Constrained choice in supply chain relationships: the effects of regulatory institutions

Abstract

Purpose Utilizing a top-down approach of middle-range theorizing (MRT), the purpose of this paper is to integrate relational exchange with institutional theory to examine how companies manage supply chain relationships to achieve desired supply chain outcomes in industries characterized by varying degrees of regulatory mandates that restrict the choice of supply chain partners. The authors identify this supply chain relationship dynamic as constrained choice. Design/methodology/approach A moderated mediation model is tested using survey data from producers in the US wine industry to investigate the effects of regulatory pressure on the ability of wine producers to achieve operational coordination when responding to relational behaviors through either trust or calculative commitment. Findings Results find that relational behaviors can improve operational coordination through two distinct paths: trust or calculative commitment. With the moderating effect of regulatory pressure, relational behaviors more effectively facilitate operational coordination through trust. Alternately, regulatory pressure attenuates the mediated relationship through calculative commitment. Research limitations/implications The research introduces constrained choice dynamics into the supply chain relationship literature via MRT. Integrating generative mechanisms from relational exchange and institutional theories provides theoretical depth and context-specific knowledge about relationships that operate in constrained choice situations. Practical implications Managers impacted by constrained choice should recognize that mechanisms typically resulting in positive relationship outcomes may respond differently in the presence of regulatory constraints. With greater regulatory pressure, efforts to enhance operational coordination are more effective using relational mechanisms to build trust. When trust is diminished, calculative commitment can be effective in achieving operational coordination, although extensive regulations make it more difficult. Originality/value Previous research traditionally assumes that managers are free to select suitable trading partners that ensure mutually beneficial relationships. The research develops a middle-range theory examining the constrained choice dynamic in relationships that are impacted to varying degrees by regulatory institutions.