JED, Vol. 18, No.3, December 2016, pp. 87-107
Shaping Supply Chain Governance
Abstract:The production process is becoming more complex and involving multiple companies and
countries. A lot of research has focused on how these activities are coordinated and how interfirm
transactions are governed. However, the existing literature is neither complete nor clear
enough to understand how external and internal factors influence the shaping of a firm’s choice of
mechanisms to govern transactions along the supply chain. Building from the existing literature,
this paper proposes a conceptual model with two dimensions. The dimension of determinants
includes three components: institution environment, industry structure and transaction
characteristics. The dimension of governance patterns consists of five mechanisms a firm may
use to govern its economic transactions along the supply chain: market contract, production
contract, relational contract, relational production contract, and hierarchy. The paper provides
prescriptions for the firm’s choice among five supply chain governance patterns under different
conditions of the above three components of determinants.
Keywords:Governance pattern; determinant; supply chain; transaction cost.