Sustainability, which means to stay in the business ecosystem for a long time, has become critical for firms to compete in the global market during the past few decades (Bansal & Hoffman, 2012). Firms involved in global supply chains desire to gain sustainable competitive advantage to win over their competitors and be successful. They benefit from their supply chains and become more and more networked with and interdependent on their supply chain partners. At the same time, they are more affected by their supply chain partners, and are faced with various challenges, including political and economic uncertainties, natural disasters, changing customer demand, shortened product lifecycles, technology disruption, severe competitions, supplier performance issues, etc. These challenges have given rise to the strategic importance of risk management capability in global supply chains (Scannell, 2012). Firms’ competitive advantage is affected by risks they encounter in their supply chain (Gimenez & Tachizawa, 2012). Failure in handling these risks can deprive focal firms’ competitive advantage in the market, and even lead firms to bankruptcy (Manuj & Mentzer, 2008).
In order to reduce the impact of unexpected risks, firms are suggested to build buffer stock or set up backup production lines for unexpected supply chain disruptions. However, these strategies are not almighty for all firms in all situations. For services and products that quickly become obsolete or highly complex in terms of integral architecture, it is infeasible to build up buffer stock or prepare alternative backup production lines concerning cost competitiveness as well as product characteristics.
Collaboration with suppliers is recommended in literature as one useful tool for firms to obtain risk management capabilities as the majority of the parts are increasingly made by suppliers, not manufactured in-house (Lankford & Parsa, 1999). Firms’ performance are closely related to the performance of their suppliers (Simpson & Power, 2005), and supply chain is doing much more than firms used to do. Firms need to rely on the external capabilities of their suppliers in order to gain sustainable competitive advantage.
Drawing from the theoretical lenses of complexity theory, resource dependency theory, Contingency Theory, Relational View, and Resource-based View, this dissertation presents a theoretical framework to study how firms can gain sustainable competitive advantage through improving risk management capabilities, which include firms’ capabilities to manage normal risks, routine risks, and extraordinary risks. It considers supplier collaboration as firms’ network responses toward their needs to improve risk management capabilities, and explores the contextual drivers of firms’ multi-level supplier collaboration.
Large scale survey data was collected from 264 U.S. manufacturing firms to test the hypothesized relationships in the proposed model using Structure Equation Modeling methodology. 18 out of 21 hypotheses were supported by data. The findings indicate that contextual drivers of product complexity, network dependency and technology turbulence lead firms to adopt different levels of collaboration with their suppliers as network responses towards the dynamism they face in their industry. These network responses further lead to firms’ risk management capabilities, which enable firms to achieve sustainable competitive advantage.
This dissertation has made the following potential contributions: (1) widens Resource-based View and competitive advantage theory by including firms’ risk management capabilities, and practically recommends pathways for firms to gain sustainable competitive advantage; (2) conceptualizes the concept of risk management capabilities, and empirically tests the interactions between different levels of collaboration and risk management capabilities; (3) identifies and develops the constructs for different levels of supplier collaboration as operational collaboration, tactical collaboration, and strategic collaboration, and empirically tests the contextual drivers that motivate and initiate firms’ supplier collaboration; and (4) empirically tests the relationship between risk management capabilities on sustainable competitive advantage.