Supply Chain Governance Mechanisms, Green Supply Chain Management, and Organizational Performance

Sang M Lee,Donghyun Choi

doi:10.3390/su132313146

Abstract

While firms understand that implementing green supply chain management (GSCM) is important, they seem uncertain about how to manage their green initiatives by looking beyond their own facilities. Building a green supply chain requires the participation of all partner firms across the supply chain. However, partner firms are different in size, situation, capabilities, and even industries. Thus, encouraging them to participate in green initiatives is difficult. Many small and medium enterprises (SMEs) hesitate to comply with green initiatives as they require a substantial amount of investment. This study empirically examines the causal relationship between the partnership governance mechanism and the success of GSCM. Based on transaction-cost economics theory (i.e., opportunism) and relational perspectives (i.e., trust) as the theoretical background, this study found that governance mechanisms between suppliers and manufacturers are positively related to GSCM performance. It showed that formal governance is important in the process-management side, while relational governance is critical for sharing knowledge in GSCM. The implications of the study results provide strategic insights on how the choice of governance mechanism affects GSCM performance and thus a firm’s competitiveness.

Highlights

Many countries around the globe have enacted environmental regulations to minimize harmful output and operational processes
Many businesses have joined the “green movement”. This movement emphasizes the importance of green supply chain management (GSCM), which has brought a great deal of risk to those firms that fail to manage their suppliers for green operations [1]
The primary focus of this study is to investigate the following research questions: (1) How can choices between the formal transactional mechanism and the relational mechanism mitigate the risk of investing in green systems for the partners? (2) What is the impact of the chosen governance mechanism on organizational performance for the partners?

Summary

Introduction

Many countries around the globe have enacted environmental regulations to minimize harmful output and operational processes. Many businesses have joined the “green movement”. This movement emphasizes the importance of green supply chain management (GSCM), which has brought a great deal of risk to those firms that fail to manage their suppliers for green operations [1]. In today’s dynamic market environment, especially in the current COVID-19 pandemic crisis, collaboration between original equipment manufacturers (OEMs) and suppliers for developing and sustaining an effective supply chain is imperative, as it is aimed at not just reducing costs through process innovation and becoming environmentally friendly to fulfill their social responsibilities [2,3,4,5].

Results

Discussion

Conclusion