applicationsof212Hunt,Shelby151codificationof199HurricaneSandy38goalofusing199keyelementsof200–10idiosyncratictransactions100firstelement202–5industrialagglomerations413fourthelement208–10industrialdistricts413secondelement205–6industrialmarketing268,361thirdelement206–8IndustrialMarketingandPurchasing(IMP)GroupWacker’sfourelements2022,360,374,532‘leHer’game212approachtoresearchonsustainabilityandlevelsofsupplychainanalysis210–12backgroundof538–9machinesascompetitiveactors214–17researchthemesandavenuesfor539meaningof200–202industrialnetworkapproach(INA)player’sstrategy207applicationsofPrisoner’sDilemma207collaborativeinnovation373logisticsanddistributionchannels372WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

573Index555offshoringandinternationalsourcingrelationshipsbetween324371othervariantsoforganizingprocurement371economicvariant327–8publicsectorprocurement373institutionallogics328researchmethods373–4institutionalwork328serviceprocurement372overviewof325strategicroleofprocurement369theoreticalpredictions(factualclaims)324–5supplierbaseconfigurations370usageinoperationsandsupplychainsupplierrelations369–70management(OSCM)325–7conceptualizationof363intellectualknowledge127coreconstructsinintellectualpropertyrights146adaptations366interestgroups310–11,314heterogeneityofresources365interfirmrelationships283interdependencies364–5inter-firmresourcesandroutines169involvementandinterfaces365–6interfirmrivalry346networkdynamics366–7intergovernmentalorganizations(IGOs)305networkembeddedness364InternationalPurchasingandSupplyEducationdomainsandunitsofanalysisof367andResearchAssociation(IPSERA)84informationalfeedbackloop447,453–5InternetofThings(IoT)159informationandcommunicationtechnologiesinterorganizationallearning284,535175,465interorganizationalrelationships154,517,534informationasymmetry446interpretiveresearchphilosophies15information-basedservices301interrelationships,graphicmodelof41informationeconomics446intra-organizationalpractices32informationprocessing255intra-organizationalrelationships194informationprocessingtheory(IPT)53,255inventorymanagement186–7,213informationprocessingview(IPV)257investmentportfolio473,477informationquality148‘ironcage’metaphor,useof532informationquantity148ISOcertifications,adoptionsof324informationsharingandconnectivity260,291,isomorphism70,321,324,327–8,537352informationsystems189–91jobshadowing39informationtechnology(IT)systems326,462,jointknowledgecreation291497,521jointventures133,157,290,300infrastructure,definitionof212JournalofPurchasingandSupplyManagementinnovationpower,ofclustersuppliers419326innovationtheory53–4InstituteforSupplyManagement(ISM)54kaizenprojects228institutionalentrepreneurship,conceptof328Kauffman'sfitnesslandscapeview406institutionalisomorphism321,537keyperformanceindicators(KPIs)231institutionallogics328know-howacquisition291institutionaltheory17,29,54,70knowledgeapplicationof323–4acquisitionof131applyingtoresearchonsustainabilityclassesof127backgroundof537conversionof129–30researchthemesandavenuesfor537–8developmentof34definitionsof321,322economy122futureresearchopportunities328–9exchangeof288keyvariablesin321–3managementof124,378,387,390,394,438coercivepressures321–2mechanismforintegrationof130decoupling323productionof122institutionalisomorphism321sharingof395legitimacy323networks134mimeticpressure322–3routines284–5normativepressures323andtransfer123WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

574556Handbookoftheoriesforpurchasing,supplychainandmanagementresearchsociety122learningprocess(knowledge)426transferof126,134,285,288legalscholarship354typesof127legitimacy,ofinstitutionaltheory323knowledge-basedresources149lifecycleknowledge-basedtheory(KBT)123,135assessment315knowledge-basedview(KBV)426ofpartnerships292applicationdomainsoflinearproductionsystem391knowledgemanagementandlocalisedself-organisation408organizationalcapabilities131–2localtheory18strategicsourcing132–3logisticsanddistributionchannels372supplierandcustomerintegration133–4logisticsmanagement,applicationofSETto277definitionsof118,120–21LogisticsPerformanceIndex(LPI)147developmentof124logisticsserviceproviders148,277,372differencewithorganizationallearninglong-termbusinessrelationships71,146,192,theory(OLT)426360,362,373,391,462,482withindomainsofpurchasingandsupplymanagementmachinelearning214(PSM)118machinelearninganalysis42supplychainmanagement(SCM)118management,applicationofSETin278ofthefirm125management‒unionpartnerships277foundationsof122–3managerialactionfundamentaltenetof118bottom-up174aggregation128top-down174appropriability129managerialpractices,professionalizationof81commitment128manager’sresourceorchestration173commonknowledge127manufacturingeffectiveness,stagesof12explicitversustacitknowledge126–7marginalizedstakeholders40foundations122–3market-basedeconomies145knowledgeconversionmechanismsmarketdiversification173129–30marketgovernance186knowledgeintegrationmechanisms130marketingcapability‒firmperformanceknowledgeversusinformation126relationship148organizationallearning130–31marketingjournals102–3otherknowledgeclassifications127marketingmanagement,portfoliomodelsinrecentdevelopments123–5483–4theoryofthefirm125marketing‒manufacturingintegration,importanceof122performancevalueof259–60overviewof119marketingmixvariables361recentdevelopmentsin123–5marketrivalry350knowledgeindustries,notionof122Markowitz’sportfoliotheory472–3Kraljicmatrix84,87–8,370,476,480,484Marshall,Alfred413overviewofelementsandrelationshipsinMartin,Roger494478Maslow’shierarchyofneeds64strategicrecommendationsandtheirimpactmember‒membernetwork427ondependence481mergersandacquisitions(M&A)157,353–4,445Kraljicpurchasingportfolioapproach474–6metaphoricaltransfer41–2in-depthanalysisof482middle-rangetheory(MRT)17–18advancedguidingprinciplesfor87–91labourmarket355,445,454,461ascomplementarytoborrowingtheoriesand‘leaderashero’meme340engagedtheorization89leadermemberexchange(LMX)278definitionof80,87learningcurve432examplesof84–6learningorganizations130,133,435–6featuresof83–4structureof55intellectualfoundationof80theoryof54levelsoftheoryandthebridgingroleof88WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

575Index557meaningof80–81operationalresearch(OR)542asmodeoftheorization89–91operationsandsupplychainmanagementpositioningPSMresearchas88–9(OSCM)248–9,252,255principlesfortheorizingPSMthrough80,institutionaltheoryusagein325–784,86–7researchbuildingoncontingencytheorysignificanceof81256–61situationalfeatureof90strategiccontingencytheoryof249astheorization90operationsmanagement(OM)63,70mimeticisomorphism322–3applicationofSETto277monitoringcosts96opportunismMorrillActof1962(UnitedStates)123definitionof97–8dependence-induced100Nashequilibrium199,208optimizers473Nash,John199OrderOutofChaos(1984)335naturalRBV(NRBV)531OrganisationforEconomicCo-operationandnaturalresource-basedview(NRBV)106,378Development’s(OECD)317applicationof109organisedcomplexity,notionof64backgroundof533organismicbiologists64toresearchonsustainability533–5organismicbiology63BOPcapabilitywithin111organizationalactivitiesontheecosystem,impactdevelopmentof534of156–7futureresearchopportunities114–15organizationalautonomy354keyvariablesof108organizationalbehaviour(OB)268relationshipsbetweenthevariablesandorganizationalculture,typologyof33theoreticalpredictions110–11organizationaldecisionmaking32,431researchthemesandavenuesfor534–5organizationaldependence,onthenaturalresource-basedview(RBV)and534environment155–6naturalresourcedependencetheory(NRDT)153,organizationaldevelopment431162–3organizationalefficiencyandeffectiveness67historyoverviewof159–60organizationalfinancialperformance160integrativeframeworkof156organizationalhierarchies174theoreticalapplicationsof160–62organizationalinnovationstrategy387theoreticalconstructsof159–60organizationalintelligence425Nestlé285,289organizationalinterdependence160networkdynamics366–7organizationalinterrelationships153networkembeddedness364organizationalknowledge125,427networkevolution,mechanismof297creationof124–6networkinnovation300organizationallearning130–31,140,378,387,networktheory82391,425,426,432,435newlyacquiredknowledge,ideaof128behaviouralapproachin427newproductdevelopment(NPD)258Crossanmodel433–4supplierinvolvementin258defined427nexussupplierindex(NSI)302factorsinfluencingcapacityofannexussuppliers302organization55Nonaka,Ikujiro124fivedisciplinesforcreating55non-governmentalorganizations(NGOs)30,114,literatureonsupplychainandsupply147,227,292,305,532management437normativepressures323processof55,426,433–4Norwegiancoopetitionalliance159theoryof54–5NVivosoftware38organizationallearningtheory(OLT)73,394,426applicationinSCM/PSM438offshoringandinternationalsourcing371conceptualsubsetsto428–36one-producttowns4134-IFramework433–4on-the-jobtraining129adaptationandroutinesstream428–31openrationalsystems249WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

576558Handbookoftheoriesforpurchasing,supplychainandmanagementresearchambidextrouslearning434–6paradoxicalmanagement,theoryandpracticeofexplorativeandexploitativelearning222431–2paradoxicaltensions,notionof221learningcurvesandforgetting432–3paradoxtheoryorganizationallearningasaprocessadvancementof221433–4applicationof225–6Crosson4-Imodel433–4assumptionsof223differencewithknowledge-basedviewcost‒benefitanalysisofcompetingchoices(KBV)426224keyelementsof429–30critical229originsof428definitionsof221overviewof428–36environmentalfociandactorcognition224organizationalpower148futureresearchopportunitiesorganizationalpredictions,ofresourcesupplychaintensionsandactororchestration178cognitions232organizationalrelationships,economictheoriessupplychaintensionsanddesignof157decisions230–31organizationalresearch248supplychaintensionsandnetworkapplicationofROin176structures232organizationalresilience383supplychaintensionsandpowerorganizationalrisks,relatedtomodernslaveryinregimes231powerrelationships41in-rolejobperformance227organizationaltensions,typesof222–3insidePSCM229–30organization,definitionof212keyvariablesin221–3organizingprocurement,INAperspectivein371managementresponses224–5organizingresources,processof169mechanisms221–2originalequipmentmanufacturers(OEMs)298–9outcomesof225OSCMjournals,institutionaltheoryusagein326outsidePSCMoutcome-orientedcontract186,191actorresponsesandcognitiveframesmetaphorof187–9227outcomeuncertainty,notionof187,189,191,194issuesofmanagingparadoxes228paradoxicalleadership228panarchytheoryquestioningtheassumptions229adaptivecycleof503–4sustainabilitytensions228interconnected506reinforcingcycles226–7phasesof504–6relationshipsbetweenthevariablesandapplicationin509theoreticalpredictions226–7ecologyresearch509–10scopeof227managementissues510–11Pareto-optimalsignallingequilibria447supplychainmanagement(SCM)502,partitioncoefficientindex(PCI)484512,543–4partner-tailoredassets284assumptionsabouthumanactors508–9patentsystems146cause–effectrelationships509people,definitionof212cross-scaleandcross-levellinkages508performance-basedcontracting(PBC)189definitionsin504performance-basedlogistics(PBL)189developmentof511personalprotectionequipment(PPE)305ecologicalresilience503–4phenomenon-drivenresearch89futureresearchopportunities511–12philosophicalorientationsholisticanddynamicviewof511notionof14keyelementsof503–8overviewof14levelsof506–7player’sstrategy207scalesof506policy‒practicedecoupling323withtwocross-levellinkages507politicalaction157paradoxicalleadership228polyadicrelationship25poolingequilibria455WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

577Index559Porter,M.E.formationof517clustertheory413–14,417historyof515–16diamondmodelofcompetitiveadvantageimageofman516414–15legalequality/voluntaryexchange516portfoliotheory,forinvestmentmarket-basedinteractions523applicationof473mutualbenefit516domainfor476purchasingimplicationsandfutureresearchininvestmentandfinancialmanagement523–7482resourceheterogeneity516inmarketingmanagement483–4resourcescarcity517inpurchasingandsupplymanagementTheoryX-basedprincipal‒agenttheory523483andWacker’stheorycriteria521–3instrategicmanagement483preferredsuppliers,identificationof526insupplychainmanagement483principal‒agentrelationships,inasupplynetworkassumptionsandtheoreticalfoundation194480–82Prisoner’sDilemma201,207–8critiquesandsupport478–80proactivelearning431determinationofrisk473problemsolving523efficientportfolios473proceduralknowledge129futureresearchopportunities485–6process,definitionof212historyofpurchasingportfoliomodels474procurement,strategicroleof369keyconceptsanddefinitions471product-as-a-servicemodels394Kraljicportfolioapproach474–6productdesigninnovation228managementproblems471productdevelopment192,211,301,373,415,Markowitz’sportfoliotheory472434originof471,472productinnovation34,134,260,280rateofreturnfor472productionefficiency432relationshipsbetweenthevariables477–8productionmanagement63relevanceforpurchasingandsupplyproductlifecycle260management473–4productportfoliomodels484usageinproduct‒processmatrix12,33purchasingandsupplymanagementproduct’sprocessnetwork303484–5productstewardship108,532supplychainmanagement484–5profitmaximization,goalof94positivistorientation14–15programmabilityoftask192post-industrialsociety123‘progressive’learning428powerdependencetheory55–6projectmanagement,constructionof213powerimbalancebetweenfirms352propertyrights,transferof186power,roleof154public‒privaterelationship70practicalknowledge127publicsectorprocurement373practice‒performancerelationships261purchasingandsupplymanagement(PSM)1–2,predictions,theoryof24–513–14,16–17,24,63,80,148–9,186,452preferredcustomermatrix526agencytheoryin187preferredcustomership,cycletheoryof515,applicationofOLTin438516–20biddingprocessin53preferredcustomertheorybusinessfunctionsof194applicationof517definitionof36attractivenesscube525gametheoryand212–14awarenessofcost‒benefit516groupsofpractices35–6comparisonlevelofalternatives517,522historicaloverviewof48–9conceptof515influenceonbuyerperformance35cycleofattractiveness516–20,522interdisciplinaryandmultidisciplinarydefinitionofterms522researchin48empiricalfindingsincludingbenefitsofneedfortheoryuniqueto29–30520–21portfoliotheory,relevanceof473–4WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

578560Handbookoftheoriesforpurchasing,supplychainandmanagementresearchpractice-basedview(PBV)32qualitymanagement187–8,190,259,445,461asprofessionandtheory81–4reasonsfor29rareearthelements(REEs)161resource-basedtheory(RBT)32,36rawmaterials,availabilityof161SCpracticeview(SCPV)32reciprocity,conceptof269social/environmentalsustainabilitycriteriarecurrentbusinessrelationships51952regionalagglomeration,ofeconomicactivitiesstakeholdertheory(ST)in315412suggestedtheoriesandexamplesof58regionalclusters,resource-basedviewof420supplier-induceddisruptions31–2regulatoryfocustheory(RFT)73supplymarketsandresourceconstraints30relationalexchangetheory(RET)56theoreticaldevelopmentof48–9relationalrents,conceptof292theoreticalframeworksof48relationalsentiments,balanceof298theoriesbytimeperiod49relationalview(RV)theoriesusedoutside71–4applicationof286–8theorybuildingapproachesdefinitionsof283–6,287case-basedanalysis37–9dynamicmodelof289criticalengagedresearch39–40futureresearchopportunities292–3discourseanalysis40–41keyvariablesof283–6metaphoricaltransfer41–2complementaryresourcesandtopicmodelling42–3capabilities285theorydevelopmentasdisciplinedeffectivegovernance285–6imagination31knowledge-sharingroutine284–5theoryenhancementapproachesto31–7relationshipsbetween288conceptualtheoryenhancement32–3relation-specificassets284systematicliteraturereview34–7levelofanalysisin291typologies33–4meaningof283underutilizedtheoriesandafutureresearchoverviewof286agendatheoreticalpredictions(factualclaims)attributiontheory52289–90auctiontheory52–3forunderstandingstrategicalliances290informationprocessingtheory53relationshiplength,notionof192–3innovationtheory53–4relationshipmarketing,commitment‒trusttheoryinstitutionaltheory54of278organizationallearningtheory54–5relation-specificassets284,288,290powerdependencetheory55–6religiousknowledge127relationalexchangetheory(RET)56researchanddevelopment(R&D)practices36resourceorchestrationtheory(ROT)57researchingsustainability,theoriesfor531socialnetworktheory(SNT)57–9applyingIMPinteractionapproachtouseof36backgroundof538–9widelyusedtheoriesandtheirapplicationsresearchthemesandavenuesfor539agencytheory51applyinginstitutionaltheorytoresource-basedview(RBV)50–51backgroundof537transactioncosteconomics(TCE)50researchthemesandavenuesfor537–8within-caseanalysis38applyingstakeholdertheorytopurchasingandsupplyorganization(PSO)252backgroundof535–6purchasingcapabilities,effectivenessof485researchthemesandavenuesfor536purchasingmatrixportfolioanalysis85applyingtheNRBVtopurchasingportfoliomodels474,477–80,483,backgroundof533484–5fromtheRBVto534purchasingprocessmodel84,86,88researchthemesandavenuesfor534–5newpotentialtheoriestoqualitativedata13,37–8,41complexadaptivesystems(CASs)542qualitativeempiricaldata13ecologicallydominantlogic543qualitycontrol50,190–91panarchytheory543–4WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

579Index561socialresource-basedview(SRBV)relationshipsbetweenthevariablesand541–2theoreticalpredictions110researchontriads,summaryof296theoryof29,35–6,49reshoring,ideaof418resourcedependencetheory(RDT)480resilienceapplicationsof158–9conceptof380–83bufferingaspects158ecologicaldefinitionof503complexityof179supplychain408conceptof153resourceadvantages,characteristicsof150onconnectionbetweeninterdependenciesresource-advantage(R-A)theoryandthetransitioningphase158applicationof148definitionsof154conceptualframeworkof140developmentsof159definitionsof141–4foundationof157domainwheretheoryappliesandlevelsoffutureresearchopportunities162–3analysis145–7historicaloverviewof157–8dynamicsofcompetitivepositionsoftradingintegrativeframeworkof156regions150oninterorganizationalrelationships157feedbackloopsin150keyvariablesin154–7firm-versus-firmlevelofanalysis146availabilityofalternativeresources155futureresearchopportunities149–50criticalityofresources154heterogeneityofdemand142ecologicalimpactsonorganizations156interdisiplinaryusesoforganizationalecosystemdependencemanagement147–8154–5marketing148organizationalimpactsontheecosystempurchasingandsupplymanagement156–7148–9power154supplychainmanagement149inrelationtothedistributionofcriticalkeyassumptionsof147resources157keyvariablesof141–4theoreticalconstructsof157–8externalfactors144resourceinnovation172financialperformance144resourcemanagement169–70,182marketplacepositionof142–3resourceorchestrationtheory(ROT)57,74organizationalresources141–2applicationofrelationshipsamong144–5domainfor175–6tenetsof148inorganizationalresearch176useof141withinSCM176–7resourceallocation52summaryof177resource-basedtheory516categoriesofmanagerialactivities169resource-basedview(RBV)50–51,82,123,141,choreographyof182–3145,168,283,291,315,346,378,426,definitionsof169531evolutionof180–83applicationof109firm-levelfocus176approachforusing112–14futureresearchopportunities179–80‘capabilitybuilding’theories108historicaldevelopmentof168definitionsof107–8keyvariablesof169–72developmentsof107assetorchestrationactivities172evolutionaryversionsof108relationshipsbetween175futureresearchopportunities114–15resourcemanagementactivities170–72Grant’sworkon124inorganizationalresearch176keyvariablesof107–8overviewof170naturalresource-basedview(NRBV)andresearchissuesidentifiedbySirmon180534strategicdeterminantsofneoclassicalviewof108breadth173positioninginevolutionaryeconomics107depth174firmlifecycle174–5WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

580562Handbookoftheoriesforpurchasing,supplychainandmanagementresearchtenetsof177signallingentities,multiplecompeting460theoreticalpredictionsof177–9signallingequilibria455–6directorganizationalpredictions178signallingtheory445–66directSCMpredictions178adoptionforpurchasingdecisions445moderatinggeneralpredictions178–9applicationof457,462–3moderatingSCMpredictions179bandwagoneffect456‘resource-picking’theories108conditionsforapplying458resourcesdefinitionsin446criticalityof154domainwherethetheoryapplies461heterogeneityof365futureresearchopportunities463–6scarcityof517informationeconomicsand446sharingof291keyconditionsandassumptions457–61restrictedsciencesofphysicsandchemistry64keyconstructsof448–51reverseauction(RA)overviewof464defined53keyvariablesin446–57popularityof53informationalfeedbackloop453–4reversemarketing,ideaof515signalconfirmation453risk-aversereceivers457signallersandreceivers452riskaversion,notionof191–2signallingcosts453riskavoidance159signallingenvironment456–7riskmanagement158–9,187,383,421signallingequilibria455–6riskmitigationsignalsandindices452–3collaboration-based159theoreticalpredictions461–2monitoring-based159Simmel,George296–7risk-neutralhumanbehaviour,indecisionmakingSimon,Herbert97457smallandmedium-sizedenterprises(SMEs)70robotics53,150,495small-talkandpastimeknowledge127Smith,Adam122salesandmarketingagency(SMA)148WealthofNations,The(1776)122salesandoperationsplanning(S&OP)processsocialamenities267259socialandtechnicalsystems,jointoptimizationscholarshipof495ofapplication82socialbehavior,theoriesof267Boyer’sviewof82socialbusinesses111ofintegration82socialcapital134legitimacyinPSM91theoryof291self-determinationtheory(SDT)71socialconstruction,theoryof15self-enforcinggovernancemechanisms286social-ecologicalsystems502,503self-organisationsocialentrepreneurship114phenomenonof402socialequity,principleof292processof402socialexchangetheory(SET)56,515,517,523rugged/fitnesslandscapemodelof402–3applicationof274self-organisedcoevolution400inB2Brelationship275Senge,Peter55tobuyer‒sellerrelationships275service-dominantlogic(SDL)372assumptionsof273–4serviceprocurement,INAperspectivein372comparisonlevel272servicequality300comparisonlevelforalternatives272–3sheepskineffect447,461costs271–2ShellOilcorporation158credit/indebtedness272ShermanAnti-TrustAct354dependence273signalconfirmation453indomainsofsignalenvironment456–7B2Brelationships268signallingcosts453organizationalbehaviour(OB)268inverselyrelatedtoquality460exchangerelationships270signallingcycles,repeated460infieldofbusinessresearch268WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

581Index563futureresearchopportunities279–80relationshipbetween314–15inlogisticsmanagement277levelsofanalysis313–14inmarketing278originsof310inoperationsmanagement277overviewof313overviewof269,270inpurchasingandsupplychainmanagementinpurchasingandsupplymanagement276–7315relationalnorms273researchthemesandavenuesfor536relationshipsbetweenthevariables274–5forstructuringandmanagementofsocietalrewards271problems310rulesofreciprocity272StandardOil354theoreticalframeworkof267start-upbusinesses388theoreticalpredictions(factualclaims)275–6statisticalparsimony,notionof207socialinquiries401strategicfactormarkets533socialknowledge127strategicmanagement425sociallegitimacy534StrategicManagementJournal124sociallyconsciouspurchasing463strategicmanagementtheory310,515,517sociallylegitimatedrationalizedelements324ofmulti-businessportfolios483socialnetworktheory(SNT)17,30,57–9,291,portfoliomodelsin483303,532structuralembeddedness,conceptof304socialpsychology72,267structuralholetheory297socialrelationships40structure‒conduct‒performance(SCP)modelssocialresource-basedview(SRBV)532,541–2107applicationof110supplierbaseconfigurations370contributionof111supplier‒distributorrelationships188futureresearchopportunities114–15supplierperformanceimprovement280keyvariablesof108–9supplierrelations369–70relationshipsbetweenthevariablesandsupplierresourcemobilization526theoreticalpredictions111–12suppliersatisfaction516–20sharedTBLvalue111suppliers’dependence,onsuppliertrainingandsocialcapabilitiesof106participation159stakeholdermanagementcapabilities111supplier–supplierrelationships295–6,465socialresources,elementsof148supplychain57,293,295,464,502,509socialselection,problemsof461Apple’sSupplyChain211socialsustainabilityassessmentinitiatives329closedloop161socialsystemdesign492cluster-orientedreconfigurationof419socio-ecologicalsystems(SESs)153,160ascomplexadaptivesystem(CAS)399–408spiritualknowledge127asdyadicbuyer‒supplierrelationship30,146spousalalimony41dyads29stakeholderagencytheory317asdynamicsocio-technicalsystems491–500stakeholdernetwork114approachforusing499stakeholderresourcedependence317definitions493stakeholdersdomainwherethetheoryapplies495‘instrumentalview’on314DynamicAlignmentTMmodel493–4,managementof158496salience312futureresearchpossibilities499–500stakeholdertheory(ST)70keyvariablesanddefinitions491–4applicationtoresearchonsustainabilityoverviewof494535–6relationshipsbetweenthevariablesdefinitionsof311,312495–7diversityof536socialsystem492domainsforapplicationof311technicalsystem491–2FriedmanvsFreeman310theoreticalpredictions497–9futureresearchopportunities317worksystem492–3inhumanitariansupplychains316end-to-end313keyvariablesof311–13finance10WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

582564Handbookoftheoriesforpurchasing,supplychainandmanagementresearchgoalalignmentandincentivesin189structure,positionandperformance300–301governancestructures172USdomesticfoodflows301,304‘greening’of161supply-sidecompetition348,350,352,356inefficienciesin277surrogatebuyers22interorganizationallevelsin250sustainability,paradoxicaltensionsof228lengthandcomplexityof199sustainabilitytensions228inmarket-basedeconomies146sustainabledevelopment389,532partnerdevelopment390socialaspectsof111relationships19,30SustainableDevelopmentGoals(SDGs)resilience408adoptionof159riskmanagement158sustainablesupplychainmanagement(SSCM)strategiesfor511114,378,532scholarship193,195defined389significanceof159dynamiccapabilitiesin388–90socio-technicalcharacteristicsby498theoreticalapplicationsfor378technologies492systematicliteraturereview(SLR)34–7triadsandnetworks194stepsinconducting35Unilever511systemslevels,inPSCMresearchandpracticesupplychainanalysis,levelsof210–1265–71supplychainchoreography,natureof183systemsthinking63,64–5,67supplychaininterdiction348–51,354–5supplychainmanagement(SCM)1,29,63,tacitknowledge118–19,124–7,129–31100–101,140,149,153,176,186,257,targetedmarketsegments,identificationof384283,296,311,323,345,378,426,534Taylor,Frederick123agencytheoryand186TechnischeHochschuleDarmstadt123applicationoftertiusgaudens296–7,305organizationallearningtheory(OLT)tertiusiungens296,305438relationalstrategy297resourceorchestration(RO)176–7theoreticalproductions,accuracyof25framingof211theoreticalpropositionspanarchytheoryof502,543basicandadvanced21predictionsofRO178basicbuildingblockstoresiliencein383addamoderatorormediator21–2supplychainnetworks400addanantecedentoroutcome22–3ascomplexadaptivesystem(CAS)405changeanantecedentoroutcome20–21supplychainpartners,evaluationofcurrentcreateachainoftheoreticalpropositionsabilitiesof39023supplychainresilience391basicbuildingblockstocreate20–23conceptof383X-focused20supplychaintensionsY-focused20,21actorcognitions232theorydesigndecisions230–31advancedbuildingblocksofnetworkstructures232domain23–4powerregimes231predictions24–5supplymanagement295,369buildingblocksofsupplynetworks300–303basicbuildingblocks18–19archetypesof301–2constructs19ascompetitionnetwork302–3relationships19–20ascomplexadaptivesystems302usingbasicbuildingblockstocreateconceptof341theoreticalpropositions20–23asegonetwork300atdifferentPSCMsystemslevels67–71evolutionof305goodtheory13,24nexussuppliers302levelsof17researchopportunities303–5meaningof13resiliencyof303theory-drivenresearch12WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

583Index565typesofopportunitiesforfutureresearch103–4criticaltheory15–16overviewof98grandtheory16–17theoreticalpredictions(factualclaims)interpretivism1599–100levelsofabstraction16theoryofshort-termoptimization531localtheory18transactioncostsmiddle-rangetheory17–18analysisof82philosophicalorientation14forbuyersandsuppliers96positivism14–15forconductingbusiness96–7theory-centrictheorizing90typesof96theory-constitutivemetaphor41seealsotransactioncosteconomics(TCE)theoryofthefirm,conceptof125transactivememorysystems427TheoryX-basedprincipal‒agenttheory523transferabilityofknowledge,betweenindividualsthird-partylogisticsproviders(3PLs)177,346119three-dimensional(3D)printing495triplebottomline(TBL)106,114,534,541TimeWarner353TurnerBroadcasting353topicmodelling42–3totalqualitymanagement(TQM)248,259UnitedNationsSustainableDevelopmentGoalstrademarkprotection14641traditionalengagedresearch39unwantedknowledge,notionof127transactioncosteconomics(TCE)16,29,49,50,urbanplanning50370–71,187,286,288,295,531applicationof98valuable,rare,inimitableandnon-substitutableinmanagementliterature102(VRIN)32,168–9inmarketing102–3value-addedproducers(VAPs)38inpurchasingandsupplymanagementvaluechains419(PSM)100–101mutuallysupportive414–17insupplychainmanagement100–101partnernetworkdesign111assumptionsregardinghumannaturevaluecreation52,109–11,148,150,169,172,boundedrationality94,97182,283,290,346,394,416,517,520opportunism94,97–8virtualintegratedcompany279automationanddigitizationof95virtuouscycles175,224,226,228,232bargaining96VolkswagenDieselgatedebacle229classificationof50volume‒varietymatrix259considerationfor96–7vonBertalanffy,Ludwig64,335framingofriskanduncertainty104impactoftransactionfrequencyandWacker’smodeloftheorybuilding417investmentsongovernancestructureWhitworth,Joseph122100within-caseanalysis,codingof38keyvariablesin94–7workforcemanagementpracticesandassetspecificity95–6performance259definitionsof95WorldBank’sLogisticsPerformanceIndex(LPI)frequencyofthetransaction94–5147relationshipsbetween98–9WorldHealthOrganisation(WHO)65uncertaintyandcomplexity96WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary

584WendyTate,LisaEllram,andLydiaBals-9781839104503DownloadedfromPubFactoryat05/28/202209:11:52AMviaColumbiaUniversityLibrary