Risk management and firm performance: the moderating role of supplier integration

DOIhttps://doi.org/10.1108/IMDS-09-2017-0427
Pages1327-1344
Published date13 August 2018
Date13 August 2018
AuthorYongyi Shou,Wenjin Hu,Mingu Kang,Ying Li,Young Won Park
Subject MatterInformation & 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
Risk management and firm
performance: the moderating role
of supplier integration
Yongyi Shou, Wenjin Hu and Mingu Kang
School of Management, Zhejiang University,
Hangzhou, China
Ying Li
School of Management, Shandong University, Jinan, China, and
Young Won Park
Faculty of Economics, Graduate School of Humanities and Social Sciences,
Saitama University, Saitama, Japan and
Manufacturing Management Research Center, Faculty of Economics,
The University of Tokyo, Tokyo, Japan
Abstract
Purpose The purpose of this paper is to scrutinize the performance effects of supply chain risk
management (SCRM). Besides financial performance, two aspects of operational performance are examined:
operational efficiency and flexibility. Moreover, the authors explore the moderating role of supplier
integration in the relationship between SCRM and operational performance.
Design/methodology/approach A survey-based methodology was adopted. Based on the data from an
international survey, this study applied the structural equation modeling and latent moderated structural
equations approach to test the hypotheses.
Findings The resultsindicate that SCRM positivelyinfluences both operationalefficiencyand flexibility, and
has an indirect effecton financial performance. In addition,supplier integration enhances the impactof SCRM
on operational flexibility, but does notmoderate the relationship between SCRMand operational efficiency.
Originality/value This study extends the existing literature by providing a comprehensive analysis
of the performance effects of SCRM. It also provides managerial insights on both risk management and
supplier integration.
Keywords Financial performance, Supply chain risk management, Supplier integration, Operational flexibility,
Operational efficiency, Information processing theory
Paper type Research paper
1. Introduction
Modern supply chains operate in the complex and rapidly changing environment (Chen et al.,
2013; Wiengarten et al., 2017). Meanwhile, firms apply increasingly sophisticated operations
practices (e.g. lean manufacturing, rapid responsiveness and global outsourcing) to gain
competitive advantage (Blome and Schoenherr, 2011; Kauppi et al., 2016). The fast-changing
environment and firmscomplicated operational strategies together contribute to a higher level
of supply chain risks. As a result, supply chain risk management (SCRM), which is defined as
the identification and management of risks in the supply chain through coordinated approaches
(Kauppi et al., 2016; Jüttner et al., 2003), is widely adopted by firms to cope with increasing risks
(Lavastre et al., 2014; Manuj et al., 2014; Kauppi et al., 2016). Prior theoretical studies have
suggested that firms can gain performance benefit through the implementation of SCRM
(Narasimhan and Talluri, 2009; Thun and Hoenig, 2011; Manuj et al., 2014). The main Industrial Management & Data
Systems
Vol. 118 No. 7, 2018
pp. 1327-1344
© Emerald PublishingLimited
0263-5577
DOI 10.1108/IMDS-09-2017-0427
Received 27 September 2017
Revised 15 January 2018
24 February 2018
Accepted 14 April 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
This work was supported by the National Natural Science Foundation of China under Grant No.
71472166, and Natural Science Foundation of Shandong Province under Grant No. ZR2017BG020.
1327
Risk
management
and firm
performance
arguments in the extant literature are that SCRM is beneficial to firmsfinancial performance by
lowering operations accidents and preventing supply chain disruptions (Ritchie and Brindley,
2007; Narasimhan and Talluri, 2009; Thun and Hoenig, 2011; Manuj et al.,2014).However,the
implementation of SCRM generally requires up-front investment and additional costs for excess
inventories, extra capabilities, back-up suppliers and alternative transportation modes
(Premkumar et al.,2005;Tang,2006;ColicchiaandStrozzi,2012;BodeandWagner,2015;
Kauppi et al., 2016), which may weaken financial performance. To our best knowledge, there is a
dearth of empirical evidence on how SCRM practices actually influence financial performance.
Therefore, this paper aims to explore the links between SCRM and financial performance.
In the extant literature, most scholars focus on the effect of SCRM on operational
performance. Previous studies have widely recognized operational performance as a
multi-dimensional construct. For example, Kauppi et al. (2016) show that risk management
along the supply chain is positively related to five aspects of operational performance
including quality, delivery, flexibility, cost and customer service. Operational efficiency and
operational flexibility, which may compete for firms limited resources (e.g. labor, capital,
etc.) and require differ ent organizational confi gurations (e.g. operati ng processes,
organizational structure, etc.) (Ebben and Johnson, 2005), are regarded as contradictory
aspects of operational performance and have attracted great attention (Adler et al., 1999;
Ebben and Johnson, 2005; Kortmann et al., 2014). On the one hand, firms attempt to profit
from a lower cost by maintaining high efficiency (Ebben and Johnson, 2005; Eisenhardt
et al., 2010). On the other hand, flexibility is critical for firms to adapt to the ever-changing
environment and to satisfy diverse customer needs (Nadkarni and Narayanan, 2007;
Eisenhardt et al., 2010). While previous studies have evidenced the positive effects of SCRM
on different aspects of operational performance (e.g. cost, delivery, flexibility, quality, etc.)
(Thun and Hoenig, 2011; Lavastre et al., 2014; Kauppi et al., 2016), the influence of SCRM on
both operational efficiency and flexibility has not been investigated simultaneously. Thus,
this paper intends to establish the relationship between SCRM and the two aspects of
operational performance. Overall, the first research question of this study is:
RQ1. What are the effects of SCRM on firm performance, including both financial
performance and operational performance?
The implementation of SCRM relies on coordination and collaboration betweenthe focal firm
and its suppliersto gain rich real-time upstreaminformation. Prior studies haveindicated the
significant role of supplier relationship in the implementation of SCRM (Chen et al., 2013;
Kauppi et al., 2016;Lavastre et al., 2014; Li et al., 2015; Zengand Yen, 2017; Zsidisin andSmith,
2005). For example, Wiengarten et al. (2016) suggest that SCRM complements with supply
chain integration in the weak rule of lawenvironments to enhance firm performance. Li et al.
(2015) highlight that joint risk management practices with suppliers contribute to the
improvement of performance. This paper focuses on supplier integration,which indicates the
coordination and collaboration practices with suppliers (Das et al., 2006; Flynn et al., 2010;
Shou et al., 2017). Supplier integration provides external linkages for the focal firm to access
supply chain information and improves the firms information processing capability through
joint information sharing actions (Flynn et al., 2010; Wong et al., 2011). Since SCRM is an
information intensive process (Manuj and Mentzer, 2008), supplier integration is supposed to
improve the effectiveness of SCRM. Therefore, this study attempts to analyze the moderating
effect of supplierintegration on the relationship betweenSCRM and operational performance.
The second research question is:
RQ2. How does supplier integration influence the performance effect of SCRM?
This study applies information processing theory (IPT) to crystallize the relationship
between SCRM and performance outcomes, and the moderating effect of supplier
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IMDS
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