The role of contractual and relational governance for the success of digital traceability: Evidence from Chinese food producers

Abstract

Digital traceability (DT), as an important application of technology in the supply chain visibility field under digital transformation in manufacturing, is critical for food producers to guarantee food safety. The success of DT requires closer collaboration among all supply chain members. A big challenge for food producers is that most supply chain members show a disinclination to participate in DT initiatives. The involvement of participants through effective governance approaches oriented around the supply chain—either via formal contracts or informal relational governance—is therefore needed. Unfortunately, the way in which food producers can facilitate the success of DT through such governances is still unclear and lacks sufficient studies. Drawing upon the transaction cost theory and relational exchange theory, this study develops a conceptual model assuming that the contractual governance food producers adopt over their supply chain members can promote the success of DT, and the relationship between contractual governance and DT success is contingent on relational governance. The hierarchical regression method is employed to test hypotheses based on survey responses from 280 Chinese food producers in four provinces with national demonstration projects for the digital technology-enabled traceability system. The statistical results demonstrate that contractual governance has an inverse-U curvilinear effect (from positive to negative) on DT success. Moreover, relational governance moderates the impact of contractual governance on DT success. Specifically, a high level of relational governance mitigates the negative impact of contractual governance, and the joint use of relational governance and contractual governance could facilitate successful DT—but only in cases with higher relational governance. This study contributes to the literature by applying two theories to reveal how food producers can drive DT success through the adoption of governance approaches. It also provides useful managerial implications for food producers to effectively employ both types of governances over their supply chain members to achieve large-scale successful DT. • Involvement of supply chain (SC) members is needed for digital technology (DT). • We study how food producers promote DT success through governance over SC members. • Hierarchical regression analysis is employed to test hypotheses using 280 samples. • Contractual governance has an inverse-U curvilinear effect upon DT success. • Relational governance moderates the impact of contractual governance on DT success.