Benefiting from supplier business continuity: The role of supplier monitoring and buyer power

Abstract

Firms are relying on comprehensive risk and disruption management strategies such as business continuity management (BCM) to help mitigate risk and minimize the effects of disruptions. However, when suppliers' implementation and use of BCM (S-BCM) can be improved and whether S-BCM is beneficial to the buyer has yet to be theoretically and empirically assessed. We use a multi-method research effort to determine whether emphasizing S-BCM is beneficial to buyers. In Study 1, we use data from 150 managers collected via a survey-based questionnaire. Study 1 aims to determine whether buyers' adoption of monitoring supplier operational performance (MS-OP) and monitoring S-BCM (MS-BCM) enhances S-BCM implementation and use. Evidence suggests that MS-BCM is more effective than MS-OP. Moreover, the results suggest that while buyer's coercive power positively augments the effectiveness of MS-BCM, it actually has a diminishing effect on the effectiveness of MS-OP. In Study 2, we use the data of 114 managers from a vignette-based experiment to determine whether S-BCM leads to improved buyer operational and financial performance. Study 2 offers evidence of a positive link between S-BCM and buyer operational and financial performance. The results also suggest that the use of reward power further augments the association between S-BCM and buyer performance.