Supply risk management via guanxi in the Chinese business context : the buyer's perspective

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Supply risk management via guanxi in the Chinese business context : the buyer's perspective

 

Author: Yip, Fu-keung
Title: Supply risk management via guanxi in the Chinese business context : the buyer's perspective
Degree: D.B.A.
Year: 2009
Subject: Hong Kong Polytechnic University -- Dissertations
Business logistics -- China
Risk management -- China
Interpersonal communication -- China
Communication in management -- China
Department: Graduate School of Business
Pages: ix, 144 leaves : ill. ; 30 cm.
InnoPac Record: http://library.polyu.edu.hk/record=b2321806
URI: http://theses.lib.polyu.edu.hk/handle/200/5358
Abstract: In the past when firms manufactured in-house, raw materials were sourced locally and finished goods were sold directly to customers, and risk was less diffused and easier to manage. With increase in outsourcing across international borders, risk is increasing and the sources of risk exist throughout the entire supply network. Supply risk happens to any organization no matter whether it is a small firm or a large multinational corporation. Actively or passively choosing to ignore supply risk will result in a significant adverse effect on a company. This is the reason why supply risk management has increasingly become a high-priority issue for top management to address. Supply risk management is a relatively new topic in supply chain management research. Previous research on supply risk management mainly focused on the various aspects of the general risk management process such as risk identification, assessment, treatment and monitoring. Although there have been practical studies proposing the use of the relational approach to manage supply risk, academic research on this topic is lacking. Besides, previous research on supply risk management mainly used the case study method while empirical research on supply risk management is limited. In addition, the management theories that underpin past research on supply risk management are limited to agency theory and institutional theory. There is a lack of theoretical exposition of supply risk management based on the relational approach. In this thesis we fill this research gap by exploring supply risk management via the relational approach in the Chinese business environment (i.e., guanxi) from the buying firm's perspective. We apply social capital theory to account for the phenomenon that purchasing firms will develop guanxi relationships with their suppliers when they perceive supply uncertainty as a major threat to their organizations. We construct a theoretical model grounded in social capital theory and develop five hypotheses on the relationships among the research constructs captured in the model. To examine the effects of perceived supply risk from key suppliers on guanxi, we conducted a large-scale survey of manufacturing companies in Hong Kong and applied a rigorous research methodology to treat the survey data. Target respondents were purchasing mangers of the manufacturing companies. We designed a questionnaire, which was pilot-tested by both purchasing academics and professionals, before administering it to the target respondents. A total of 4,000 questionnaires were sent to the target respondents and 188 usable responses were received. We used the AMOS and SPSS software to analyze the data and the results supported all of the hypotheses. The research findings show that purchasing firms would form guanxi networks with their key suppliers when they perceive supply risk. We also identified that with guanxi development between the buyer and the supplier, both communication and supplier trust are improved. Finally, both of these constructs are positively related to supplier performance. By using three forms of social capitals, namely obligation, expectation and trustworthiness, and information channel, we successfully explained that when an organization faces supply risk, it tends to form guanxi networks with its key suppliers to reduce risk. While transaction cost theory has been dominating in research on buyer-supplier relationships, this thesis offers a new insight by providing an empirically validated explanation of the reciprocity relationships between the buyer and the supplier based on social capital theory. We discuss the limitations of the study and suggest some directions for future research at the end of the thesis. This thesis contributes to both academic research by identifying the role of guanxi in supply risk management, and practice by providing useful insights to purchasing professionals to guide their effort in managing supply risk.

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