Inter-organizational relational mechanism on firm performance. The case of Australian agri-food industry supply chain
| DOI | https://doi.org/10.1108/IMDS-03-2016-0093 |
| Pages | 1934-1953 |
| Date | 16 October 2017 |
| Published date | 16 October 2017 |
| Author | Nasir Uddin |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
Inter-organizational relational
mechanism on firm performance
The case of Australian agri-food
industry supply chain
Nasir Uddin
Department of Information Science & Library Management,
University of Rajshahi, Rajshahi, Bangladesh
Abstract
Purpose –The purpose of this paper is to explore how structural and economic issues of organising inter-
firm relationships influence a supply chain (SC) performance, by using the insight of organisational theories
and institutional economics.
Design/methodology/approach –The study is an exploratory field study in the Australian agri-food
industries.Using a conceptual model anda set of semi-structured interviewquestions, data collectionwas done
through in-depthinterviews with eight agri-food firmsfrom the agri-food SCs in Western Australia (WA).
Findings –The findings demonstrated the requirement of higher coordination and integration from the
downstream industries to include upstream producers as the integral part of the SC.
Research limitations/implications –The study is based on eight in-depth interviews on cross-sectional
food SCs in WA and generalises the result for the overall food industry in WA.
Originality/value –The study provides valuable information to the existing literature on industrial
management and has important value to the users of agri-food SCs. It provides empirical evidence of the
factors of SC performance for agri-food producers, processors and retailers, other stakeholders and
government agencies for their planning and benchmarking.
Keywords Western Australia, Supply chain management, Agri-food industry, Buyer-supplierrelationship,
Relational mechanism
Paper type Research paper
Introduction
Business transactions are conducted in interactive communication processes between two
partners, seller and buyer, and their decisions upon the continuation of the transaction
process (Stölzle, 1999). Therefore, a significant part of supply chain (SC) management
literature consists of managing competent inter-organisational relationships such as
alliances or partnerships in an SC to gain competitive advantage. Efficient management
of the SC relationships is one of the key indicators of firms’operational excellence as
it integrates suppliers and customers to improve their responsiveness and flexibility
(Thakkar et al., 2012; Jayaram et al., 2014). Relationships in an SC may range from single
transactions to complex, interdependent relationships which may vary from arm’s-length
transactions (or market governance) to vertical integration. The relationships can also be a
hybrid cooperative relationship (Contractor and Lorange, 1988) with the members of an SC,
e.g. primary producers, manufacturers, wholesalers and retailers involved in the production
and delivery of goods to consumers. Besides, the levels of this relationships and SC
transactions usually depend on the levels of trust, commitment, mutual dependence,
leadership and top management support; the higher the levels of transactions, the closer the
Industrial Management & Data
Systems
Vol. 117 No. 9, 2017
pp. 1934-1953
Emerald Publishing Limited
0263-5577
DOI 10.1108/IMDS-03-2016-0093
Received 8 March 2016
Revised 9 June 2016
22 September 2016
9 November 2016
Accepted 2 December 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
© Nasir Uddin. Published by Emerald Publishing Limited. This article is published under the Creative
Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create
derivative works of this article ( for both commercial & non-commercial purposes), subject to full
attribution to the original publication and authors. The full terms of this licence may be seen at http://
creativecommons.org/licences/by/4.0/legalcode
1934
IMDS
117,9
firms are to an integrated relationship, superior business performance and more profit
(Golicic et al., 2003; Jain et al., 2014).
Previous studies have argued that a lack of emphasis on SC relationships may decline
competitiveness in a marketplace (Maloni and Benton, 2000). While on the other hand,
a coordinated SC relationship can provide many returns such as lower product and
service costs, enhanced quality and innovation and a better firm performance
(Golicic et al., 2003). It has been argued that a “long-term relationships lead to reduced
political, social or economic risk, reduced transaction costs, and access to economies
of scale by by-passing traditional market arrangements”(Loader, 1997, p. 24) which,
as Arndt (1979) noted, is crucial to compete in the marketplace to achieve greater profit
margin and performance.
Based on the above issues, the current approach combines the cumulative influence of
organisational theories and the new institutional economics to investigate how the
structural, economic and behavioural factors of an SC relationship influence firm
performance. An organisational theory such as resource-based view (RBV) ( Barney, 1991;
Wernerfelt, 1984) of the firm provides a potential strategy framework to develop an
SC relationship as an intangible asset that is hard to imitate; that will provide a source of
sustained competitive advantage in SC. The new institutional economics focus on
transaction cost theory (Coase, 1937; Williamson, 1975, 1985) to identify the most efficient
structure of transaction in a buyer-seller relationship emphasising the issues of
minimising inter-firm transaction cost. Thus, the primary objective of this study was to
empirically explore the impact of structural, economic and behavioural issues of an SC
relationship in a firm performance which are crucial to creating value in the whole of
SC processes. Despite a lot of research on relationship issues in agri-business SC, there
is a paucity of empirical evidence showing important antecedents of relationships on
firm performance in the context of Australia. There is a lack of identification and
operationalization of related concepts such as governance structure, trust, power,
mutual understanding and symmetry of the relationships on firm performance
(e.g. Skipworth et al., 2015; Prajogo and Olhager, 2012). Since SC outcome and firm
performance are increasingly intertwined (Hult et al., 2006), this study thus can contribute
to the facts why some S C outperforms others.
The next section provides the research context followed by background theories and
literature reviews. The research model and methodologies are then discussed. After that,
a detailed analysis of the findings is presented. Finally, the study concludes with the
implications of the results.
Research context
Australia is an exporter of wheat, meat, wooland other agricultural products where the food
industryis a major component of the Australianeconomy generating export incomeof around
$24 billion(DAFF, 2008). But the contributionfrom the agri-food sector to AustralianGDP has
been decliningover the last century as comparedto the proportionate growthof other areas of
the Australian economy. It has fallen to approximately 2.3 per cent of GDP with an export
income of only around 20 per cent (The Conversation, 2015) compared to 70 per cent in the
first half of thenineteenth century. The majorfactors are identified as exportcompetitiveness
and market development issues such as operational inadequacies, lack of innovativeness of
the smaller and local firm, failure of achieving cost competitiveness and dominance of spot
market, among others (DAFF, 2008; Jackson et al., 2007).
Traditionally, the Australian agri-food SC has been dominated by auction systems and
regulated markets, which means the buying and selling of the products are conducted
without prior commitments placed on producers, and with little control over the
commodities by buyers. From the auction/spot market, producers do not gain any insight
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Inter-
organisational
relational
mechanism
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