Risk and Visibility in Global Supply Chains: An Empirical Study

Working with international suppliers in global supply chains, manufacturing firms now are faced with substantial supplier risks which could be triggered by disruptions in either their suppliers or the supplier’s market. Reactive actions to the risks, however, have usually been shown to be inefficient and sometimes ineffective. In this dissertation, therefore, I develop a theoretical framework linking some key relationship-specific capabilities to supplier risk. My contention is that the capabilities, when developed, can help proactively mitigate the risk. Thus, the model in this study is grounded in the resource-based and the relational views. In this study, the survey method has been employed to collect data from 66 manufacturing firms in the United State who are sourcing from international suppliers. Procedural and statistical methods have been employed to guard against typical empirical issues including non-response bias, common method bias, and problems in validity and reliability of measurement instruments. Structural equation modeling with partial least squares was employed to test the model with bootstrapping to estimate t-values for the paths. The analysis results showed support for the model. A conclusion from the study is that visibility is the critical relationship-specific capability that needs to develop for buying firms to mitigate supplier risk proactively. This is because it may not be substitutable by other mechanisms like goodwill trust, and other capabilities, including absorptive capacity and IT integration, will only operate via visibility to influence risk performance. Moreover, visibility is a significant capability that helps mitigate risk regardless of the relationship duration between the buyer and the supplier and of the market conditions under which the supplier is working. This study thus adds to the risk literature with discussions of supplier risks. Nuances have also been added to the resource-based and relational views by developing the theoretical relationships among the identified capabilities and by examining the contextual conditions under which the relationships are working to mitigate supplier risk. Managers from both sides of a dyadic relationship may benefit from the study by utilizing the tools and the study results to monitor and mitigate supplier risk