The Decision of the Supply Chain Executive to Support or Impede Supply Chain Integration: A Multidisciplinary Behavioral Agency Perspective

Abstract

Applying the behavioral agency model developed by Wiseman and Gomez-Mejia (1998), this paper analyzes human resource factors that induce supply chain executives (SCEs) to make decisions that foster or hinder supply chain integration. We examine two internal sources - compensation and employment risk - and one external source - environmental volatility - of risk bearing that can make SCEs more reluctant to make the decision of promoting supply chain integration. We argue and empirically confirm the notion that an employment and compensation system that increases SCE risk bearing reduces the SCE´s willingness to make risky decisions and thus discourages supply chain integration. We also reveal that this negative relationship becomes stronger under conditions of high environmental volatility. In addressing the “so what?” question, we find empirical support for the hypothesis that supply chain integration positively influences operational performance. Even though this decision has positive value for the firm, we found that SCEs discourage supply chain integration when they face higher risk bearing. Hypotheses are tested using a combination of primary survey data and archival measures in a sample of 133 Spanish firms.