Supply chain governance mechanisms, green supply chain management, and organizational performance

As environmental sustainability has become an important competitive source, implementing green supply chain management (GSCM) is now a concern for most business organizations. More recently, firms are being increasingly pressured to consider environmental issues in their supply chains. A growing number of organizations realize that to simultaneously achieve their environmental goals and competitive advantage, they need to manage their supply chain with green initiatives by looking beyond their own facilities. Building strong collaboration routines with suppliers has become a critical factor for implementing and maintaining the green management strategy. Also, green products developed through collaboration between suppliers and manufacturers are a source of sustainable competitive advantage. However, some suppliers hesitate to comply with green initiatives, because they require a substantial amount of investment. It can be difficult to induce suppliers to make focused investments, because there is a great deal of risk involved. Previous research has also acknowledged the importance of GSCM. However, the structure that enables the firm to develop a good partnership to successfully adopt GSCM is not well researched. Thus, this study addresses the question how to design governance mechanisms (i.e., formal and relational) between partners to coordinate resources and mitigate the risk of opportunistic behavior for green supply management. This study empirically examines the causal relationship between the governance mechanism and 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 and relational governance is suited to the knowledge sharing side in green management. Implications from the result of this study can shed new insights as to how choice of governance mechanisms affects GSCM performance and thus the firm\u27s competitiveness