The effects of supply chain collaboration on performance and transaction cost advantage: The moderation and nonlinear effects of governance mechanisms

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A buying firm attempts to seek economic and social benefits through supply chain collaboration. Successful collaboration is predicted not only to strengthen a buying firm performance but also to reduce transaction costs. Establishment of an appropriate governance is of a great help in stabilizing a relationship and strengthening performance. Therefore, this study aims to identify underlying factors that constitute collaboration and transaction cost advantage, to explore effects of supply chain collaboration on firm performance and transaction cost advantage, and to examine the moderation effect of governance mechanisms in the proposed relationships. Data were obtained via a web survey of Korean manufacturing firms across different industry sectors. Confirmatory factor analysis was performed to assess the unidimensionality, reliability, and validity of a large-scale survey and hierarchical regression analysis was conducted for the hypotheses testing. The results indicated that supply chain collaboration leads to better firm performance and transaction cost advantage and that performance results in transaction cost advantage. A further analysis of the moderation effect of governance mechanisms indicated that firm performance with contractual governance yields better transaction cost advantage and that supply chain collaboration with contractual governance results in better transaction cost advantage than with relational governance. The findings contribute to the supply literature by providing theoretical and empirical implications. In theory, various collaborative practices in the supply chain and types of transaction cost are identified. Valid and reliable scales are also confirmed through successive stages of measurement analysis. In practice, clear definition of supply chain collaboration offers guidance in designing appropriate and effective collaborative activities which can result in a better performance. Managers are also advised to identify contexts in which either a contractual governance or a relational governance can be best utilized.