The raise of China in the global economic environment has captured the interest of scholars in several branches of management, including purchasing and supply chain management, during the last years. However, the key issue of the relationship governance structure firms adopt when dealing with Chinese suppliers has remained largely underinvestigated. While one may object that the selection of either the predominant governance pattern (i.e., either transactional or relational, or a mix of the two) and of their specific mechanisms (e.g., contractual issues and contract completeness; nature and forms of monitoring and evaluation; trust-based practices like information sharing, asset-specific investments, collaborative problem solving and supplier development, etc) is led by generic drivers and as such it is generalizable to any business context, on the other hand it might be conjectured that the specificity of the Chinese one actually forces firms to re-adapt the governance structure when they start to manage their Chinese suppliers. Applicability of practices for supplier integration to the case of firms’ relationship with Chinese suppliers has already been questioned in the literature (Lockstrom et al., 2010). We aim to contribute to a better understanding of this controversial issue by investigating the relationship governance structure that a selected sample of six Italian companies adopt in sourcing from their Chinese suppliers. Through in-depth interviews with business unit top managers, chiefs of the Chinese purchasing operations, and buyers of the Chinese divisions we analyze the company’s strategy in China (e.g., product’s characteristics, markets supplied), the company’s and the Chinese subsidiary’s sourcing strategies, and the relationship governance structure the company adopts with Chinese strategic suppliers. We also analyze if the company relies on the Chinese supply market for supplying to other facilities beyond the Chinese one – and more in general, the extent of company’s reliance on Chinese suppliers for the whole global production network. A short summary of all these issues for the six companies is provided in table 1. All the companies in our sample hold a production facility in China; while differences exist in the extension of the companies’ global production network, all of them are relatively big corporations (turnovers range from 100 ml to 4 bl euro) and very significant players in their own industries. The scale of the Chinese sourcing is also significant for all of them, and the age of the companies’ sourcing activity in China is comparable, the beginning of it dating early 2000s. Based on the information we collected, and on the cross-case comparison, we propose sourcing complexity and the degree of integration of the Chinese sourcing with the company’s global sourcing as two main drivers of the relationship governance structure for managing the Chinese suppliers. In our model, sourcing complexity reflects either the technical sophistication of the purchasing category and the actual availability of suitable suppliers on the Chinese supply market. The latter dimension seems to play a significant role in accounting for sourcing complexity – which in turn impacts the selection of the governance structure: even for less complex products and technologies, buying firms might struggle to find “suitable suppliers” since the economic and service conditions are frequently not consistent with the firm’s needs, thus leading to relatively high sourcing complexity despite the apparent technological simplicity. The degree of integration of the Chinese sourcing with the company’s global sourcing reflects the extent to which the purchasing dept. of the Chinese subsidiary provides to the purchase of the group’s need on a global scale – or it is at least an option the central purchasing department considers in the bidding process, among the various potential sources. We propose that: - in dealing with Chinese...
Exploratory Framework of Relationship Governance in Global Sourcing: The Case of China
BARBIERI, PAOLO;
2012
Abstract
The raise of China in the global economic environment has captured the interest of scholars in several branches of management, including purchasing and supply chain management, during the last years. However, the key issue of the relationship governance structure firms adopt when dealing with Chinese suppliers has remained largely underinvestigated. While one may object that the selection of either the predominant governance pattern (i.e., either transactional or relational, or a mix of the two) and of their specific mechanisms (e.g., contractual issues and contract completeness; nature and forms of monitoring and evaluation; trust-based practices like information sharing, asset-specific investments, collaborative problem solving and supplier development, etc) is led by generic drivers and as such it is generalizable to any business context, on the other hand it might be conjectured that the specificity of the Chinese one actually forces firms to re-adapt the governance structure when they start to manage their Chinese suppliers. Applicability of practices for supplier integration to the case of firms’ relationship with Chinese suppliers has already been questioned in the literature (Lockstrom et al., 2010). We aim to contribute to a better understanding of this controversial issue by investigating the relationship governance structure that a selected sample of six Italian companies adopt in sourcing from their Chinese suppliers. Through in-depth interviews with business unit top managers, chiefs of the Chinese purchasing operations, and buyers of the Chinese divisions we analyze the company’s strategy in China (e.g., product’s characteristics, markets supplied), the company’s and the Chinese subsidiary’s sourcing strategies, and the relationship governance structure the company adopts with Chinese strategic suppliers. We also analyze if the company relies on the Chinese supply market for supplying to other facilities beyond the Chinese one – and more in general, the extent of company’s reliance on Chinese suppliers for the whole global production network. A short summary of all these issues for the six companies is provided in table 1. All the companies in our sample hold a production facility in China; while differences exist in the extension of the companies’ global production network, all of them are relatively big corporations (turnovers range from 100 ml to 4 bl euro) and very significant players in their own industries. The scale of the Chinese sourcing is also significant for all of them, and the age of the companies’ sourcing activity in China is comparable, the beginning of it dating early 2000s. Based on the information we collected, and on the cross-case comparison, we propose sourcing complexity and the degree of integration of the Chinese sourcing with the company’s global sourcing as two main drivers of the relationship governance structure for managing the Chinese suppliers. In our model, sourcing complexity reflects either the technical sophistication of the purchasing category and the actual availability of suitable suppliers on the Chinese supply market. The latter dimension seems to play a significant role in accounting for sourcing complexity – which in turn impacts the selection of the governance structure: even for less complex products and technologies, buying firms might struggle to find “suitable suppliers” since the economic and service conditions are frequently not consistent with the firm’s needs, thus leading to relatively high sourcing complexity despite the apparent technological simplicity. The degree of integration of the Chinese sourcing with the company’s global sourcing reflects the extent to which the purchasing dept. of the Chinese subsidiary provides to the purchase of the group’s need on a global scale – or it is at least an option the central purchasing department considers in the bidding process, among the various potential sources. We propose that: - in dealing with Chinese...I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
