Supply chain disruption response and recovery: The role of power and governance

Abstract

How buyer-supplier relationships manage and recover from periods of distress is a critical managerial challenge. We examine this issue specifically by looking at buyer-supplier relationships that are recovering from a supply chain disruption. Governance studies have been central in the supplier management literature for some time, and we are motivated to understand the role of governance for relationships in distress and the impact of power dynamics in this context. We explore the impact of contractual and relational governance on disruption response and recovery and examine the moderating role of power that the buyer might leverage over their suppliers following a disruption. Power is conceptualised as threat of coercion and promise of reward, and thus reflects the two contrasting dimensions of power. Addressing common concerns with single respondent surveys, we used a cross-sectional survey to collect matched pair data from 239 US manufacturers and examined the dyadic perspectives of both buyers and suppliers, analysing the data using hierarchical OLS regression. We found that contractual and relational governance both enhance disruption response and recovery by encouraging supplier cooperation. We also report that threat of coercion from the buyer, and the promise of reward for a supplier, is not effective in reinforcing the positive impact that contractual governance has on disruption response and recovery performance. However, we find that the promise of a reward does enhance the effectiveness of relational governance in improving the response and recovery.