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Business Faculty Publications Monte Ahuja College of Business
2011
Making Sense Of Supply Disruption Risk Research: A Conceptual Making Sense Of Supply Disruption Risk Research: A Conceptual
Framework Grounded In Enactment Theory Framework Grounded In Enactment Theory
Scott C. Ellis
Jeff Shockley
Raymond M. Henry Cleveland State University, [email protected]
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Publisher's Statement This is the accepted version of the following article: Ellis, S. C., Shockley, J., Henry, R. M. (2011).
Making Sense of Supple Disruption Risk Research: A Conceptual Framework Grounded In
Enactment Theory. Journal of Supply Chain Management, 47(2), pp. 65-96, which has been
published in final form at http://onlinelibrary.wiley.com/doi/10.1111/j.1745-493X.2011.03217.x/
full
Original Published Citation Original Published Citation Ellis, S. C., Shockley, J., Henry, R. M. (2011). Making Sense Of Supple Disruption Risk Research: A Conceptual Framework Grounded In Enactment Theory. Journal of Supply Chain Management, 47(2), pp. 65-96.
This Article is brought to you for free and open access by the Monte Ahuja College of Business at EngagedScholarship@CSU. It has been accepted for inclusion in Business Faculty Publications by an authorized administrator of EngagedScholarship@CSU. For more information, please contact [email protected].
MAKING SENSE OF SUPPLY DISRUPTION RISK RESEARCH:A CONCEPTUAL FRAMEWORK GROUNDED IN
ENACTMENT THEORY
SCOTT C. ELLISUniversity of Kentucky
JEFF SHOCKLEYRadford University
RAYMOND M. HENRYCleveland State University
The rich stream of supply disruption risk (SDR) literature incorporates severaldifferent theories and constructs across studies, but lacks a unifying decision-making framework. We review 79 SDR studies and advance a comprehensiveframework, grounded in enactment theory, which integrates the disparateelements of SDR research and offers new insights into the SDR decision-making process. Enactment theory posits a three-stage, closed-loop process,consisting of enactment, selection and retention, through which individualsprocess and make sense of equivocal environments. We suggest that thissense-making process also underlies SDR decision-making, and providesthe theoretical underpinnings for the environmental, organizational andindividual factors that affect the formation of buyers’ perceptions of SDRand the actions they take to mitigate such risks. In accordance with ourconceptual framework, we develop seven propositions that advance the socialand psychological factors that drive the idiosyncratic nature of SDR decision-making.
Keywords: risk/risk assessment; behavioral supply management; theory building.
INTRODUCTIONIn 2000, a Philips NV semiconductor fabricationplant in Albuquerque, New Mexico was severelydamaged by fire caused by a lightning strike (Lee2004; Sheffi and Rice 2005). At the same time, the
two major customers of this plant — Nokia Corp.and Ericsson LM — were launching a newgeneration of cell phones (Sheffi and Rice 2005).Nokia developed alternate sources of supply andworked with Philips to develop production
capability in other chip fabrication centers aroundthe world. Ericsson adopted a different strategy ofbuffering with inventory to ‘‘ride out’’ the perceivedshort-term loss in capacity (Schmitt 2008). During
the period of the disruption, which extended farlonger than Ericsson originally thought, Nokiaincreased market share while Ericsson suffered
significant losses and was ultimately forced to exitselect cell phone markets.
Supply disruptions can significantly reduce operationalperformance, profitability and shareholder value over thelong term (Hendricks and Singhal 2003, 2005a, b;PricewaterhouseCoopers 2008). Moreover, supply chainmanagers expect that their vulnerability to supply dis-
ruptions will only increase in coming years (Juttner2005). The operational and strategic implications of ef-fective supply disruption risk (SDR) management havemotivated scholars to explore a range of issues including
the types of supply disruptions, assessment models andrisk mitigation strategies. However, consistent with theviews of Blackhurst, Craighead, Elkins and Handfield(2005), our review of 79 scholarly publications suggests
that extant supply risk management research is highly
65
fragmented. In particular, our findings indicate that theSDR stream of research incorporates several theories andconstructs across disparate studies, but lacks a unifying
framework. Further, the psychological and social theo-retical underpinnings of SDR are in their incipient stagesof development. As such, per the vignette above, it re-mains unclear why firms that are seemingly faced with
the same nominal SDRs act in such different ways.We address this gap in extant literature by applying Karl
Weick’s (1969, 1995, 2001) enactment theory to thestudy of the SDR decision-making process. Central to
enactment theory is sense-making — a closed-loop,socio-psychological process that describes how individ-uals resolve equivocality. As conceived by Weick (1969),the sense-making process is predicated on the notion that
an individual’s actions enable enhanced understandingof the environment, which in turn, influences future ac-tions. Guided by enactment theory, we develop an inte-grative framework in which SDR decision-making isconceptualized as a specialized case of the sense-making
process. Accordingly, we suggest that organizationalbuyers use the sense-making process to cope withequivocality that stems from the supply environment.Through our framework and related propositions, we
advance substantive theory that explains how attributesof the (supply) environment, organization (i.e., firm)and individual (i.e., buyer) affect SDR decision-makingand its efficacy.
Our research contributes to the body of SDR research inthree important ways. First, our application of enactmenttheory facilitates the integration of disparate studies ofSDR into a cohesive conceptual framework. Accordingly,
we offer a comprehensive view of SDR decision-makingthat is grounded in phenomenological studies of SDRand supported by rationale culled from enactment the-ory. Second, our conceptual framework supports the
notion that the perception of risk, rather than actual risk,influences the SDR decision-making process. As such, weadvance a theoretical rationale that accounts for differ-ences in objective versus perceptual views and explains
why perceptions and mitigation actions vary across in-dividuals faced with the same nominal risk. Third, ourstudy builds on seminal models of risky decision-making(e.g., Sitkin and Pablo 1992; Yates and Stone 1992) bysuggesting that equivocality affects how individuals pro-
cess SDR decisions. Further, our substantive theory pro-vides novel insights into the social and psychologicaltheoretical mechanisms that underlie the formation ofrisk perceptions and adoption of specific risk mitigation
tactics.The remainder of this paper proceeds as follows. In the
following two sections, we present a review of the SDRliterature and describe enactment theory, respectively.
Subsequently, we propose a conceptual framework thatintegrates key environmental, organizational and indi-vidual factors that affect the SDR decision-making pro-
cess and draw from enactment theory to advancepropositions that support our framework. In the finalsection, we discuss the theoretical and practical implica-
tions of our study.
REVIEW OF SDR LITERATUREWhile the focus of our literature review is SDR, we
recognize that the study of risk permeates the boundariesof several fields of academic research. Given the breadth
of extant SDR research, we used two rules to constrainour review. First, we limited our review to articles thatwere published within peer-reviewed academic journals.Second, we constrained our review to those articles inwhich supply risk and/or disruption is the primary con-
sideration. As such, we omit related streams of research,such as those addressing supply chain agility (e.g., Bra-unscheidel and Suresh 2009) and opportunism (e.g.,Hallikas, Puumulainen, Vesterinen and Virolainen
2005), from our review. Application of these heuristicsresulted in the identification of 79 SDR articles. In Table1, we briefly describe the risk elements, referenced the-ories, methodology, research focus and conclusions ad-
vanced within each of these articles.
Theoretical PerspectivesOrganizational perspectives, such as transaction cost
economics (TCE) and resource dependence (RD) theo-ries, as well as real options approaches have played acentral role in studies of SDR. Whereas TCE logic lends
conceptual support for the links between SDR and (i)uncertainty and (ii) asset specificity, RD theory suggeststhat SDR is a function of dependence. Accordingly, pre-vious research has used these organizational theories to
examine the effects of supply base complexity, marketthinness, technological dynamism, supply uncertainty,product customization, product importance and inven-tory buffering strategies on supply risk (Choi and Krause
2006; Wagner and Bode 2006; Khan, Christopher andBurnes 2008; Kull and Closs 2008; Ellis, Henry andShockley 2010). Alternately, real options theory linkspostponement and SDR mitigation, suggesting that de-
layed investment reduces uncertainty by permitting moreinformed decision-making. Using this approach, Cuc-chiela and Gastaldi (2006) explain how defer, stage, ex-plore, lease, outsource and other options may be used tomitigate risks stemming from internal and external
sources of uncertainty. In the same vein, Hult, Craigheadand Ketchen (2010) find that the use of deferral options,under conditions of high uncertainty, is positively relatedto supply chain project return on investment.
A burgeoning stream of SDR research has incorporateda behavioral perspective, which advances a perceptualview of risk and considers the psychological and socialfactors that affect the formation of risk perceptions.
Such emphasis on risk perceptions stems from (i) the
66
TA
BLE
1
Su
pp
lyD
isru
pti
on
Ris
k(S
DR
)R
esea
rch
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
Alt
ay
and
Ram
irez
(2010)
1Sup
ply
chain
Em
pir
ical
Exa
min
es
the
cro
ss-s
ect
or
imp
act
of
diffe
rent
typ
es
of
natu
ral
dis
ast
ers
on
firm
financi
al
perf
orm
ance
usi
ng
seco
nd
ary
sourc
ed
ata
on
3,5
00
natu
ral
dis
ast
ers
ove
ra
15-y
ear
peri
od
Dis
ast
er
imp
act
isfe
ltacr
oss
all
sect
ors
of
the
sup
ply
chain
and
the
imp
act
of
anatu
rald
isast
er
isfe
ltm
ore
sob
yd
ow
nst
ream
sup
ply
chain
mem
bers
.T
he
auth
ors
sug
gest
that
sup
ply
chain
-wid
em
itig
ati
on
sho
uld
be
pra
ctic
ed
,w
hic
his
haza
rd-
speci
fic,
and
off
er
am
od
elfo
rm
anag
ers
touse
tob
ett
er
und
ers
tand
the
imp
act
ad
isast
er
will
have
on
their
busi
ness
perf
orm
ance
.B
ab
ich,
Burn
eta
sand
Rit
chke
n(2
007)
2Sup
ply
chain
Analy
tica
lm
od
elin
gE
xam
ines
dis
rup
tio
nri
sks
ina
sup
ply
chain
;o
ne
reta
iler
wit
hco
mp
eti
ng
risk
ysu
pp
liers
who
may
defa
ult
on
their
pro
duct
ion
lead
tim
es
Reta
ilers
may
be
ab
leto
manag
esu
pp
lier
defa
ult
rate
sto
take
ad
vanta
ge
of
bo
thsu
pp
lier
com
peti
tio
nand
div
ers
ifica
tio
n.
Bhatt
ach
ary
yaet
al.
(2010)
1,2
,3T
ransa
ctio
nco
stE
mp
iric
al
Exa
min
es
(acr
oss
81
countr
ies)
ho
wacc
ura
tely
com
mo
nly
use
dth
ird
-part
yin
dic
es
ass
ess
aco
untr
y’s
op
era
tio
nalri
sk,
and
ho
wth
isle
velo
fri
skaff
ect
sth
evo
lum
eo
fb
oth
its
imp
ort
and
exp
ort
sup
ply
chain
s
The
thir
d-p
art
yin
dic
es
ind
ivid
ually
pro
vid
ean
inco
mp
lete
view
of
the
op
era
tio
nalri
sko
fd
oin
gb
usi
ness
ina
countr
y.T
hese
ind
ices
sho
uld
be
use
dto
geth
er
and
wit
han
und
ers
tand
ing
of
med
iati
ng
vari
ab
les
toacc
ura
tely
ass
ess
the
true
op
era
tio
nalri
sko
fd
oin
gb
usi
ness
ina
countr
y.B
erg
er
et
al.
(2004)
1,2
,7D
eci
sio
nanaly
sis
Analy
tica
lm
od
elin
gU
ses
deci
sio
ntr
ee
ap
pro
ach
es
(pro
bab
ility
mo
delin
g)
tod
ete
rmin
eth
eo
pti
malnum
ber
of
sup
plie
rsco
nsi
deri
ng
the
Incr
easi
ng
the
num
ber
of
sup
plie
rsis
aco
st-e
ffect
ive
stra
teg
yo
nly
when
sup
plie
rsare
ext
rem
ely
unre
liab
le.
These
67
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
likelih
oo
do
fa
sup
ply
dis
rup
tio
n(o
rp
art
iald
isru
pti
on)
for
ind
ep
end
ent
sets
of
sup
plie
rs
mo
dels
ass
ess
the
imp
act
on
syst
em
perf
orm
ance
when
part
ial
sets
of
sup
plie
rsare
do
wn.
Bla
ckhurs
t,C
raig
head
,E
lkin
sand
Hand
field
(2005)
2,5
,7Sup
ply
chain
Em
pir
ical
Co
nd
uct
sa
mult
i-in
dust
ryst
ud
yo
fp
erc
eiv
ed
cause
sand
pra
ctic
ed
mit
igati
on
stra
teg
ies
for
sup
ply
chain
dis
rup
tio
ns
Key
issu
es
insu
pp
lych
ain
manag
em
ent
and
seve
ral
rese
arc
hab
lep
rop
osi
tio
ns
are
identi
fied
base
do
nsu
pp
lym
anag
er
inte
rvie
ws
mo
tiva
ted
by
am
od
elo
fd
isru
pti
on
reco
very
,d
isco
very
and
sup
ply
chain
red
esi
gn.
Burk
e,
Carr
illo
and
Vakh
ari
a(2
007)
2,7
Deci
sio
nanaly
sis
Analy
tica
lm
od
elin
gE
xam
ines
sing
le-p
eri
od
,si
ng
le-
pro
duct
sourc
ing
deci
sio
ns
und
er
dem
and
unce
rtain
ty
Sin
gle
sup
plie
rso
urc
ing
isth
ed
om
inant
stra
teg
yw
hen
sup
plie
rca
paci
ties
are
larg
ere
lati
veto
the
pro
duct
dem
and
and
when
the
firm
do
es
no
to
bta
ind
ivers
ifica
tio
nb
enefits
.Sele
ctio
ntr
ad
eo
ffs
exi
stb
etw
een
sup
plie
rm
inim
um
ord
er
quanti
ties,
cost
sand
sup
plie
rre
liab
iliti
es.
Cach
on
(2004)
4,5
,7C
ontr
act
Analy
tica
lm
od
elin
gE
xam
ines
ho
wp
ush
,p
ull
and
ad
vance
-purc
hase
contr
act
s,and
ass
oci
ate
din
vento
ryand
sup
ply
risk
s,aff
ect
sup
ply
chain
effi
ciency
Dis
trib
uti
on
of
inve
nto
ryri
sks
acr
oss
sup
plie
rand
reta
iler
sig
nific
antl
yaff
ect
sth
eeffi
ciency
of
the
sup
ply
chain
.Shifts
inin
vento
ryri
skca
nin
crease
bo
thsu
pp
lych
ain
effi
ciency
and
pro
fit
for
bo
thth
esu
pp
lier
and
reta
iler.
Cho
iand
Kra
use
(2006)
2,3
,7C
om
ple
xity
and
transa
ctio
nco
stC
once
ptu
al
Exp
lore
ssu
pp
lych
ain
com
ple
xity
and
its
manag
em
ent
Co
mp
lexi
tyre
duct
ion
may
lead
tolo
wer
transa
ctio
nco
sts,
as
well
as
incr
ease
sin
sup
plie
reffi
ciency
and
resp
onsi
veness
,b
ut
itm
ay
als
oin
crease
sup
ply
dis
rup
tio
nri
skand
red
uce
inno
vati
on.
68
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
Cho
pra
and
So
dhi(2
004)
2,3
,4,7
Sup
ply
chain
Co
nce
ptu
al
Cate
go
rize
sth
eso
urc
es
of
risk
and
desc
rib
es
stra
teg
ies
that
may
be
use
dto
mit
igate
these
risk
sourc
es
Pre
sents
afr
am
ew
ork
for
stre
sste
stin
gth
esu
pp
lych
ain
toach
ieve
hig
her
risk
-rew
ard
trad
e-
off
s.P
rop
ose
sa
means
tota
ilor
risk
mit
igati
on
stra
teg
ies.
Chri
sto
pher
and
Lee
(2004)
2,5
,6,8
Sup
ply
chain
Co
nce
ptu
al
Exa
min
es
the
role
of
confid
ence
and
sup
ply
chain
visi
bili
tyas
an
eff
ect
ive
mit
igati
on
stra
teg
y
Succ
ess
fulsu
pp
lych
ain
risk
manag
ers
quic
kly
rest
ore
confid
ence
toth
esu
pp
lynetw
ork
aft
er
ad
isru
pti
on.
Co
hen
et
al.
(2003),
Li(2
007)
3,6
Sup
ply
chain
Analy
tica
lm
od
elin
gE
xam
ines
eff
ect
ofle
ad
tim
e,le
ad
tim
eunce
rtain
tyand
risk
ave
rsio
no
nth
eo
pti
malt
ime
top
rod
uce
ina
sup
ply
netw
ork
Ris
kave
rsio
n,
as
well
as
kno
wle
dg
eo
fth
eb
uye
r’s
dem
and
dis
trib
uti
on,
dete
rmin
es
when
the
sup
plie
rch
oo
ses
too
pti
mally
pro
duce
or
dela
yp
rod
uct
ion.
Cra
ighead
et
al.
(2007)
2,3
,7Sup
ply
chain
Co
nce
ptu
al
Exp
lore
ssu
pp
lych
ain
dis
rup
tio
nse
veri
tySeve
rity
of
sup
ply
chain
dis
rup
tio
ns
isim
pact
ed
by
densi
ty,
com
ple
xity
and
no
de
crit
icalit
y.C
onsi
ders
two
sup
ply
chain
mit
igati
on
cap
ab
iliti
es:
reco
very
and
warn
ing
.C
ucc
hie
laand
Gast
ald
i(2
006)
1,2
,3,7
Realo
pti
ons
Analy
tica
lm
od
elin
gO
ffers
are
alo
pti
ons
ap
pro
ach
tosu
pp
lyri
skm
itig
ati
on
Fra
mew
ork
toeva
luate
mult
iple
risk
chara
cteri
stic
susi
ng
are
al
op
tio
ns
mo
del.
Dalg
leis
hand
Co
op
er
(2005)
4,5
Co
ntr
ol
Case
Pro
vid
es
an
analy
sis
of
the
key
issu
es
tob
ead
dre
ssed
inim
ple
menti
ng
ari
skm
anag
em
ent
syst
em
,b
ase
do
nth
eexp
eri
ence
so
fa
wate
rauth
ori
tyin
Aust
ralia
Anum
ber
of
stra
teg
icri
sks
speci
fic
toth
ew
ate
rin
dust
ryare
identi
fied
.Sho
ws
the
ess
enti
al
req
uir
em
ents
for
an
inte
gra
ted
ap
pro
ach
tom
anag
ing
risk
sfo
ra
wate
rauth
ori
ty.
Elli
set
al.
(2010)
2,3
,7,8
Behavi
ora
l,re
sourc
ed
ep
end
ence
and
transa
ctio
nco
st
Em
pir
ical
Exa
min
es
buye
rd
eci
sio
n-m
aki
ng
und
er
risk
.P
rese
nts
ari
skd
eci
sio
n-m
aki
ng
mo
del
Mo
delsh
ow
sho
wsi
tuati
onalri
skfa
cto
rsaff
ect
buye
r’s
deci
sio
n-
maki
ng
pro
cess
es
thro
ug
hth
eir
perc
eiv
ed
pro
bab
ility
and
mag
nit
ud
eo
flo
ss.
Als
osh
ow
s
69
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
ho
wb
uye
rs’
perc
ep
tio
ns
of
risk
influence
sth
eir
forw
ard
deci
sio
n-
maki
ng
.Fais
al,
Banw
et
and
Shanka
r(2
006)
2,4
,5,7
Sup
ply
chain
Inte
rpre
tive
/em
pir
ical
Exa
min
es
sup
ply
chain
risk
mit
igati
on
by
und
ers
tand
ing
the
dyn
am
icre
lati
onsh
ips
am
ong
risk
mit
igati
on
enab
ling
pra
ctic
es
Deve
lop
sa
no
mo
log
icalnetw
ork
of
inte
rnalenab
lers
of
risk
mit
igati
on
(e.g
.,in
form
ati
on
shari
ng
,ag
ility
)and
sho
ws
the
ord
er
of
deve
lop
ment
of
such
inte
rnalc
ap
ab
iliti
es
usi
ng
ab
inary
matr
ix.
Gaud
enzi
and
Bo
rghesi
(2006)
4,6
,8B
ehavi
ora
lC
once
ptu
al
Use
sa
pro
cess
mo
delto
identi
fysu
pp
lych
ain
risk
fact
ors
fro
mth
ep
ers
pect
ive
of
cust
om
er
valu
e
The
mo
stcr
itic
alsu
pp
lych
ain
risk
sare
identi
fied
fro
ma
care
ful
eva
luati
on
of
the
eff
ect
of
dis
rup
tio
ns
on
the
cust
om
er
valu
ep
rop
osi
tio
n.
Invo
lvin
gke
yd
eci
sio
nm
ake
rsis
ess
enti
al.
Giu
nip
ero
and
Elt
anta
wy
(2004)
1,2
,3,4
,7Sup
ply
chain
Co
nce
ptu
al
Pro
vid
es
manag
eri
alg
uid
elin
es
on
eva
luati
ng
the
situ
ati
onal
fact
ors
that
cause
sup
ply
risk
Sit
uati
onalfa
cto
rssu
chas
the
deg
ree
of
pro
duct
tech
no
log
y,se
curi
tyneed
s,th
ere
lati
veim
po
rtance
ofth
esu
pp
lier
and
/or
the
purc
hase
rs’
pri
or
exp
eri
ence
wit
ha
risk
ysi
tuati
on
sho
uld
dete
rmin
eho
wm
uch
risk
manag
em
ent
isneed
ed
inth
esu
pp
lych
ain
toavo
idunfo
rese
en
loss
es
and
anti
cip
ate
risk
s.G
up
ta(1
996),
Meye
ret
al.
(1979),
Mo
inza
deh
and
Ag
garw
al
(1997)
2,7
Sup
ply
manag
em
ent
Analy
tica
lm
od
elin
gE
xam
ines
vari
ous
inve
nto
ry-
base
dm
itig
ati
on
stra
teg
ies
for
manag
ing
sup
ply
dis
rup
tio
ns.
Co
nsi
ders
syst
em
relia
bili
tyand
do
wnti
me
as
inp
uts
for
op
tim
al
inve
nto
ryb
uff
eri
ng
stra
teg
ies
Inve
nto
ryca
nb
euse
das
an
eff
ect
ive
risk
mit
igati
on
stra
teg
yund
er
anum
ber
ofci
rcum
stance
s,b
ut
the
relia
bili
tyo
fth
esu
pp
lyb
ase
,to
talnum
ber
of
sup
plie
rsand
yield
rand
om
ness
dri
ves
the
op
tim
alp
olic
y.
70
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
Haks
oz
and
Kad
am
(2008)
4,5
Co
ntr
act
Co
nce
ptu
al
Exa
min
es
contr
act
s,co
ntr
act
penalt
ies
and
pro
duct
ion
insu
pp
lych
ain
s
To
om
uch
pro
duct
ion
isfa
rm
ore
likely
top
rod
uce
loss
es
and
the
react
ion
tounce
rtain
tysh
ould
be
tod
ecr
ease
contr
act
ed
volu
mes.
While
bre
ach
penalt
ies
mit
igate
risk
toth
eb
uye
rs,
they
can
als
osi
gnific
antl
yin
crease
the
vari
ance
inp
rofits
.M
ore
ove
r,p
enalt
yse
lect
ion
sho
uld
be
ap
rud
ent
deci
sio
nth
at
reflect
sno
tju
stexp
ect
ed
pro
fits
but
als
oth
isva
riati
on.
Halli
kas,
Vir
ola
inen
and
Tuo
min
en
(2002)
2,3
,6,8
Tra
nsa
ctio
nco
stand
netw
ork
Case
Deve
lop
sq
ualit
ati
veto
ols
toass
ess
the
risk
sass
oci
ate
dw
ith
sup
plie
rnetw
ork
s
Pro
bab
ility
of
cause
and
eve
nt
and
seve
rity
/eff
ect
of
cause
on
com
pany
are
the
key
rep
rese
nta
tio
ns
of
sup
ply
risk
.Sug
gest
sd
eep
er
und
ers
tand
ing
of
cause
sand
eff
ect
so
fri
sky
eve
nts
iscr
itic
alto
eff
ect
ive
risk
manag
em
ent.
Harl
and
,B
rench
ley
and
Walk
er
(2003)
4,7
Behavi
ora
lC
ase
Exa
min
es
risk
ass
ess
ment
and
manag
em
ent
too
lsfo
rco
mp
lex
sup
ply
netw
ork
s
Sup
ply
netw
ork
risk
ass
ess
ment
too
lsfa
cilit
ate
six
act
ivit
ies:
map
pin
gth
esu
pp
lynetw
ork
,id
enti
fyin
gri
sk,
ass
ess
ing
risk
,m
anag
ing
risk
,fo
rmin
gco
llab
ora
tive
sup
ply
netw
ork
risk
stra
teg
yand
imp
lem
enti
ng
the
stra
teg
y.H
end
rick
sand
Sin
ghal(2
003,
2005a,b
),K
lein
do
rfer,
Belk
e,
Elli
ot,
Lee,Lo
we
and
Feld
man
(2003)
2Sup
ply
chain
Em
pir
ical
Exp
lore
sho
wsu
pp
lych
ain
dis
rup
tio
ns
imp
act
firm
op
era
ting
and
financi
alp
erf
orm
ance
Sup
ply
dis
rup
tio
ns
sig
nific
antl
yaff
ect
firm
op
era
ting
and
financi
al
perf
orm
ance
.Fir
ms
do
no
tre
cove
rq
uic
kly
fro
msu
pp
lyd
isru
pti
ons.
71
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
Hend
rick
set
al.
(2009)
1,2
,3,4
Sup
ply
chain
Em
pir
ical
Exa
min
es
ho
wfirm
op
era
tio
nal
slack
,b
usi
ness
div
ers
ifica
tio
n,
geo
gra
phic
div
ers
ifica
tio
nand
vert
icalre
late
dness
influence
the
sto
ckm
ark
et
react
ion
tosu
pp
lych
ain
dis
rup
tio
ns
Busi
ness
div
ers
ifica
tio
nhas
no
sig
nific
ant
eff
ect
on
the
sto
ckm
ark
et
react
ion.
Fir
ms
that
are
mo
reg
eo
gra
phic
ally
div
ers
ified
exp
eri
ence
am
ore
neg
ati
vest
ock
mark
et
react
ion.Fir
ms
wit
ha
hig
hd
eg
ree
of
vert
icalre
late
dness
exp
eri
ence
ale
ssneg
ati
vest
ock
mark
et
react
ion.
Ho
(1996)
2,3
,4,5
,6,7
Co
nti
ng
ency
and
behavi
ora
lE
mp
iric
al
Exa
min
es
envi
ronm
enta
lfa
cto
rsth
at
dri
veunce
rtain
tyin
manufa
cturi
ng
pro
duct
ion
pro
cess
es
Deve
lop
sa
rese
arc
hfr
am
ew
ork
for
learn
ing
org
aniz
ati
ons
und
er
risk
and
unce
rtain
ty.
Hult
et
al.
(2010)
6,8
Realo
pti
ons
Em
pir
ical
Co
ntr
ast
sho
wre
alo
pti
ons
are
ad
dre
ssed
for
bo
thfirm
-leve
land
sup
ply
chain
deci
sio
ns
The
fund
am
enta
lm
ech
anic
so
fse
vera
lo
pti
ons
op
era
ted
iffe
rentl
yfo
r‘‘su
pp
lych
ain
deci
sio
ns’
’th
an
they
do
for
‘‘firm
-le
veld
eci
sio
ns.
’’Ia
nko
vaand
Katz
(2003)
1,7
Sup
ply
chain
Case
Pre
sents
po
litic
alri
skm
anag
em
ent
stra
teg
ies
inem
erg
ing
eco
no
mie
s
Co
mp
anie
sp
urs
ue
eit
her
low
-in
volv
em
ent
stra
teg
ies
where
they
wo
rkw
ith
aco
nso
rtiu
mo
rth
ey
deve
lop
ad
ivers
enetw
ork
of
pub
lic,
pri
vate
and
go
vern
ment
part
ners
tohelp
them
navi
gate
the
po
litic
alenvi
ronm
ent.
Jutt
ner
(2005)
1,2
,3Sup
ply
chain
Em
pir
ical
Co
nd
uct
sa
surv
ey
of
purc
hasi
ng
manag
ers
reg
ard
ing
the
busi
ness
req
uir
em
ents
for
purc
hasi
ng
risk
manag
em
ent
Manag
ers
are
conce
rned
ab
out
risk
inth
eir
sup
ply
chain
sb
ut
lack
speci
fic
und
ers
tand
ing
on
ho
wto
manag
eri
sk.
Jutt
ner,
Peck
and
Chri
sto
pher
(2003)
1,2
,3,4
,7Sup
ply
chain
Case
Deve
lop
sa
fram
ew
ork
for
exp
lori
ng
the
natu
reo
fsu
pp
lych
ain
risk
The
ess
enti
alco
nst
ruct
so
fsu
pp
lych
ain
risk
manag
em
ent
are
:ri
skso
urc
es,
sup
ply
chain
risk
conse
quence
s,su
pp
lych
ain
stra
teg
yand
sup
ply
chain
risk
mit
igati
on.
Pre
sents
aro
bust
72
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
ag
end
afo
rfu
ture
sup
ply
chain
risk
manag
em
ent
rese
arc
h.
Khan
and
Burn
es
(2007)
7,8
Tra
nsa
ctio
nco
stC
once
ptu
al
Revi
ew
sri
skth
eo
ryap
plie
dto
the
stud
yand
manag
em
ent
of
sup
ply
chain
s
The
key
deb
ate
ssu
rro
und
ing
sup
ply
risk
manag
em
ent
are
exa
min
ed
,and
arg
ues
that
em
pir
icalm
od
els
of
sub
ject
ive
sup
ply
chain
risk
are
inth
eir
infa
ncy
.K
han
et
al.
(2008)
3,7
Tra
nsa
ctio
nco
stC
ase
Exa
min
es
ho
wp
rod
uct
desi
gn
may
be
leve
rag
ed
tom
itig
ate
sup
ply
chain
risk
The
ass
ess
ment
too
lsuse
db
yM
ark
sand
Sp
ence
reff
ect
ively
chara
cteri
zeth
ep
rob
ab
ility
and
seve
rity
of
sup
ply
chain
risk
and
deve
lop
pro
duct
desi
gn
stra
teg
ies
tom
anag
eri
sks
Kle
ind
orf
er
and
Saad
(2005)
2,4
,7Sup
ply
chain
Em
pir
ical/
case
Deve
lop
sa
fram
ew
ork
for
sup
ply
risk
ass
ess
ment
and
mit
igati
on
Co
mp
any
chara
cteri
stic
sand
ind
ust
ryre
gula
tory
pro
gra
ms
have
asi
gnific
ant
dir
ect
eff
ect
on
freq
uency
and
seve
rity
of
acc
idents
.K
nem
eye
r,Z
inn
and
Ero
glu
(2009)
4C
hao
sand
reso
urc
ed
ep
end
ence
Co
nce
ptu
al
Pro
po
ses
ap
roact
ive
pro
cess
for
manag
ing
cata
stro
phic
sup
ply
chain
risk
The
pro
cess
for
manag
ing
cata
stro
phic
risk
consi
sts
of
four
genera
lst
ep
s:id
enti
fica
tio
no
flo
cati
ons
and
thre
ats
for
each
key
loca
tio
n,
est
imati
on
of
pro
bab
iliti
es
and
po
tenti
allo
sses,
eva
luati
on
of
counte
rmeasu
res
and
sele
ctio
no
fco
unte
rm
easu
res.
Kra
ljic
(1983)
2,3
,4Sup
ply
manag
em
ent
Co
nce
ptu
al
Pro
po
ses
that
two
crit
eri
a,
imp
ort
ance
of
purc
hase
and
com
ple
xity
of
sup
ply
mark
et,
are
imp
ort
ant
dete
rmin
ants
of
firm
s’ap
pro
ach
es
tom
anag
ing
dir
ect
mate
rialp
urc
hase
s
Sup
ply
risk
sca
nb
em
anag
ed
by
und
ers
tand
ing
buyi
ng
firm
s’st
reng
ths
rela
tive
tosu
pp
liers
’.B
ase
do
nre
lati
vest
reng
ths,
stud
yre
com
mend
sexp
loit
ati
on,
bala
nce
do
rd
ivers
ifica
tio
nsu
pp
lym
anag
em
ent
ap
pro
ach
es.
73
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
Kull
and
Clo
ss(2
008)
7R
eso
urc
ed
ep
end
ence
Analy
tica
lm
od
elin
gA
naly
zes
ho
ldin
gin
vento
ryas
ari
skre
duct
ion
stra
teg
yIn
creasi
ng
inve
nto
ryd
oes
no
talw
ays
red
uce
,and
may
eve
nin
crease
,su
pp
lyri
sk.
Fir
ms
may
deri
vem
ore
benefit
fro
mest
ab
lishin
gin
vento
ryp
olic
yp
ara
mete
rs,
incr
easi
ng
coo
rdin
ati
on
and
red
uci
ng
seco
nd
-tie
rsu
pp
lier
lead
tim
es.
Leo
po
ulu
sand
Kir
yto
po
ulu
s(2
004)
4,5
,7Sup
ply
chain
Case
Exa
min
es
ho
wri
skass
ess
ment
may
be
inte
gra
ted
into
the
purc
hasi
ng
com
peti
tive
bid
din
gp
roce
ss
An
analy
tica
lhie
rarc
hy
pro
cess
may
be
use
dto
identi
fyth
eb
est
sup
plie
r(t
hat
min
imiz
es
ove
rall
risk
)fr
om
ap
oo
lo
fp
ote
nti
al
sup
plie
rsth
at
vary
inte
rms
of
tech
nic
aland
manag
eri
al
perf
orm
ance
.Le
v(1
975)
2,7
Sup
ply
manag
em
ent
Em
pir
ical
Exa
min
es
the
‘‘sm
oo
thness
’’o
fva
rio
us
perf
orm
ance
measu
res
and
its
imp
act
on
sto
ckp
rice
s
Inve
nto
ryb
uff
eri
ng
help
sfirm
sm
anag
eth
eneg
ati
veeff
ect
so
fenvi
ronm
enta
lunce
rtain
ty.
Lew
is(2
003)
2,3
,5,7
Co
ntr
ol
Case
Ass
ess
es
cause
and
eff
ect
rela
tio
nsh
ips
of
dis
rup
tive
eve
nts
on
inte
rnal(o
pera
tio
nal)
and
ext
ern
al(c
ust
om
er)
loss
es
and
exa
min
es
ase
ries
ofca
usa
leve
nts
for
ase
ries
of
dis
rup
tive
case
s
Fir
ms
need
tound
ers
tand
risk
fact
ors
(cause
s),
the
conse
quence
so
fth
ose
fact
ors
and
deve
lop
aco
ntr
olm
ech
anis
mfo
rth
ose
fact
ors
.A
fram
ew
ork
of
pre
-,d
uri
ng
and
ex
po
stm
itig
ati
on
stra
teg
ies
isp
rese
nte
dfo
reach
case
.Li
(2007)
3,6
Deci
sio
nanaly
sis
Analy
tica
lm
od
elin
gE
xam
ines
risk
and
risk
ave
rsio
nw
hen
asu
pp
lier
isp
rod
uci
ng
cust
om
ized
cap
italg
oo
ds
Ris
kave
rsio
nca
use
sfirm
sto
be
conse
rvati
veand
tod
evi
ate
fro
mth
eo
pti
malp
rod
uct
ion
stra
teg
y.Li
and
Ko
uve
lis(1
999)
5,7
Co
ntr
act
and
deci
sio
nanaly
sis
Analy
tica
lm
od
elin
gE
xam
ines
the
imp
act
of
diffe
rent
contr
act
ing
stra
teg
ies
inunce
rtain
pri
ceenvi
ronm
ents
Co
ntr
act
sth
at
are
tim
e-fl
exi
ble
,q
uanti
ty-fl
exi
ble
,alo
ng
wit
hsu
pp
lier
sele
ctio
nand
risk
shari
ng
can
red
uce
the
sourc
ing
cost
inenvi
ronm
ents
of
pri
ceunce
rtain
ty.
74
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
Liet
al.
(2006)
7Sup
ply
chain
Analy
tica
lm
od
elin
gA
naly
zes
valu
eo
fin
form
ati
on
shari
ng
ina
sim
ula
ted
sup
ply
chain
By
shari
ng
sup
ply
info
rmati
on,
do
wnst
ream
firm
sca
nale
rta
dis
rup
tio
nat
an
up
stre
am
stag
e,
deri
veth
eco
rrect
earl
yw
arn
ing
tim
eand
make
pro
per
deci
sio
ns
too
ffse
tth
eneg
ati
veim
pact
of
the
dis
rup
tio
n.
Manujand
Mentz
er
(2008a)
1,2
,3,4
,7Sup
ply
chain
Co
nce
ptu
al
Inte
gra
tes
mult
i-d
isci
plin
ary
rese
arc
hto
deve
lop
ari
skm
anag
em
ent
and
mit
igati
on
fram
ew
ork
for
glo
balsu
pp
lych
ain
s
Sup
ply
,o
pera
tio
naland
dem
and
risk
sare
the
pri
mary
risk
sin
the
ext
end
ed
sup
ply
chain
.A
five
-st
ep
fram
ew
ork
isd
eve
lop
ed
that
exa
min
es
glo
balsu
pp
lych
ain
risk
sth
roug
hri
skid
enti
fica
tio
n,
risk
ass
ess
ment,
ass
ess
ment
of
risk
manag
em
ent
stra
teg
ies,
imp
lem
enta
tio
no
fri
skm
anag
em
ent
stra
teg
yand
mit
igati
on
of
sup
ply
chain
risk
s.M
anujand
Mentz
er
(2008b
)
1,2
,3,7
Behavi
ora
lC
ase
Exa
min
es
the
eff
ect
iveness
of
six
risk
mit
igati
on
stra
teg
ies
wit
hin
the
conte
xto
fg
lob
als
up
ply
chain
manag
em
ent
The
ad
op
tio
no
fp
ost
po
nem
ent,
specu
lati
on,
hed
gin
gand
inte
gra
tio
nst
rate
gie
sis
afu
nct
ion
of
sup
ply
chain
s’su
pp
lyand
dem
and
risk
and
all
sup
ply
chain
sw
illin
crease
use
of
secu
rity
and
avo
idance
stra
teg
ies.
Mit
chell
(1995)
6,7
,8B
ehavi
ora
lC
once
ptu
al
Pro
vid
es
are
view
of
the
org
aniz
ati
onalb
uyi
ng
behavi
or
litera
ture
Sup
ply
risk
isd
efined
as
the
pro
duct
of
the
pro
bab
ility
of
loss
and
sig
nific
ance
of
loss
toth
ein
div
idualo
rb
uyi
ng
org
aniz
ati
on.
Identi
fies
alis
to
fsu
pp
lym
anag
em
ent-
rela
ted
fact
ors
that
are
risk
-enhanci
ng
and
risk
-re
duci
ng
.
75
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
Nara
sim
han
and
Tallu
ri(2
009)
4,7
Sup
ply
chain
Co
nce
ptu
al
Identi
fies
four
main
are
as
of
sup
ply
chain
risk
:va
lue-f
ocu
sed
pro
cess
eng
ineeri
ng
,la
bo
rm
anag
em
ent
inth
esu
pp
lych
ain
,ca
tast
rop
hic
eve
nts
pla
nnin
gand
ag
ility
and
mit
igati
on
Ris
kass
ess
ment
and
mit
igati
on
are
key
focu
sare
as
of
futu
resu
pp
lych
ain
rese
arc
h.
No
rrm
an
and
Janss
on
(2004)
1,2
,3,4
,7Sup
ply
chain
Case
Inve
stig
ate
sho
wE
rics
son,
aft
er
am
ajo
rsu
pp
lyd
isru
pti
on,
imp
lem
ente
dnew
sup
ply
chain
risk
manag
em
ent
too
ls
Eri
csso
nim
ple
mente
da
risk
identi
fica
tio
np
roce
ssth
at
incl
ud
es
map
pin
go
fp
rod
uct
/se
rvic
eflo
ws
of
up
stre
am
sup
plie
rs.
Ris
kid
enti
fica
tio
nis
follo
wed
by
stru
cture
dri
skass
ess
ment,
ong
oin
gm
anag
em
ent
and
mo
nit
ori
ng
act
ivit
ies.
Pro
bab
ility
and
conse
quence
of
sup
ply
dis
rup
tio
ns
dete
rmin
ein
cid
ent
hand
ling
and
conti
nuit
yp
lans.
Parl
ar
and
Perr
y(1
995)
2Sup
ply
chain
Analy
tica
lm
od
elin
gM
od
els
sup
ply
line
pro
cess
where
one
or
mo
resu
pp
liers
may
no
tb
eava
ilab
led
ue
tod
isru
pti
on
(e.g
.,st
rike
)
Ase
ries
of
mo
dels
issu
bje
cted
tod
iffe
rent
ass
um
pti
ons
of
sup
ply
ava
ilab
ility
and
sho
weff
ect
so
np
rod
uct
ion
yield
.P
eck
(2005)
1,2
,3,4
,5Sys
tem
sC
ase
Exa
min
es
the
sourc
es
and
conse
quence
so
fsu
pp
lych
ain
risk
Ris
kis
em
bed
ded
info
ur
leve
lso
fth
esu
pp
lych
ain
:va
lue
stre
am
,p
rod
uct
and
pro
cess
leve
l,ass
et
and
infr
ast
ruct
ure
leve
l,o
rganiz
ati
ons
and
inte
r-o
rganiz
ati
onalle
veland
envi
ronm
ent
leve
l.P
eck
(2006)
1,2
,3,4
,5,7
Behavi
ora
lC
once
ptu
al
Inte
gra
tes
sup
ply
chain
vuln
era
bili
ty,
risk
and
manag
em
ent
litera
ture
Sup
ply
chain
risk
isa
com
ple
xis
sue
due
toit
sm
ult
i-d
isci
plin
ary
and
mult
i-firm
natu
re.
Sug
gest
sth
at
ext
ant
corp
ora
teri
skm
anag
em
ent
too
lsare
ineff
ect
ive
76
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
at
manag
ing
com
ple
xiti
es
of
sup
ply
netw
ork
s.P
ett
it,
Fik
sel
and
Cro
xto
n(2
010)
1,2
,5Sup
ply
chain
Fo
cus
gro
up
Exp
lore
sle
sso
ns
learn
ed
fro
mact
ualsu
pp
lych
ain
dis
rup
tio
ns
tod
eve
lop
aco
nce
ptu
alfr
am
ew
ork
toeva
luate
and
imp
rove
sup
ply
chain
s
Fin
din
gs
confirm
seve
nd
isti
nct
sup
ply
chain
vuln
era
bili
ties:
turb
ule
nce
,d
elib
era
teth
reats
,ext
ern
alp
ress
ure
s,re
sourc
elim
its,
sensi
tivi
ty,co
nnect
ivit
yand
sup
plie
r/cu
sto
mer
dis
rup
tio
ns.
Rao
and
Go
ldsb
y(2
009)
1,2
,3,4
,6Sup
ply
chain
Co
nce
ptu
al
Revi
ew
sext
ant
litera
ture
on
sup
ply
chain
risk
sto
find
und
er-
inve
stig
ate
dis
sues,
and
deve
lop
sa
typ
olo
gy
tosp
eci
fica
llyin
vest
igate
risk
identi
fica
tio
nin
the
sup
ply
chain
Identi
fies
five
generi
cse
tso
ffa
cto
rsth
at
contr
ibute
to‘‘o
vera
llri
sk’’
inth
esu
pp
lych
ain
:envi
ronm
enta
lri
sk,
ind
ust
ryri
sk,
org
aniz
ati
onalri
sk,
pro
ble
m-
speci
fic
risk
and
deci
sio
n-m
ake
rri
sk.
Rit
chie
and
Bri
nd
ley
(2007a)
1,2
,3,5
,8A
gency
Case
Exp
lore
sth
ein
tera
ctio
nb
etw
een
sup
ply
chain
risk
and
sup
ply
chain
perf
orm
ance
Deve
lop
sa
thre
e-s
tag
eri
skm
anag
em
ent
fram
ew
ork
inw
hic
hri
skand
perf
orm
ance
dri
vers
aff
ect
risk
and
perf
orm
ance
conse
quence
s,w
hic
hin
turn
,in
fluence
risk
manag
em
ent
resp
onse
s.R
itch
ieand
Bri
nd
ley
(2007b
)
1,2
,3,6
,7,8
Behavi
ora
lC
ase
Exp
lore
ssu
pp
lych
ain
risk
manag
em
ent
too
lsD
eve
lop
sa
sup
ply
chain
risk
ass
ess
ment
fram
ew
ork
that
consi
sts
of
five
do
main
s:ri
skco
nte
xtand
dri
vers
,ri
skm
anag
em
ent
and
influence
rs,
deci
sio
nm
ake
rs,
risk
manag
em
ent
resp
onse
sand
perf
orm
ance
outc
om
es.
Pro
po
ses
that
deci
sio
nm
ake
rs’
perc
ep
tio
ns,
risk
pro
file
,att
itud
es
and
exp
eri
ence
aff
ect
deci
sio
n-
maki
ng
pro
cess
.
77
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
Rit
chie
,B
rind
ley
and
Arm
stro
ng
(2008)
1,2
,3,4
Ag
ency
Co
nce
ptu
al
Use
sa
po
rtfo
liori
skm
anag
em
ent
ap
pro
ach
tod
eve
lop
ari
skass
ess
ment
fram
ew
ork
for
sup
ply
chain
s
Sup
ply
chain
manag
ers
must
manag
ea
full
po
rtfo
lioo
fri
skd
rive
rs.Fra
mew
ork
isp
rovi
ded
toco
nst
ruct
ari
skm
anag
em
ent
po
rtfo
lio.
Sin
ha
et
al.
(2004)
1,4
,5,7
Sup
ply
chain
Case
Exp
lore
sth
ed
imensi
ons
of
sup
ply
chain
risk
:la
cko
ftr
ust
,in
form
ati
on
transp
are
ncy
,d
ep
end
ence
on
outs
ourc
ing
and
stand
ard
izati
on
of
contr
act
s
Afive
-ste
pp
roce
ssis
use
dto
eva
luate
risk
inth
eaero
space
ind
ust
ry,
incl
ud
ing
pro
ble
mid
enti
fica
tio
nand
ass
ess
ment,
failu
rem
od
es
analy
sis
and
conti
nuo
us
imp
rove
ment
pro
gra
ms.
Sm
elt
zer
and
Siferd
(1998)
2,3
,4,7
Tra
nsa
ctio
nco
stand
reso
urc
ed
ep
end
ence
Co
nce
ptu
al
Exa
min
es
‘‘p
roact
ive
purc
hasi
ng
’’p
ract
ices,
such
as
sup
plie
rce
rtifi
cati
on
and
qualit
ym
anag
em
ent
‘‘P
roact
ive
purc
hasi
ng
’’help
sm
itig
ate
sup
ply
risk
s,b
ut
only
ifsu
chp
ract
ices
are
ong
oin
g.
Sp
ekm
an
and
Davi
s(2
004)
1,2
Sup
ply
chain
and
transa
ctio
nco
stC
once
ptu
al
Pre
sents
aty
po
log
yo
fri
skin
ext
end
ed
ente
rpri
ses
Mo
reth
an
just
log
isti
cs-r
ela
ted
risk
sho
uld
be
consi
dere
din
risk
manag
em
ent
fram
ew
ork
s.Sutt
on
(2006)
4Sys
tem
sC
once
ptu
al
Fo
cuse
so
nente
rpri
seri
sks
ext
ern
alto
the
firm
(fro
msu
pp
lych
ain
part
ners
)
Pre
sent
ari
skass
ess
ment
fram
ew
ork
for
ext
end
ed
ente
rpri
sesy
stem
s.Tallu
riet
al.
(2006)
2,7
Deci
sio
nanaly
sis
Analy
tica
lm
od
elin
gE
valu
ate
sve
nd
or
perf
orm
ance
by
consi
deri
ng
the
vari
ab
ility
of
vend
or
att
rib
ute
sas
key
inp
uts
tori
skanaly
sis
Deve
lop
sa
meth
od
for
consi
deri
ng
vend
or
perf
orm
ance
usi
ng
am
ult
i-att
rib
ute
ap
pro
ach
tove
nd
or
sele
ctio
nand
eva
luati
on.
Tang
(2006a)
7Sup
ply
chain
Co
nce
ptu
al
Exa
min
es
stra
teg
ies
that
mit
igate
the
eff
ect
so
fsu
pp
lych
ain
dis
rup
tio
ns
Ad
vance
sse
vera
lri
skm
itig
ati
on
tact
ics
incl
ud
ing
po
stp
onem
ent,
stra
teg
icst
ock
,flexi
ble
sup
ply
base
,m
ake
-and
-buy,
eco
no
mic
sup
ply
ince
nti
ves,
flexi
ble
transp
ort
ati
on,
reve
nue
manag
em
ent,
dyn
am
ic
78
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
ass
ort
ment
pla
nnin
gand
sile
nt
pro
duct
rollo
ver.
Tang
(2006b
)1,2
,3,4
,5,7
Sup
ply
chain
Co
nce
ptu
al
Inte
gra
tes
four
are
as
of
sup
ply
chain
risk
manag
em
ent
litera
ture
:su
pp
lym
anag
em
ent,
dem
and
manag
em
ent,
pro
duct
manag
em
ent
and
info
rmati
on
manag
em
ent
Sup
ply
risk
isa
funct
ion
of
sup
ply
netw
ork
desi
gn,
sup
plie
rre
lati
onsh
ips,
sup
plie
rse
lect
ion
pro
cess
es,
sup
plie
ro
rder
allo
cati
on
and
sup
ply
contr
act
s.
To
mlin
(2006),
To
mlin
and
Wang
(2005)
4,6
,7Sup
ply
chain
Analy
tica
lm
od
elin
gA
naly
zes
diffe
rent
mit
igati
on
stra
teg
ies
for
manag
ing
dis
rup
tio
nri
sk.C
om
pare
sre
liab
levs
.unre
liab
led
ualsu
pp
liers
usi
ng
ap
eri
od
icre
view
inve
nto
rysy
stem
.C
onsi
ders
behavi
ora
leff
ect
so
nch
oic
eo
fm
itig
ati
on
stra
teg
ies
Fir
ms’
op
tim
ald
isru
pti
on
mit
igati
on
stra
teg
yis
dete
rmin
ed
by
the
am
ount
of
do
wnti
me
and
risk
att
itud
eo
fth
efirm
.C
onti
ng
ent
rero
uti
ng
iso
ften
aco
mp
onent
of
the
op
tim
al
dis
rup
tio
n-m
anag
em
ent
stra
teg
y.
Tre
leve
nand
Sch
weik
hart
(1988)
2,7
Sup
ply
chain
Co
nce
ptu
al
Exa
min
es
the
eff
ect
of
sing
levs
.m
ult
iple
sourc
ing
stra
teg
ies
on
risk
and
perf
orm
ance
Identi
fies
the
risk
of
sourc
ing
op
tio
ns
usi
ng
am
ult
i-fa
cto
rri
skass
ess
ment
fram
ew
ork
.W
ag
ner
and
Bo
de
(2006)
1,2
,3B
ehavi
ora
land
reso
urc
ed
ep
end
ence
Em
pir
ical
Exa
min
es
ho
wse
lect
sup
ply
chain
chara
cteri
stic
saff
ect
dem
and
-si
de
risk
,su
pp
ly-s
ide
risk
,and
cata
stro
phic
risk
Sup
plie
rd
ep
end
ence
,si
ng
leso
urc
ing
,and
glo
balso
urc
ing
are
dete
rmin
ants
of
sup
ply
-sid
eri
sk;
cust
om
er
dep
end
ence
and
sup
plie
rd
ep
end
ence
influence
dem
and
-sid
eri
sk;
and
sup
plie
rd
ep
end
ence
and
glo
balso
urc
ing
aff
ect
cata
stro
phic
risk
.W
ag
ner
and
Bo
de
(2008)
1,2
,3,7
Behavi
ora
land
conti
ng
ency
Em
pir
ical
Exa
min
es
ho
wd
iffe
rent
typ
es
of
sup
ply
chain
dis
rup
tio
nri
sks
and
risk
manag
em
ent
ap
pro
ach
es
aff
ect
sup
ply
chain
perf
orm
ance
Ris
km
anag
em
ent
po
siti
vely
aff
ect
ssu
pp
lych
ain
perf
orm
ance
but
dem
and
and
sup
ply
risk
are
neg
ati
vely
ass
oci
ate
dw
ith
sup
ply
chain
perf
orm
ance
.W
ats
on
(2004)
2,5
Co
ntr
act
and
transa
ctio
nco
stC
ase
Exa
min
es
contr
act
ing
and
po
wer
rela
tio
nsh
ips
wit
hin
the
film
ind
ust
ry
Ris
kca
nb
eco
ntr
olle
din
the
contr
act
ing
phase
ifm
ark
et
tim
ing
issu
es
and
com
peti
tio
nare
79
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
consi
dere
dw
hen
const
ruct
ing
the
init
ialsu
pp
lyco
ntr
act
.Z
sid
isin
(2003a)
2,8
Behavi
ora
land
transa
ctio
nco
stC
ase
Defines
sup
ply
risk
base
do
nin
terv
iew
sw
ith
manag
ers
inse
ven
firm
s
Sco
pe
of
sup
ply
risk
isd
ete
rmin
ed
fro
mth
eso
urc
es
of
risk
the
firm
face
s,w
heth
er
envi
ronm
enta
lo
rfirm
-sp
eci
fic
sourc
es.
Zsi
dis
in(2
003b
)1,2
,3B
ehavi
ora
lC
ase
Exp
lore
sfa
cto
rsth
at
aff
ect
manag
ers
’p
erc
ep
tio
ns
of
sup
ply
risk
Pro
po
ses
acl
ass
ifica
tio
no
fsu
pp
lyri
skth
at
rela
tes
item
,m
ark
et
and
sup
plie
rch
ara
cteri
stic
so
fsu
pp
lyri
sk.
Zsi
dis
inand
Ellr
am
(2003)
1,2
,7B
ehavi
ora
lE
mp
iric
al
Exa
min
es
sup
ply
risk
and
its
rela
tio
nsh
ipto
the
use
of
behavi
or-
base
dand
/or
buff
eri
ng
mit
igati
on
stra
teg
ies
Sug
gest
sth
at
cho
ice
of
mit
igati
on
tech
niq
ue
(outc
om
eo
rb
ehavi
or-
base
d)
mig
ht
be
dete
rmin
ed
by
the
typ
eo
fri
ska
firm
face
s.Z
sid
isin
et
al.
(2004)
2,3
,4,5
,8A
gency
Case
Syn
thesi
zes
com
mo
nri
skass
ess
ment
tech
niq
ues
Fir
ms
use
ava
riety
of
tech
niq
ues
toass
ess
sup
ply
risk
;te
chniq
ues
may
be
cate
go
rize
das
form
al
pro
cess
es,
sup
plie
rim
pro
vem
ent-
base
do
rsu
pp
lier
inte
rrup
tio
n-b
ase
d.
Identi
fies
and
defines
eig
ht
risk
ass
ess
ment
att
rib
ute
sth
at
rang
efr
om
desi
gn
toenvi
ronm
ent-
rela
ted
ab
iliti
es.
Zsi
dis
in,
Meln
ykand
Rag
atz
(2005)
1,2
,7,8
Sup
ply
chain
Co
nce
ptu
al
Exa
min
es
fact
ors
aff
ect
ing
very
low
pro
bab
ility
-of-
occ
urr
ence
dis
rup
tio
ns
Busi
ness
conti
nuit
yp
lannin
gis
ad
op
ted
for
very
low
pro
bab
ility
-o
f-o
ccurr
ence
dis
rup
tio
ns.
Zsi
dis
inet
al.
(2000)
2,3
,7Sup
ply
chain
Case
Exp
lore
sho
wte
chno
log
y,su
pp
lier
and
funct
ionalri
skfa
cto
rsaff
ect
risk
ass
ess
ment,
conti
ng
ency
pla
nnin
gand
risk
manag
em
ent
Fin
ds
that
firm
ste
nd
touse
mult
iple
sup
plie
rsto
mit
igate
risk
ass
oci
ate
dw
ith
stra
teg
icp
urc
hase
s.H
ow
eve
r,o
nly
four
out
of
the
nin
eSB
U’s
stud
ied
use
form
alri
skass
ess
ment
tofo
rmco
nti
ng
ency
pla
ns.
80
notion that perceptions of risk play a formative rolewithin an individual’s cognitive decision-making process(Yates and Stone 1992) and (ii) findings that managers’
assessments of risk are often imprecise and different fromthose predicated on traditional decision theory (Marchand Shapira 1987). Accordingly, behavioral studies con-ceptualize SDR in terms of perceived probability and
magnitude of loss and examine factors that influenceoverall perceptions of SDR (Zsidisin 2003a). Using abehavioral approach, Mitchell (1995) proposes severalindividual-level factors, such as buyer demographics and
personality, that affect organizational buyers’ risk per-ceptions. In the same vein, Ellis et al. (2010) find thatenvironmental factors affect perceptions of probabilityand magnitude of loss, which in turn influence views of
overall SDR.
DefinitionsThe variety of theoretical perspectives has facilitated the
development of SDR-related definitions that are bothobjective and behavioral in nature. For example, Hen-
dricks and Singhal (2005b, p. 35) adopt an objectiveview and define a supply chain disruption as ‘‘an indi-cator of a firm’s inability to match demand and supply’’;the authors assert that supply disruptions may be due
to many reasons ranging from poor forecasting andplanning to part shortages and production problems.Similarly, Craighead, Blackhurst, Rungtusanatham andHandfield (2007, p. 132) postulate that supply chain
complexity is positively related to disruption severity; intheir study, supply disruptions are defined as ‘‘unforeseenevents that interfere with the normal flow of materialsand/or goods within the supply chain.’’ Other studies
incorporate behavioral elements into definitions of SDR-related constructs. For example, Zsidisin (2003a, p. 222)defines supply risk as ‘‘the probability of an incident as-sociated with inbound supply from individual supplier
failures or the supply market occurring, in which itsoutcomes result in the inability of the purchasing firm tomeet customer demand or cause threats to consumer lifeand safety.’’ Ellis et al. (2010, p. 36) build on this work
and define SDR as ‘‘an individual’s perception of the totalpotential loss associated with the disruption of supply ofa particular purchased item from a particular supplier.’’
Constructs and FindingsSeveral aspects of risk, including antecedents and con-
sequences of risk as well as risk assessment frameworks,have been explored in prior research. In aggregate, theSDR literature suggests many supply market-, supplybase-, supplier- and product-related antecedents of SDR.
Whereas supply market antecedents include factors suchas market thinness, entry barriers and capacity availabil-ity (Kraljic 1983), supply base antecedents include thenumber of suppliers, density of the supply network,
differentiation of suppliers and interrelationships be-
TA
BLE
1C
onti
nued
Stu
die
sFig
ure
1Fra
mew
ork
Cate
go
riza
tio
na
Refe
rence
dTheo
riesb
Meth
od
cR
ese
arc
hFo
cus
Co
ncl
usi
ons
Zsi
dis
inand
Sm
ith
(2005)
7,8
Ag
ency
Case
Exp
lore
sro
leo
fearl
ysu
pp
lier
invo
lvem
ent
as
ari
skre
duct
ion
tact
ic
Earl
ysu
pp
lier
invo
lvem
ent
ind
irect
lyle
ad
sto
pro
duct
failu
rere
duct
ion
and
sup
plie
rfa
ilure
red
uct
ion.
aFra
mew
ork
cate
go
riza
tio
nco
des:
(envi
ronm
ent)
1—
geo
po
litic
alfa
cto
rs,
2—
sup
ply
fact
ors
,3
—p
rod
uct
fact
ors
;(o
rganiz
ati
on)
4—
stru
cture
and
syst
em
s,5
—co
ntr
ols
;(in
div
idual)
6—
att
rib
ute
s,7
—enact
ment,
8—
sele
ctio
nand
rete
nti
on.
bE
xtant
rese
arc
huse
sb
oth
form
alth
eo
ries
(e.g
.,ag
ency
,b
ehavi
ora
l,ch
ao
s,co
mp
lexi
ty,
contr
act
,co
ntr
ol,
deci
sio
nanaly
sis,
netw
ork
,re
alo
pti
ons,
reso
urc
ed
ep
end
ence
,sy
stem
sand
transa
ctio
nco
st)
and
sub
stanti
veth
eo
ries
(e.g
.,su
pp
lych
ain
and
sup
ply
manag
em
ent)
.W
here
as
form
alth
eo
ries
are
fair
lyub
iquit
ous
and
may
be
ap
plie
dto
ara
ng
eo
fco
nte
xts,
sub
stanti
veth
eo
ries
are
conte
xt-s
peci
fic.
Sup
ply
chain
theo
ries
invo
lve
risk
pheno
mena
ass
oci
ate
dw
ith
bo
thsu
pp
lier
(i.e.,
up
stre
am
)and
cust
om
er
(i.e
.,d
ow
nst
ream
)tr
ansa
ctio
ns;
sup
ply
manag
em
ent
theo
ries
genera
llyad
op
ta
buye
rp
ers
pect
ive
and
ad
dre
ssup
stre
am
risk
pheno
mena
only
.c W
euse
the
term
‘‘em
pir
ical’’
tod
esc
rib
ela
rge-s
cale
inte
rvie
w,
surv
ey
and
arc
hiv
ald
ata
colle
ctio
n/a
naly
sis
ap
pro
ach
es.
81
tween suppliers (Choi and Krause 2006; Craighead et al.2007). Extant research further suggests that supplier at-tributes, such as supplier capabilities, performance and
size (Mitchell 1995; Cohen, Ho, Ren and Terwiesch2003; Zsidisin 2003a), and product characteristics, likelevel of customization and pace of technological change(Kraljic 1983; Giunipero and Eltantawy 2004; Ellis et al.
2010), influence SDR.Several studies find a significant relationship between
supply disruption and firm performance. In particular,results from empirical research indicate that supply dis-
ruptions are negatively related to buying firms’ stockperformance (Hendricks and Singhal 2003, 2005b;Hendricks, Singhal and Zhang 2009) and operationalperformance (Hendricks and Singhal 2005a). These
studies have motivated a related stream of research thatproposes risk assessment methodologies and tactics tomitigate SDR. Within this research stream, Kleindorferand Saad (2005) develop a comprehensive, stepwiseapproach to identifying and mitigating risks. Similarly,
Sheffi and Rice (2005) propose the use of vulnerabilitymaps to aid in the identification and mitigation of supplyrisks. Several mitigation tactics, such as early supplierinvolvement (Zsidisin and Smith 2005), information
sharing (Li, Lin, Wang and Yan 2006), buyer–supplierrelationship management (Sinha, Whitman andMalzahn 2004), contingency planning (Tomlin and Wang2005; Tomlin 2006), sourcing policy and philosophy
(Treleven and Schweikhart 1988; Smeltzer and Siferd1998; Zsidisin, Panelli and Upton 2000) and inventorypolicy (Meyer, Rothkopf and Smith 1979; Gupta 1996;Moinzadeh and Aggarwal 1997; Kull and Closs 2008),
may reduce the likelihood and/or severity of supplydisruption.
Gaps and TrendsOur review of the SDR literature leads us to draw three
important conclusions. First, we find that risk drivers,consequences of risk, risk mitigation tactics and risk
assessment represent important elements of a compre-hensive model of SDR. However, these important com-ponents are not well integrated in existing research.Second, our review suggests the growing importance ofincorporating organizational and individual factors into
SDR research. However, this effort is only in its incipientstages; we find few empirical studies of SDR that draw onsuch variables to explain disruption risk phenomena.Third, our findings indicate a developing consensus that
behavioral views are important to our understanding ofSDR. However, extant SDR research provides limited in-sight into the social and psychological mechanisms thatunderlie SDR perceptions and the SDR decision-making
process.
ENACTMENT THEORYEnactment theory concerns the psychological and so-
cial processes through which individuals and organiza-
tions derive meaning, or ‘‘make sense,’’ from theirexperiences (Weick 1969, 1995, 2001). Fundamental tothis theory is sense-making — a closed-loop processcomprised of enactment, selection and retention activi-
ties that enable individuals to resolve equivocality (Weick1969). Equivocality denotes the extent to which multiplemeanings are linked with situation and arises when (i)derived meanings are subject to infinite revision as events
unfold and conflicting individual and social explanationsare invoked and (ii) the relative superiority of a particularexplanation remains ambiguous (Weick 2001, p. 10).With high levels of equivocality, the environment is un-
analyzable and enactment becomes the primary meansof understanding (Weick 2001).
Sense-making ProcessWithin the sense-making process, enactment represents
the execution of actions that are guided by preconcep-tions but may not be fully understood by the actor
(Weick 2001). Accordingly, enactment incorporates pre-vious understanding and provides the raw material forsubsequent clarification of understanding. Selectionrefers to the interpretation process in which individuals
attach meanings to actions by constructing plausiblestories that explain current accounts of enactment (Weick2001). In effect, an individual ‘‘selects’’ a contextuallyrational explanation, from those available, that best uti-
lizes past wisdom and experiences. Through the selectionprocess, past experiences constrain and preconceptionsinfluence, current understanding. As such, the selectionprocess accounts for the extent to which the perceived,
enacted environment matches an objective reality and iscritical to the accurate judgment of risk.
Through enactment and selection, salient entities areidentified and cause–effect relationships are developed;
in the subsequent retention process, these entities andtheir cause–effect relationships are stored within cogni-tive cause maps. The resulting cognitive cause map existswithin the mind of the individual and represents (i) past
wisdom, that is, ‘‘knowledge of what one thinks’’ (Weick2001, p. 189), (ii) the criteria that influences what isnoticed versus ignored, and how one will act (Weick1969) and (iii) the enacted environment (Weick 2001).Through closed-loop process feedback, retained wisdom
may constrain future actions and/or influence how futureactions are interpreted (Weick 2001). As such, throughthe enactment-selection-retention process, action is in-formed and the capacity for judgment is developed.
Organizations augment the sense-making processthrough aggregating cognitive mechanisms such as groupmind and collective cause maps. Group mind refers tothe cognitive interdependence that forms among indi-
viduals that maintain close relationships; through such
82
relationships, individuals ‘‘enact a single transactivememory system, complete with differentiated responsi-bility for remembering different portions of common
experience’’ (Weick 2001, p. 260). Commonalities acrossindividuals’ cognitive cause maps form the basis for or-ganizational values and goals that guide enactment andselection activities (Weber and Glynn 2006). As such,
collective cause maps, supported by organizationalstructure, systems and controls, facilitate reductions inequivocality by constraining the number of acceptablemeanings that may be attached to an event.
Core PrinciplesEnactment theory employs two salient principles, in-
volving rationality and interaction, which facilitate thedevelopment of our conceptual framework. The first
principle holds that individuals behave with constrainedrationality that is retrospective in nature. Constrainedrationality implies that individuals ‘‘act rationally withinthe limits of the [cognitive cause] maps they build’’(Weick 2001, p. 322). Simplifying procedures applied to
cognitive cause maps suggest that individuals pursuereasonable rather than economically optimal strategies tocope with equivocality. The retrospective nature of ra-tionality focuses on justifying enactment rather than
planning future action; in this post hoc view, rationalbehavior is situation-dependent and involves justifica-tion of enactment that facilitates legitimacy with impor-
tant members of the social unit (i.e., leaders of theorganization).
A second underlying principle of enactment theory
suggests that interaction, and associated committed ac-tion, represent the fundamental elements of social or-ganization. Interaction refers to the action–responsedyad that interlocks individuals’ behaviors and provides
the context for committed action — action that is irre-vocable, public and volitional and to which individualsbecome bound (Weick 2001, p. 17). Committed actiongives rise to organization as individuals become depen-
dent on those with whom they interact in order toachieve desired outcomes. Coordination results as indi-viduals (i) adopt shared goals that justify committedactions and (ii) conduct actions heedfully while envi-
sioning the joint actions of the organization (Weick2001). Thus, the principles of rationality and interaction,coupled with the need to cope with equivocality, renderthe individual, organization and environment inextrica-bly intertwined.
SDR CONCEPTUAL FRAMEWORKThrough the lens of enactment theory, we develop a
conceptual framework that advances understanding ofthe SDR decision-making process. As shown in Figure 1,
our framework integrates extant SDR research (see cate-gorization references in Table 1 that link SDR studieswith Figure 1) with constructs culled from organizational
Individual
Attributes [6] PersonalityValuesExperience Cognitive Abilities
Adapted From Weick’s Organizing Model (1969, Fig. 4, p. 93)
Enactment [7] Early Supplier InvolvementLogistics Integration Supplier Selection & Evaluation Supplier Development Contingency Planning
Selection [8]LossLoss SignificanceLoss LikelihoodOverall Risk
SDR Decision-Making as Sense-Making Process
Retention [8]Cognitive Cause Map
Product Factors [3] Customization Technology
Supply Factors [2] Supplier Supply Network Supply Market
Geopolitical Factors [1] GovernmentNatural Disasters Societal Disruptions
Environment
Controls [5] RolesRulesCulture Reward Systems
Structure & Systems [4] Decentralization Work Team Composition Staffing Level Information Systems Formal Risk Assessment
Organization
FIGURE 1Supply Disruption Risk (SDR) Conceptual Framework1,2
1The numbers in brackets serve as common references that link sets of factors to the SDR studies presented in Table 1.2We set the color of the double-ended arrow that links environmental and organizational factors to gray to denote that this set of relationships
is not germane to our theoretical development. While we acknowledge the existence of this relationship, the focus of this study is on how
environmental, organizational and individual factors affect the sense-making process.
83
and behavioral literature. We adopt three units of anal-ysis — environment, organization and individual — toserve as the fundamental building blocks of our frame-
work and use double-headed arrows to represent theinterdependent nature of these units of analysis. The in-terdependence among individual, organization andenvironment is driven by three principles culled from
enactment theory: (i) environments are enacted throughindividuals’ actions, (ii) organizations, which representindividuals’ social structures, interact with the environ-ment through individuals’ actions and (iii) through the
sense-making process, organizations augment individu-als’ ability to understand the environment (Weick 2001).We conceptualize an ‘‘organization’’ as a firm and suggestthat the ‘‘environment’’ consists of entities external to the
firm that are not subject to direct control throughownership or fiat. The ‘‘individual’’ is a buyer of directmaterials; buyers enact their environments through theadoption of risk mitigation actions and the meaning thatis derived from these actions.
In the context of SDR decision-making, we draw fromenactment theory to suggest that the socio-psychologicalsense-making process underlies the formation of buyers’SDR perceptions and decisions to mitigate such risks. At
the individual level, we conceptualize the SDR decision-making process as a specialized case of sense-making inwhich judgments and evaluations of risk and adoption ofrisk mitigation tactics may be viewed as situation-specific
enactment, selection and retention activities. We positthat equivocality, and its reduction, link environmental,organizational and individual factors to the SDR deci-sion-making process. Whereas equivocality stems from
the supply environment, buyers invoke the sense-makingprocess to resolve such equivocality. In the course ofsense-making, buyers enact risk mitigation strategies (i.e.,enactment) and form judgments and overall appraisals
of SDR (i.e., selection) which are retained to informsubsequent enactments (i.e., retention). Further, we positthat individual and organizational factors affect howequivocality is resolved and, subsequently, how SDR
perceptions are formed and managed. Thus, the level ofequivocality inherent in the supply environment, cou-pled with the organizational and individual factors thataffect the equivocality resolution process, cause the SDRdecision-making process to vary significantly across
buyers and their firms.
EnvironmentTraditionally, the environment has been defined in
terms of resources, complexity, interdependence andmarkets (Porac, Thomas and Baden-Fuller 1989; Scheid-
Cook 1992). An important distinction lies in the contrastbetween ‘‘enacted environment’’ and ‘‘environment.’’Whereas the enacted environment refers to a mentalmodel stored within the mind of an individual, the
concept of environment is much broader in nature. The
narrow scope of enacted environment is attributable tothe notion that individuals, due to their bounded ratio-nality, cannot attend to and interpret all possible envi-
ronmental cues; through the sense-making process, anindividual forms a mental model of the environmentthat is only a ‘‘partial representation of a larger transac-tional network’’ (Porac et al. 1989, p. 399). In contrast,
the broader notion of environment extends beyond anindividual mind and represents an objective reality thatmay not be fully known or accurately understood by anindividual. Within our framework, we conceptualize the
broader environment in terms of geopolitical, supplymarket and product factors and suggest that these factorsserve as an expansive source of uncertain, complex, dy-namic and interdependent cues that drive equivocality
within the SDR decision-making process.Geopolitical Factors. Geopolitical factors can generally
be classified as governmental, natural and societaldisruptions (Iankova and Katz 2003) and involveequivocality ‘‘arising from supply chain distance suchas disruption caused by political (e.g., fuel crisis), natural(e.g., foot and mouth disease outbreak, fire, earthquake)or social (e.g., terrorist attacks) uncertainties’’ (Juttner2005, p. 121). A government’s formal policies, such asnationalization and confiscation mandates, exchangecontrols, workforce safety laws and local contentrequirements, and informal policies, which may tacitlyallow bribery and corruption, drive uncertainty throughthe creation of a problematic or overly regulatedexchange environment (Iankova and Katz 2003; Peck2005). Uncertainty is exacerbated when transactionsinvolve international exchange; in such cases,asymmetries of information render monitoring difficultand permit deception in contracting (Bhattacharyya,Datta and Offodile 2010). Further, internationalexchange increases the complexity of transactions asbuyers must bridge disparate political, legal, monetary,logistical and cultural systems (David 2004).
Natural disasters, such as fires, floods, windstorms andearthquakes, and societal disruptions, which includeexcess violence, outbreak of disease, terrorist attacks,revolutions, strikes, war and protest, similarly introducehigher levels of equivocality into the SDR decision-making process (Berger, Gerstenfeld and Zeng 2004;Giunipero and Eltantawy 2004; Sheffi and Rice 2005).Such events may directly or indirectly affect flows ofdirect materials by rendering suppliers’ productionfacilities or supporting infrastructure (e.g., roads, portsand communication systems) inoperable (Wagner andBode 2008). Uncertainty driven by the inability to predictthe onset, severity or impact of natural disasters andsocietal disruptions renders both a priori and ex postmitigation difficult (Altay and Ramirez 2010). Further,the relative infrequency of these exogenous eventssuggests that buyers accumulate limited retainedunderstanding that may be drawn upon to resolve theequivocality that stems from these situations (Spekman
84
and Davis 2004). Accordingly, extant research is rich withexamples which suggest that multiplicity of perceptionsand actions typify emergency situations (Weick 2001;Sheffi and Rice 2005).
Supply Factors. Whereas geopolitical factors incorporatea global view of the transactional environment, supplyfactors involve supplier, supply network and supplymarket attributes. Extant SDR research suggests thatsupplier factors, such as supplier performance variationand supplier proximity, introduce complexity anduncertainty into the SDR decision-making process.Inconsistent suppler performance, stemming fromsuppliers’ inadequate product and/or product-relatedcapabilities, materializes in the form of insufficientsupply capacity, poor product quality, lack of productinnovation and inability to reduce costs; such problemscomplicate buyers’ coordination efforts (Zsidisin 2003a;Spekman and Davis 2004; Zsidisin, Ellram, Carter andCavinato 2004). The level of uncertainty and complexityincreases as buyers source direct materials with distantsuppliers. Whereas proximal suppliers facilitate higherlevels of buyer–supplier coordination (Kaynak 2002),coordination of distant suppliers is complicated by theincreased likelihood of (i) higher transportation leadtimes and (ii) multimodal shipments (Peck 2005).Further, longer lead times increase the need to managehigher inventory levels and difficulty of responding todemand variation in product volume and mix (Zsidisinand Ellram 2003).
The supply network refers to the current members of afirm’s upstream supply chain. Supply network attributes,such as complexity and density, may also increase theequivocality associated with the supply environment.Drawing from Choi and Krause (2006), we conceptualizesupply network complexity as a multidimensionalconcept that includes the (i) number of suppliers, (ii)differentiation of suppliers and (iii) interrelationshipsamong suppliers in the supply chain. The number ofsuppliers reflects the size of a firm’s direct materialssupply base; whereas too many suppliers increase thecomplexity of coordination and control, too fewsuppliers (as with thin markets) may result inoverdependence and increased equivocality that stemsfrom supplier opportunism and limited informationflows. Differentiation of suppliers concerns the extentto which suppliers within a supply base do not sharecommon culture, practices or systems. As in the case ofthe keiretsu, low levels of differentiation facilitate sharedunderstanding which limits complexity; however,complexity increases as buying firms manage supplierswhose cultures and practices are more heterogeneous innature (Choi and Krause 2006). Interrelationships aredefined as supplier–supplier relationships that existwithin a firm’s supply base; to the extent thatinterrelationships facilitate the alignment of culture,practices and systems, supplier–supplier relationshipsmitigate the complexity inherent in a supply network
(Choi and Krause 2006). Supply network density refersto the geographic spacing of suppliers comprising theupstream supply chain (Craighead et al. 2007). A denselylocated supplier network, through its interaction withgeopolitical factors, may have a significant effect onequivocality as a greater portion of the supply networkmay be simultaneously impacted by government action,natural disaster or societal disruption.
The supply market is comprised of all current andpotential suppliers of a firm’s direct material. Supplymarket attributes, such as thinness and dynamism, mayalso contribute to the level of equivocality that stemsfrom the environment. Whereas thinness refers to thenumber of suppliers capable of supplying a directmaterial (Cannon and Perreault 1999), dynamismrepresents the fluctuation in the manufacturing capacityor price of purchased goods in the supply market(Zsidisin 2003a). In thin markets, where there are fewersuppliers, buyers are more dependent on existingsuppliers; the resulting dependence increases thelikelihood that suppliers will behave opportunistically(Bensaou and Anderson 1999). Further, thin marketsoffer buyers fewer opportunities to gain market insightsfrom alternate suppliers (Cannon and Perreault 1999).Together, the increased likelihood of supplier oppor-tunistic behavior and reduced information flowintroduce equivocality as buyers’ ability to understandthe motives that underlie suppliers’ actions are severelyinhibited. Alternately, dynamic supply markets, char-acterized by rapid structural change, infuse uncertaintyinto the underlying value proposition of a purchasedgood. Such dynamism may be structural in nature;low barriers to entry and rapidly changing producttechnology may facilitate the rise of new entrants(Porter 1980). Conversely, supply markets characterizedby mature product technologies and high levels ofcompetition are subject to consolidation and exit ofexisting firms which cause the competitive landscape tochange (Hallikas and Varis 2009). In a dynamic market,equivocality ensues as changes in the market outpacegrowth in a buyer’s retained understanding of potentialsuppliers, available products offered by the market andthe prevailing price per product feature.
Product Factors. Product attributes, such as custom-ization and the nature of underlying technology, mayalso affect the level of equivocality inherent within theSDR decision-making process. Product customizationrefers to the extent to which the specifications of thedirect materials are singular to the buying firm (Perdueand Summers 1991) and necessitates relationship-specificinvestments with suppliers to develop capabilities thatmatch customers’ specific needs (Stump, Athaide andJoshi 2002). Buyers’ dependence on suppliers increasesas suppliers’ investments in specialized plants,equipment and personnel effectively reduce the numberof available sources of supply (Hallen, Johanson andSeyed-Mohamed 1991). Equivocality stems from product
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customization as (i) the resulting thin markets permitsuppliers’ opportunistic behavior and limit informationflows (Hedge, Kekre, Rajiv and Tadikamalla 2005) and(ii) the deviation from standard product designsnecessitates proprietary interfaces, increasing thecomplexity of coordination between buyer and supplier(Novak and Eppinger 2001). The dynamism of producttechnology — the rate of technological change for aparticular product technology in an industry (Droge,Claycomb and Germain 2003) — also impacts the levelof equivocality inherent in the supply environment(Weick 2001). Rapid technological change obfuscatesperformance expectations as buyers must learn theintricacies of new technologies to adequately evaluatesupplier capabilities and effectively resolve supply chainissues. With rapidly changing technologies, standards forprice and value assessments become ambiguous asretained understanding lags technological advancement(Ellis et al. 2010).
Equivocality. In aggregate, we assert that uncertainty,complexity, dynamism and interdependence representoverlapping properties of the supply environment thataffect the level of equivocality of the SDR decision-making process. Whereas uncertainty raises the prospectfor equivocality due to ‘‘a lack of information aboutcause-effect relationships’’ (Milliken 1987, p. 134),complexity, which captures ‘‘the number of elementswithin the system and the degree to which theseelements are differentiated’’ (Choi and Krause 2006,p. 5), increases the likelihood that a buyer willconfront the unknown. In the same vein, dynamismsuggests that an individuals’ extant knowledge,conceptualized as retained understanding, may notkeep pace with the rapidly changing environment(Achrol and Stern 1988). Further, interdependencerequires close interlocking behaviors, which imposecomplexities of coordination (Weick 2001). Throughthese mechanisms, we suggest that geopolitical, supplyand product attributes associated with the supplyenvironment impose difficulty in establishing a singularmeaning that informs decision-making.
Proposition 1: The level of uncertainty, complexity,dynamism and interdependence associated withgeopolitical, supply market and product factors ispositively associated with the level of equivocalityinherent in the SDR decision-making process.
OrganizationThe predominant view in the sense-making literature is
that organizations are an ‘‘internal cognitive constraint’’(Barley and Tolbert 1997) or ‘‘structures that constrain
sense-making by making some actions unimaginable andothers self-evident’’ (Weber and Glynn 2006, p. 1641).Organizing serves to reduce the level of equivocality fromthe environment by ‘‘[shaping] what people say and do,
[shaping] what people notice in their deeds and dis-
course, and [shaping] the thoughts, presumptions, andlabels that people treat as their beliefs’’ (Weick 2001, p.96). Previous supply risk research suggests that two
general sets of organizational factors may play an im-portant role in the management of supply disruptions:(i) systems and structures and (ii) controls (Mitchell1995). We propose that these sets of organizational fac-
tors serve to reduce equivocality through policies, pro-cedures, information and social interactions that affect anindividual’s sense-making process. Organizational struc-tures, systems and controls influence what buyers pay
attention to and what justifications of the enacted envi-ronment are considered appropriate. Through their effecton the sense-making process, organizational factors fa-cilitate buyers’ capacity to cope with equivocality inher-
ent in SDR decisions.
Organizational Structure and Systems. Organizationalstructure and systems act to reduce environmentalequivocality by facilitating sensible interpretation (i.e.,selection) and group mind (i.e., retention). Weick (2001)identifies several aspects of organizational structure thatare germane to the sense-making process: level ofdecentralization, composition of work teams andstaffing level. Decentralization refers to the extent towhich authority for decision-making is distributedthroughout lower levels of the organization (Lee andChoi 2003). Relative to centralization, decentralizedstructure facilitates understanding as (i) actions are notimpeded by vertical communication flows and requestsfor approval and (ii) authority to act resides with thosemost knowledgeable to act. Accordingly, decentralizationpromotes more frequent enactment and subsequentinterpretations that make sense of previous actionswhile leading to appropriate future actions (Weick2001). Composition of work teams reflects the natureand distribution of knowledge and underlyingexperience of those who collaborate to accomplishorganizational goals. Both breadth of knowledge andknowledge overlaps facilitate development ofcomprehensive group mind (Weick 2001). Whereasbreadth of knowledge increases the likelihood of theteam’s familiarity with current circumstances, knowledgeoverlaps provide the mutual understanding that enablesgroup mind (Weick, Sutcliffe and Obstfeld 2005). Assuch, teams having broad, overlapping knowledge andexperiences may leverage a richer group understanding toresolve equivocality. In a similar vein, understaffinglimits the capacity to cope with equivocality as thenumber of individuals available to act, interpret andform group mind is reduced (Weick 2001).
Organizational information systems provideadditional means to cope with equivocality that stemsfrom the environment (Mitchell 1995; Zsidisin et al.2004). Rich information systems, and their relatedtechnologies, facilitate the collection, storage andprocessing of information that enables the
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characterization of the supply environment through (i)analytical and decision support, (ii) identification andpresentation of environmental cues, (iii) support ofgroup mind, (iv) information presentation and (v)timely feedback. Whereas transaction systems facilitatethe assessment of historical data, decision support toolspermit further understanding of the environmentthrough simulation and what-if analyses (Murphy andWood 2004). Accordingly, analytical and decisionsupport tools augment retained understanding andfacilitate sensible interpretation of prior actions. Infor-mation systems also affect the specific cues to whichindividuals attend. Given the infinite number of ways inwhich continuous experience may be parsed, infor-mation systems can identify and present salient cuesthat support meaningful interpretation and effectiveaction while dismissing those cues that are superfluous(Craighead et al. 2007). Further, information sharingfacilitates the development of group mind; throughinformation sharing, relevant pieces of relatedexperience can be pooled across multiple members ofthe organization such that integrated organizationalunderstanding is enhanced. In addition, informationsystems influence how information is represented toactors; data format, presentation and context influenceboth preference and judgment (Tversky and Kahneman1981; Stone, Yates and Parker 1994). Thus, through datarepresentation, information systems reduce equivocalityby constraining (i) preference that guides enactment and(ii) interpretation that influences judgment of prioractions. Finally, information systems promote equivo-cality reduction by facilitating timely transmission andreceipt of messages. Timely feedback enables promptrevisions to interpretation and swift updates to retainedunderstanding that enable further sense-making efforts(Weick 2001).
Organizations may further increase the capacity toresolve equivocality through the use of risk assessmentsystems that formalize scanning and informationprocessing efforts (Lewis 2003). Scanning refers to thebreadth and depth to which the external environmentis examined for salient cues; alternately, informationprocessing reflects the translation of cues into mean-ingful information that promotes shared understanding(Weick 2001). Together, scanning and informationprocessing reduce equivocality by advancing organi-zational knowledge (Brown, Stacey and Nandhakumar2007). In general, formal risk assessment systems use afour-step process in which (i) top management approvesresources to support the risk management process, (ii)vulnerable key processes, assets, facilities and humanpopulations are identified, (iii) specific vulnerabilities,probabilities of occurrence and risk reducing activities areevaluated and (iv) an ongoing reporting and auditingteam is implemented (Kleindorfer and Saad 2005). Theoutput from this process may enhance organizationalunderstanding such that a comprehensive representation
of the supply environment is shared within theorganization.
Proposition 2: Decentralized structure, diverse workteams with overlapping knowledge, staffing level andsystems that enable rich information flows and formalassessment are negatively associated with the level ofequivocality inherent in the SDR decision-makingprocess.
Organizational Controls. Organizational controls,such as rules, roles, reward systems and culture,represent social mechanisms that facilitate interpretationof the environment and shape behavior. Identity andidentification are central components of sense-making(Weber and Glynn 2006). Weick et al. (2005, p. 416)assert, ‘‘who we think we are (identity) as organizationalactors shapes what we enact and how we interpret.’’ Oneelement of identity construction can be found in the rolesthat are established for organizational actors. Rolesemerge from justifications of committed action andreflect a ‘‘set of both expected and enacted behaviors’’that facilitate heedful interaction among members of anorganization (Zigurs and Kozar 1994, p. 277). As such,roles reduce equivocality by guiding enactment anddefining appropriate types of response. Whereas rolesgenerally describe duties associated with a particularposition, rules reflect general policy and presetresponses to standardized situations (Scott 2001). Thecapacity of the organization to cope with equivocalityincreases as (i) the ‘‘severity, number, latitude fordeviations and clarity’’ of rules intensifies, (ii)agreement on ‘‘the content of rules, the nature ofviolations and how violations will be handled’’increases and (iii) the speed with which ‘‘people learnabout the effects of their actions’’ increases (Weick 2001,p. 43). Thus, roles and rules affect organizational capacityto cope with equivocality by defining appropriate actionand aiding recognition and interpretation of cause–effectrelationships.
Rewards systems reinforce the alignment betweenemployees’ actual and expected behavior through threemechanisms: (i) performance definition, (ii)performance appraisal and (iii) performance feedback(Summers 2005; Noe, Hollenbeck, Gerhart and Wright2008). Through performance definition, employee goalsthat are congruent with those of the organization areidentified and set (Folan and Browne 2005). Whereasappraisal involves the assessment of employee perfor-mance, feedback facilitates adjustment in employeebehavior. Thus, reward systems, when linked toemployee performance, affect enactment by motivatingdesired organizational behaviors (Rynes, Gerhart andParks 2005; Ritchie and Brindley 2007b). In addition,behavior-based reward systems may promote organi-zational learning by (i) rewarding nonevents (i.e., the
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absence of crisis), enactment and communal behaviorsand (ii) permitting failure (Weick 2001; Zsidisin andEllram 2003); by facilitating an organizationalenvironment that promotes learning, the capacity toreduce equivocality is increased.
Culture refers to the enduring beliefs of anorganization (Scott 1998) and is embodied withinorganizational values, paradigms and stories (Bruner1991). Organizational values represent social agreementon the criteria that distinguishes acceptable action,sensible interpretation and effective performance(Oyserman 2002). Organizational values reside ingroup mind and guide heedful, coordinated action byaffecting preferences for action and providing capacity forjudgment (Weick 2001). Further, values enhanceorganizational sense-making by driving the need toexplain behavior to one’s important peers in a sociallyacceptable manner (Weick 2001). In a similar vein,organizational paradigms are dominant beliefs aboutunderlying patterns or models and arise from strongsocially accepted justifications (Isabella 1990). Adominant model within an organization ‘‘improvesprediction, [and] allows a higher level of agreement oncause-effect relationships and/or preferences’’ (Weick2001, p. 80); in this way, paradigms facilitateequivocality reduction. Stories provide means topropagate values and paradigms throughout theorganization; stories are particularly useful supplementsto experience when trial and error is not possible (Bruner1991). As an equivocality coping tool, shared stories‘‘provide general guidelines within which they[individuals] customize diagnoses and solutions tolocal problems’’ (Weick 2001, p. 341). In sum, becauserules, roles and reward systems rely on precedence foreffect, culture represents a particularly powerful means toreduce equivocality.
Proposition 3: Organizational controls, such as roles,rules, rewards systems and culture, are negativelyassociated with the level of equivocality inherent in theSDR decision-making process.
IndividualWithin the context of SDR, we suggest that the sense-
making process serves as the basis for the SDR decision-
making process in which the adoption of risk mitigationtactics, judgments and evaluations of SDR, and under-standing of the supply market are closely linked. Al-though these linkages exist within an individual’s mind,the activities associated with the underlying sense-mak-
ing process are both psychological and social in nature.SDR Decision-Marking as Sense-Making Process. In
highly equivocal situations, the sense-making processbegins with enactment. Faced with multiple potentialinterpretations of environment, ‘‘people often don’tknow what the ‘appropriate action’ is until they take
some action and see what happens’’ (Weick 2001, p.225). Enactment involves actions that provide the streamof episodes that may be singled out for subsequentinterpretation. During enactment, preconceptions guideactions aimed at managing a situation; through suchactions, equivocality — the raw material of sense-making— is introduced into the sense-making process (Weick1969). Equivocality is reduced through (i) subsequentstages of the sense-making process and (ii) laterenactments, which incorporate feedback from previousenactments and simplify problem structure (Weick2001). Thus, through action, individuals bothdetermine and affect the situation and developknowledge of a previously equivocal environment; inthis way, an enacted environment is created.
In the context of SDR, buyers enact risk mitigationpractices under the preconception of effectively shapingthe supply environment. Several risk mitigation practices,such as early supplier involvement, logistics integrationand supplier development, rely on extensive joint buyer–supplier efforts to eliminate disruptions caused by poorproduct quality, late delivery and excessive costs (Waters-Fuller 1995; Krause, Scannell and Calantone 2000;Giunipero and Eltantawy 2004; Zsidisin and Smith2005). Early supplier involvement is a collaborativeactivity in which buyers involve suppliers in the initialstages of the product development cycle (Zsidisin andSmith 2005). Through early involvement in buyers’product development processes, suppliers may leverageinternal expertize to influence buyers’ product designs(Primo and Admundson 2002). Supplier involvementrequires extensive bilateral sharing of proprietaryinformation and joint problem solving, which is oftenfacilitated by the colocation of supplier personnel atbuyers’ design centers (Clark and Fujimoto 1991).Similarly, logistics integration refers to buyer andsupplier efforts to coordinate the flows of goods,services and related information throughout the supplychain (Lambert, Cooper and Pagh 1998). Extant researchhas identified two facilitators of logistics integration:buyer–supplier information sharing and colocation(Handfield 1993). In the same vein, supplierdevelopment involves buyers’ direct investment in theimprovement of current or potential suppliers’performance or capabilities (Krause 1999). Throughsupplier development efforts, supplier improvement isachieved through buyer’s provisions of on-site technicalassistance, training and investment in plant andequipment (Krause 1999). In general, early supplerinvolvement, logistics integration and supplierdevelopment activities aim to mitigate SDR throughextensive buyer–supplier joint efforts.
Similarly, comprehensive supplier selection andformal ongoing evaluation activities advance a buyer’sunderstanding of the supply environment by fosteringsupplier interactions before and following the sourcingdecision, respectively. Supplier selection is a multistaged
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process in which buyers (i) identify a pool of potentialsuppliers, (ii) develop a short-list of acceptable suppliersand (iii) award business to suppliers that offer superiorvalue propositions (Fawcett, Ellram and Ogden 2006).The use of comprehensive selection criteria and rigorousselection methodology facilitates the identification ofsuppliers that best support the firm’s value creationprocess. Accordingly, comprehensive selection processesuse (i) inclusive sets of concrete performance andbehavioral selection criteria (Kannan and Tan 2002),(ii) cross-functional teams to develop selection criteriaand evaluate suppliers against the selection criteria(Fawcett et al. 2006) and (iii) extensive primary andsecondary data obtained through supplier self-assessment, historical databases, audits, interviews anddirect observation (Talluri, Narasimhan and Nair 2006).Formal supplier evaluation involves continued periodicbroad-based monitoring of suppliers following selectionand the timely communication of performance feedbackto suppliers (Krause et al. 2000). Thus, comprehensivesupplier selection and formal evaluation resolveequivocality through significant interfunctional andinterorganization joint efforts.
In contrast, contingency planning involves activitiesthat are executed with little buyer–supplier interaction. Ingeneral, contingency planning activities involve securingexcess supply capacity or holding inventory at keypositions within the supply chain (Giunipero andEltantawy 2004; Tomlin 2006). Firms may secure excesscapacity using several approaches: (i) contracting withmultiple suppliers, (ii) contracting with suppliers withlow capacity utilization or with suppliers that maintainredundant manufacturing systems that are globallydistributed (Lewis 2003) or (iii) investing in in-housemanufacturing capacity (Chopra and Sodhi 2004;Tomlin 2006). Alternately, contingency plans maydirect firms to hold raw material, work-in-process orfinished goods inventory to mitigate the effects of asupply disruption (Zsidisin and Ellram 2003;Giunipero and Eltantawy 2004).
SDR mitigation practices, therefore, vary in terms oftheir focus, level of buyers’ and suppliers’ involvement,and subsequently, the extent of inherent committedaction. Drawing from enactment theory, we suggestthat the degree to which the adoption of a particularmitigation approach facilitates sense-making is contin-gent upon the level of commitment inherent in therisk mitigation practice. Committed action plays animportant role in conceptually linking SDR mitigationenactments and richer understanding of the supplyenvironment. In particular, SDR mitigation actions char-acterized by higher levels of organizational visibility andinvestment are more difficult to undo or disown. Suchconditions bind individuals to their actions, increase thetenacity of socially acceptable justification, and, as withself-fulfilling prophecies, motivate future enactments thatvalidate the initial justification and desired ends (Weick
et al. 2005). Thus, each interaction in the series of relatedenactments provides additional opportunities for sense-making, which serves to further reduce equivocality,bolster retained understanding and facilitate the devel-opment of a richer enacted environment.
Proposition 4: Buyer’s use of risk mitigation tactics thatinvoke higher levels of committed action is negativelyassociated with the level of equivocality inherent in theSDR decision-making process.
Selection and retention are the underlying activitiesthat enable the formation and storage of judgments andevaluations of SDR. Judgment refers to the ‘‘the appraisaland choice of values, intrinsic goods, and ends’’ andinvolves making comparisons (Weick 2001, p. 363).Similarly, as conceptualized by Yates and Stone (1992),judgment and evaluation activities force meaning uponsituation. In particular, Yates and Stone (1992) assert thatjudgments of risky situations materialize in the form ofperceptions of loss, loss significance and loss likelihood.Accordingly, judgments represent the synthesis offeedback from prior enactment, changes in context andretained understanding. Through cognitive processes,judgments of loss are aggregated to form the basis foran overall evaluation of risk (Yates and Stone 1992). Inthe context of SDR decision-making, equivocal supplysituations are processed by buyers as they (i) enact SDRmitigation actions, (ii) integrate feedback with retainedunderstanding to form and refine judgments andevaluations of SDR and (iii) advance their retainedunderstanding of the supply environment as cognitivecause maps are updated.
Our view of SDR decision-making as sense-makingdeparts from prior behavioral models. Most notably,Yates and Stone (1992) articulate a four-stagesequential process in which situation affects judgmentsof loss, which influence overall evaluations of risk, whichdrive risk mitigation action. In contrast, we posit aprocess of risky decision-making that consists of similaractivities, but processed by the individual in modifiedorder. Further, we suggest that this apparent incon-gruence is attributable to the moderating role ofequivocality. Situations characterized by little equivo-cality are measurable, determinant, logical andanalyzable whereby the relationship between cause andeffect is more easily defined (Weick 2001). Suchsituations diminish the role of action as a means ofunderstanding and are conducive to the rationaldecision-making process in which risk assessmentstrategies refine retained understanding to guide SDRmitigation actions. However, equivocal environmentsare unanalyzable; the absence of meanings rendersjudgments and evaluations difficult. When faced withequivocality, individuals must take action to develop areasonable representation of the external environmentthat makes sense of previous actions and suggests future
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actions. As such, the order of activities that comprise therisky decision-making process is a function of the level ofequivocality inherent within the environment.
Proposition 5: The level of equivocality moderates theorder of activities that comprise the SDR decision-making process. Under conditions of high equivocality,adoption of risk mitigation tactics precedes formation ofrisk judgments and evaluations, which precedes retainedunderstanding of the supply environment. Under condi-tions of low equivocality, formation of risk judgmentsand evaluations refine retained understanding of thesupply environment, which precedes adoption of riskmitigation tactics.
Individual Attributes. Individual attributes, such aspersonality, values, experience and cognitive abilities,affect how buyers engage and cope with equivocality.According to Weick (2001), personality traits, whichinclude confidence in skill, disposition towardcommunion and emotion, play a significant role inguiding enactment within an equivocal situation.Confidence in skill is the belief that actions will bedeemed effective per the criteria set forth by theorganization and is borne by the presumption of logic,which motivates individuals to act more forcefully inorder to validate initial presumptions (Mitchell 1995).Similar to a self-fulfilling prophesy, forceful actionimposes order onto the situation, facilitating interpreta-tions that confirm initial presumptions (Weick et al.2005). Further, through persistent action, confidentindividuals resolve equivocality by enacting their viewof the environment onto others. Disposition towardcommunion refers to an individual’s innate preferencefor social versus independent action ‘‘and is abouttolerance, trust, and non-contractual cooperation’’(Weick 2001, p. 213). As the preference for communalbehavior increases, individuals become more tolerant ofand receptive to new ideas and experiences; accordingly,incidences of learning, which enable the development ofa richer enacted environment, concomitantly increase(Weick 2001). In addition, a preference for communionenables the development of group mind, which leveragesa broader shared understanding to further processequivocality (Taylor and van Every 2000). Emotionrepresents a feeling that follows a salient stimulus andprecedes response (Berscheid, Gangestad and Kulakowski1984). Intense negative emotions, such as threat or fear,narrow attention; thus, a propensity for intenseemotional negative response limits an individual’scapacity to reduce equivocality.
At the individual level, values refer to the ‘‘internalizedsocial representations or moral beliefs that people appealto as the ultimate rationale for their actions’’ (Oyserman2002, p. 16151). Values differentiate good from bad,natural from unnatural and truth from falsity, andfacilitate the alignment of goals of the individual with
those of the organization (Oyserman 2002). Likepersonality, values provide a guide for enactment andthe assumptions that drive interpretation (Weick 2001);as such, strong values facilitate equivocality reduction.
Cognitive ability and experience represent integratedattributes that affect individuals’ capacity to processequivocality (Giunipero and Eltantawy 2004). Cogni-tive ability refers to the capacity to retrospectively drawfrom a wide range of resources and represents amaximum bound for retained understanding (Weick2001). The capacity to link constructs with meaningfulpatterns and store both constructs and their associationsin memory underlies cognitive ability (Porac et al. 1989).Whereas cognitive ability represents potential, knowl-edge gained through prior experience enables individ-uals to cope with equivocality. Further, individuals aremore likely to act when they have the cognitive capacityand knowledge to effectively respond; this, in turn,heightens the accuracy of perceptions and motivatesindividuals to ‘‘pay attention to a wider variety ofinputs because, whatever they see, they will have someway to cope with it’’ (Weick 2001, p. 230). Accordingly,cognitive ability and breadth of experience interact toprovide the base knowledge that is available to supportbroader enactment and equivocality resolution.
Proposition 6: Individual attributes, such as confidencein skill, disposition toward communion, values, experienceand cognitive abilities, are negatively associated with thelevel of equivocality inherent in the SDR decision-makingprocess. Alternately, intensity of negative emotionalresponse is positively associated with the level ofequivocality inherent in the SDR decision-makingprocess.
As individuals enact and interpret their actions, newknowledge of the environment is retained. Thus, buyerswho (i) possess the aforementioned individual attributesand (ii) act within organizations having the afore-mentioned structure, systems and controls that facilitateequivocality reduction are more likely to possess greaterknowledge in the form of a more comprehensive, richermental representation of the supply environment.Further, learning is self-reinforcing; gains in knowledgefacilitate sensible enactment and meaningful inter-pretation that further improve the capacity to retainnew understanding. Because retained understandingprovides the platform for subsequent enactment andselection, the efficacy of SDR mitigation tactics andaccuracy of SDR judgment and evaluation is directlyrelated to the capacity to resolve equivocality throughthe sense-making process. Our assertion facilitates aricher interpretation of the opening vignette wherebywe suggest that Nokia Corp., through its extensive jointefforts with Philips NV, resolved considerably moreequivocality than did Ericsson LM. Accordingly, NokiaCorp. enacted a more comprehensive and accurate
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representation of the supply environment that accountsfor the relative effectiveness of their mitigation actions.
Proposition 7: Equivocality reduction is positivelyassociated with the efficacy of risk mitigation tacticsand accuracy of risk judgments and evaluations.
DISCUSSIONWe draw from enactment theory to develop a concep-
tual framework that meaningfully integrates extant SDRresearch. Through our framework, we suggest that the
sense-making process underlies SDR decision-makingand provides the theoretical underpinnings that logicallylink the environment, organization and individual. Fur-ther, through our application of enactment theory, we
introduce the central role that equivocality and its reso-lution play within the SDR decision-making process. Inaggregate, the development of the psychological and so-ciological mechanisms drawn from enactment theory
facilitates a richer understanding of the nomologicalnetwork that integrates novel organizational and indi-vidual constructs with those previously consideredwithin the SDR literature. The resulting conceptual
framework advances new insights into the importance ofperceptual views of risk, the risky decision-making pro-cess and managerial practice.
Perceptual Views of RiskIn accordance with a behavioral view of risk, our study
reinforces the importance of conceptualizing risk as aperceptual rather than objective phenomenon. Consis-tent with an influential stream of previous research(March and Shapira 1987; Sitkin and Pablo 1992; Yates
and Stone 1992), we suggest that risky decision-makingis an idiosyncratically satisfying rather than rationallyoptimizing activity. This salient point is borne within ourconceptual framework whereby we differentiate ‘‘envi-
ronment’’ from ‘‘enacted environment.’’ Whereas envi-ronment is consistent with a rational, objective view (e.g.,Khan and Burnes 2007) that exists independent of theindividual and organization, enacted environment refers
to an idiosyncratic, perceptual view (i.e., mental model)that is developed and revised through the sense-makingprocess (Weick 2001). The idiosyncratic nature of thesense-making process reaffirms previous assertions thatsubstantive differences may exist (i) between an indi-
vidual’s perceptions and the objective reality of thebroader environment (Boyd, Dess and Rasheed 1993)and (ii) across individuals’ perceptions of the broaderenvironment (Yates and Stone 1992). Accordingly, our
use of enactment theory further substantiates the im-portance of understanding perceptual views of SDR.More importantly, enactment logic provides an over-arching theoretical rationale that lends new insights into
how perceptual biases of risk are formed.
Risky Decision-MakingWith respect to the broader risky decision-making lit-
erature, our substantive theory lends new insights into
the nature of the relationship between risk perceptionand behavior. At first glance, the SDR decision-making assense-making process appears to conflict with dominantrisky decision-making models proposed in extant re-
search. Whereas previous studies (e.g., Sitkin and Pablo1992; Yates and Stone 1992) explicitly assert that per-ceptions of risk drive behaviors or actions, enactmenttheory suggests that behaviors drive risk perceptions. This
apparent conflict in directionality is resolved by sug-gesting that the incipient stage of the sense-making pro-cess is a function of the level of equivocality inherent in asituation. For situations characterized by low levels of
equivocality, whereby individuals can readily relate anevent to a meaningful underlying pattern, sense-makingmay begin with the selection process; as such, judgmentsand evaluations of SDR are formed, retained memory isupdated and risk mitigation tactics are enacted. This is
consistent with the traditional view whereby perceptionsof risk precede action. However, in situations character-ized by high levels of equivocality (as is the focus ofWeick’s enactment theory), enactment precedes under-
standing; that is, in equivocal situations, buyers advancetheir understanding of SDR through their adoption ofrisk mitigation tactics. Much like the doctor who makes adiagnosis through the application of treatment, buyers
have little comprehension of the SDR inherent in ahighly equivocal supply situation until mitigation poli-cies are enacted.
Our adoption of enactment theory also allows us to
build upon previous seminal work that studies how so-cial influence affects risky behavior. Within their con-ceptual model, Sitkin and Pablo (1992) conceptualizesocial influence in terms of organizational culture and
role model behavior. Through the lens of enactmenttheory, we advance the notion that social interaction iscritical to sense-making and, subsequently, the risky de-cision-making process. In particular, we assert that social
mechanisms, such as committed action and the devel-opment of group mind, significantly influence the for-mation of buyers’ risk perceptions and behaviors.Committed action drives the need to justify enactment ina manner deemed acceptable by the focal social structure;
similarly, group mind refers to the extent to which cog-nitive cause maps are shared across individuals withinthe same social structure (Weick 2001). Significant over-lap of cognitive cause maps suggests that individuals
share similar goals and values and indicates the preva-lence of a shared organizational culture (Weick 2001).Consistent with Sitkin and Pablo’s (1992) conceptualdevelopment, these social mechanisms (e.g., group mind
and committed action) reinforce the assertion that cul-ture and role model behavior influence risky decision-making. However, enactment theory suggests that the
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theoretical underpinnings for this assertion are attribut-able to the extent to which individuals are compelled tojustify their enactments to other individuals in the same
social structure who, by virtue of overlapping cognitivecause maps, share the same values and goals.
Similarly, our conceptual framework lends further in-sight into the relationship between problem domain fa-
miliarity and risky decision-making. Sitkin and Pablo(1992, p. 22) define problem domain familiarity as ‘‘thefamiliarity that results from increased levels of past ex-perience in a given problem domain.’’ In our conceptual
framework, we explicitly link experience with the sense-making process and suggest that experiences enable in-dividuals to develop richer cognitive cause maps. How-ever, we draw from enactment theory to suggest that the
diversity of an individual’s experience, in addition to thenumber of experiences within a focal problem domain,facilitate sense-making. A broader range of experiences,which facilitate varied capabilities and diverse logics,provides additional guidance to an individual’s inter-
pretation process (Weick 2001). Thus, as with the brico-leur — a creator of solutions that use only thoseresources at hand, buyers that maintain both breadthand depth of knowledge are likely to successfully cope
with the SDR inherent in an equivocal situation.
Managerial ImplicationsOur conceptual framework and associated theoretical
development also contribute to managerial practice inseveral important ways. Our developed theory suggests
that it is important for purchasing organizations to rec-ognize transactions that are characterized by high levelsof equivocality. For such cases, situational understandingmay be enhanced by tasking buyers who have significant
and broad experience in purchasing with these transac-tions. Further, organizational structure and systems mayaugment buyers’ equivocality reduction processes bypromoting accurate views of environment and steering
committed action in the desired direction. Accordingly,organizations should (i) facilitate cross-functional inter-action, (ii) provide data that supports interpretationalclarity and (iii) implement risk assessment systems that
prompt buyers to make sense of the known and probethe unknown. Similarly, organizational systems should(i) promote the breadth and depth of buyers’ knowledgethrough training, cross-training and job rotation, (ii)support simulation and what-if analyses to increase
breadth of knowledge, (iii) ensure that roles, goals, andculture constrain buyer behavior such that total life cyclecosts associated with purchases are minimized and (iv)use measurement and reward systems that provide in-
centives for buyers to interact with suppliers and cross-functional colleagues to effectively manage equivocality.More broadly, our study suggests the importance ofmaintaining a professional social structure that extends
beyond the firm’s boundaries. Interaction with external
purchasing professionals, through purchasing-centricorganizations or trade groups, may help buyers (i) per-ceive a situation in a manner that is more congruent with
an objective reality and (ii) establish a richer socialstructure that may be drawn upon when faced withconditions beyond comprehension.
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