Achieving risk resilience in an environment of mistrust: supply chain piracy of physical goods

Abstract

PurposeThis paper investigates how companies become resilient to supply chain (SC) piracy through using transactional and relational governance mechanisms to develop strategies effective in environments characterized by weak regulative institutions and mistrust.Design/methodology/approachThis study developed case studies of nine large manufacturers with operations in Brazil.FindingsThe companies employed transactional and relational governance mechanisms to learn from past incidents, anticipate, and respond to the threat of SC piracy, becoming more resilient over time. Transactional governance mechanisms reduced risk triggers through technology, while relational governance mechanisms enhanced trust between SC and non-SC members, allowing the members to build social capital.Practical implicationsThe authors provide practical guidance for managers and policymakers in developing risk management strategies based on technology and collaboration to reduce SC piracy in environments characterized by mistrust.Social implicationsSC piracy is a serious problem for global operations and SCs in many low-cost manufacturing locations. Besides the cost and service level consequences, the authors also highlight worker safety consequences, including the potential for kidnapping, psychological trauma, injuries, and death.Originality/valueThis study focuses on the little-researched topic of SC piracy. The authors examine the negative effects of a weak institutional environment, while most prior research focuses on the positive effects of a strong institutional environment. The authors position transactional and relational governance mechanisms as essential elements of SC risk resilience.