Aligning Performance Measurement Systems across the Supply Chain: Evidence from Electronic Components Suppliers

Abstract

ABSTRACT Successful interorganizational governance requires practices that reduce information asymmetry between supply chain partners and foster collaborative activities. We study one potential practice—suppliers aligning their performance measurement systems with their largest customer’s performance priorities. Using survey data collected from face-to-face interviews with executives from over 1,000 electronic components suppliers, we find that suppliers with greater customer-supplier information asymmetry and higher partner interdependence have performance measurement systems that align more with their largest customer’s performance priorities. These results are particularly apparent when the exchange involves complex components and when the largest customer represents a greater proportion of supplier sales, suggesting that performance measurement system alignment is of greater value in such situations. We conclude that the performance priorities of large customers play a role in shaping suppliers’ management control systems.