The Role of Managerial Ability in Supply Chain Management

In: Review of Pacific Basin Financial Markets and Policies, Volume 25, Issue 4

Abstract

This study investigates whether supplier firms' managerial ability affects their strategic decisions in supply chain management. Previous research documents that suppliers could collaborate with or be exploited by powerful major customers. I expect that suppliers with high-ability managers are perceived to be with more favorable future prospects to fulfill contractual obligations and thus possess stronger bargaining power. As a result, these suppliers could resist rent extraction from major customers and achieve supply chain collaboration, making it beneficial for them to operate with a concentrated customer base. Using a comprehensive sample of supply chain links, I hypothesize and find a positive association between managerial ability and customer concentration. I also find that suppliers with more able managers are more likely to continue their existing supply chain relationships. This paper extends the implications of managerial ability to the supply chain setting and adds to the understanding of collaboration/competition between suppliers and customers.