Supply Chain Finance Adoption : Three is a Crowd in Entangled Relationships

Phraknoi, Nichapa and Stevenson, Mark and Busby, Jerry (2022) Supply Chain Finance Adoption : Three is a Crowd in Entangled Relationships. PhD thesis, Lancaster University.

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Supply Chain Finance (SCF) has gained increasing attention in recent years – for both favourable reasons, e.g. the critical need for working capital during economic recovery, and adverse reasons, e.g. high-profile scandals and abuses of SCF reported in the media such as Greensill and Carillion. The SCF literature has primarily focused on the economic advantages of SCF, and a so-called win-win-win approach claiming that all the parties involved , e.g. the bank, buyer, and supplier, would all benefit from SCF arrangements. Even though previous research on the adoption of SCF has pointed to the reluctance of firms, especially suppliers, to adopt SCF, the literature has given most attention to large focal firms, placing less emphasis on their supply chain partners. Yet supplier reluctance is also important to these focal firms as the successful implementation of SCF is determined by the degree of participation and frequency of transactions with suppliers. This has produced a need to systemically understand how small, less powerful non-focal firms construct their understandings of SCF and make decisions about SCF participation. This thesis investigates the understandings of, and the decision to adopt, SCF primarily in SMEs, both upstream as suppliers and downstream as distributors, in two different settings ─ the UK, where SCF is relatively well developed, and Thailand where SCF recently started in 2016. Given the dissensus in the literature regarding the appropriate theoretical underpinnings, this study employs a grounded theory-based methodology in which no theory was committed to before data collection and analysis, allowing for a substantive theory of SCF relationships to emerge from the collected data. This involved 56 interviews with SMEs, banks and subject experts as well as analysis of supporting documents. Consistent with grounded theory, the study sought to identify the main concern of the research participants and the way in which they dealt with this identified main concern. Through a constant comparative analysis of interview data, supporting documents, and relevant literature, the emergent main concern or core category was identified as the ‘Dyadic - Triadic distinction’. This distinction was between dyadic forms of SCF, in which informants had relatively independent relationships in their physical and financial supply chains, and triadic forms, in which relationships were entangled in some way. Triadic forms appeared to be inherently problematic, leading to the thesis that ‘Three is a Crowd’. Participants dealt with this main concern through five interrelated categories of concern ─ Risk, Relationship, Awareness, Control, and Context. Following the emergence of the main concern or core category and the five interrelated categories, a systematic analysis was undertaken of how transaction cost economics (TCE), which was identified as the most appropriate formal theory, could and could not account for the findings. For example, many of the findings could be interpreted in terms of opportunism and information impactedness, but there were concerns with relationships and control that could not be explained by TCE. From this analysis a qualitative model of how SMEs understood and made decisions to adopt SCF was proposed. In addition, a more detailed model was developed to show the significance of signalling concerns in the findings. The main contribution of this thesis is to show how the firms often meant to be the primary beneficiaries of SCF – SMEs – are much less concerned with technical advantages (such as lower financing cost), and much more concerned with the relational consequences of participating in more complex triadic forms of SCF. The key practical implication that is drawn is that focal firms need to be aware, when offering triadic SCF to their smaller supply chain partners, that these partners often have existing dyadic SCF relationships. Therefore, their decision to adopt an offered triadic SCF is not straightforward, but involves participating in a new relationship and at the same time having to maintain or reduce existing ones ─ often including both financing and supply chain relationships.

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12 Jan 2022 10:39
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15 Mar 2024 00:05