Supply Risk Structural Equation Model of Trust, Dependence, Concentration, and Information Sharing Strategies

Authors:
Santanu Mandal;Sourabh Bhattacharya
Affiliations:
Hyderabad University, Hyderabad, Andhra Pradesh, India;Hyderabad University, Hyderabad, Andhra Pradesh, India
Venue:
International Journal of Risk and Contingency Management
Year:
2013

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Abstract

The purpose of the paper was to formulate a framework for supply side risk and empirically validate the same in the Indian context. A framework was developed for supply side risk by starting with a structured literature review complemented with theoretical underpinnings from the principles of Resource Based Value, Transaction Cost Economies and the Relational Capital Theory. The study validated the framework through a survey of 164 purchasing and supply chain managers in India. The study used confirmatory factor analysis to develop the measurement model. Structural equation modeling was deployed for testing the proposed structural relationships and hypotheses. The findings clearly indicated that factors such as supplier concentration, supplier dependence, sourcing strategies and trust towards customers enhanced the supply side risk situation for the organization. In contrast to this, trust towards suppliers and high level of information sharing among the supply chain partners created undesired risk.