Formal or informal governance mechanism: a contingent view in resolving supply chain disruptions

Purpose: Both formal and informal governance mechanisms are important to minimize unresolved supply chain disruptions in buyer-supplier relationships. However, the role and impact of governance mechanisms could be contingent upon the product complexity and the level of visibility across the supply chain. Therefore, we attempt to examine the changing effect of different governance mechanisms under contexts of product's complexity and supply chain visibility. Design/methodology/approach: This research uses survey data collected from manufacturing companies located in the United States of America and the United Kingdom. We received survey responses from 291 senior supply chain and procurement professionals, and we used this data to test our hypotheses through negative binomial regression models. Findings: Our results show that, overall, informal governance has an insignificant effect on unresolved supply chain disruptions, while formal governance has an inverted U-shape effect on unresolved supply chain disruptions. Both product complexity and visibility moderate the dynamics of governance mechanisms when it comes to unresolved supply chain disruptions. Practical implications: These findings are useful for supply chain managers in designing and developing governance mechanisms and strategies for different buyer–supplier relationships, considering the level of visibility and complexity of the particular product. In other words, our results assist managers in ensuring better disruption mitigation and resilience development. Originality/value: By testing the impact of both formal and informal governance using a curvilinear model, our research makes novel contributions to the extant literature on buyer-supplier relationships and governance. Furthermore, emphasizing the role of visibility and product complexity in reducing unresolved disruption adds to the current knowledge within the broader areas of resilience research.