Theory Testing from a Critical Realist Perspective
In a previous post, it was demonstrated that researchers can play two different roles, as they can either build or test theories. An SMJ article by Miller and Tsang (2011), which is titled Testing management theories: Critical realist philosophy and research methods, focuses on the latter role we can play. The authors claim: “Not only do we have a plurality of theories within management research, there is also no consensus about the criteria for evaluating theories.” Taking a critical realist perspective, they advance practical guidance for evaluating management theories by proposing a four-step approach to theory testing. This approach includes (1) identifying the hypothesized mechanisms, (2) testing for the presence of the mechanisms in the empirical setting, (3) testing isolated causal relations, and (4) testing the theoretical system. The authors underline that “steps 2 and 3 have been neglected for the most part”. In sum, a lot can be learnt about theory testing from this brilliant article.
Miller, K., & Tsang, E. (2011). Testing management theories: Critical realist philosophy and research methods. Strategic Management Journal, 32 (2), 139-158 DOI: 10.1002/smj.868
Egocentric Network vs. Whole Network Level of Analysis
Supply chains have often been regarded as interorganizational networks. An incredibly insightful article by Provan et al. (2007), Interorganizational networks at the network level: A review of the empirical literature on whole networks, makes clear that two different views on interorganizational networks need to be distinguished: (1) the view from the organizational level of analysis (also referred to as actor level, micro-level or egocentric network level) and (2) the view from the network level of analysis (also referred to as macro-level or whole network level). Egocentric theories often focus on the “embeddedness” of an organization in a network and on dyadic relationships. The authors argue that “[o]nly by examining the whole network can we understand such issues as how networks evolve, how they are governed, and, ultimately, how collective outcomes might be generated”. Their article provides a review of studies of whole networks. I am certain that supply chain management research can benefit from this valuable contribution.
Provan, K., Fish, A., & Sydow, J. (2007). Interorganizational Networks at the Network Level: A Review of the Empirical Literature on Whole Networks. Journal of Management, 33 (3), 479-516 DOI: 10.1177/0149206307302554
Logistics Clusters (Guest Post by Yossi Sheffi, MIT)
Logistics clusters play an increasingly important part in logistics & supply chain management. I am happy to share the following guest post by Professor Yossi Sheffi, a distinguished expert in logistics clusters. Thank you for contributing to my blog.
Logistics clusters are agglomerations of firms that come together to share logistics expertise and know-how. As I argue in my new book Logistics Clusters: Delivering Value and Driving Growth (MIT Press, October 2012), these entities have a number of unique, and generally underestimated, attributes. First, they are self-reinforcing in that logistics clusters use the high volumes of freight they generate to capture economies of scope and scale and reduce costs while improving service quality. These benefits attract more companies, which in turn bring further efficiencies within reach. Second, resident companies use the cluster to pool expertise and equipment, which buffers them against fluctuations in demand. Third, logistics clusters are major creators of employment opportunities that tend not to be “offshorable” and not tied to the fortunes of any one industry. Finally, these entities are building considerable expertise in environmental sustainability. These are some of the reasons why I believe that the private and public sectors need to invest more in logistics clusters.
Yossi Sheffi is a professor at the Massachusetts Institute of Technology, where he serves as Director of the MIT Center for Transportation & Logistics.
Natural Resource Scarcity
In their recently published JBL paper, A natural resource scarcity typology: Theoretical foundations and strategic implications for supply chain management, Bell et al. (2012) rightly note: “Scarcity of critical natural resources such as oil, water, food, and precious metals has the potential to greatly impact commercial activity as the twenty-first century progresses”. In deed, avoiding waste of resources has become a top priority for many supply chain practitioners. However, in view of the importance of the topic, it is baffling that supply chain management research has almost completely neglected resource scarcity. Our theories are concerned with resources (e.g., resource-based theory, resource-dependence theory), but resource scarcity does not really play a big role. Therefore, the article by Bell et al. is certainly a step in the right direction. The authors position natural resource scarcity as a supply chain risk factor, and prescribe strategies for its mitigation. Particularly, they offer a natural resource scarcity typology.
John E. Bell, Chad W. Autry, Diane A. Mollenkopf, & LaDonna M. Thornton (2012). A natural resource scarcity typology: Theoretical foundations and strategic implications for supply chain management Journal of Business Logistics, 33 (2), 158-166 DOI: 10.1111/j.0000-0000.2012.01048.x
Cooperative Relationships between Organizations
I recently rediscovered an article by Ring and Van de Ven (1992), which was published in the Strategic Management Journal: Structuring cooperative relationships between organizations. Herein, the authors propose that “[v]arying levels of risk and reliance on trust will explain the governance structures of transactions”. They distinguish between low and high risk and between low and high reliance on trust. This leads to four cells: (1) markets (low risk, low reliance on trust transactions), (2) hierarchies (high, low), (3) recurrent contracts (low, high), and (4) relational contracts (high, high). Thus, the article provides “a conceptual framework for understanding a broader variety of governance mechanisms than those typically accompanying a focus on markets and hierarchies”. Ring and Van de Ven’s paper was the 2008 winner of The Dan and Mary Lou Schendel Best Paper Prize, which “recognizes a paper published at least five years ago that has made a lasting contribution to scholarship in strategic management”.
Ring, P.S., & Van de Ven, A.H. (1992). Structuring cooperative relationships between organizations. Strategic Management Journal, 13 (7), 483-498 DOI: 10.1002/smj.4250130702
Cloud Logistics
Usually, I hate buzzwords. Particularly, I am saturated by the extensive use of the phrase “cloud computing”. However, a keynote speech by Werner Delfmann about “cloud logistics”, which was held at the 6th International Scientific Symposium on Logistics in Hamburg, Germany, exceeded all my expectations. Delfmann’s speech is based on discussions within the BVL‘s Scientific Advisory Board and the discussion paper The Cloud – Logistics for the Future? by Delfmann and Jaekel (2012) can be downloaded on the BVL’s website. Herein, the authors transfer the cloud paradigm from computing to logistics. They argue that an “adequate answer to the challenges for logistics arising from an increasingly complex, uncertain, volatile and less predictable environment seems to be found in principle by means of adaptive, coordinated, distributed, autonomous logistics systems based on decentralized self-control mechanisms”. I believe that cloud logistics can influence our notion of logistics service providers: They might move into a “cloud operator” role.
Theory Building and Theory Testing
Research revolves around theory. Hereby, the role of researchers is twofold: Researchers can either start with real-life observations and produce a set of propositions that summarize a new theory (inductive theory building), e.g., using grounded theory research, or start with an existing theory for formulating hypotheses and use data to test them (deductive theory testing), e.g., using structural equation modeling.
For an extensive investigation of this dual role see Colquitt and Zapata-Phelan (2007).
Colquitt, J. & Zapata-Phelan, C. (2007). Trends in theory building and theory testing: A five-decade study of the Adademy of Management Journal. Academy of Management Journal, 50 (6), 1281-1303 DOI: 10.5465/AMJ.2007.28165855
Real Options in Supply Chain Management
A real option is “a right – without an obligation – to invest resources (e.g., labor, money, time) toward a course of action at a future point in time” (McCarter et al., 2011). SCM applications of real options are scarce. In their illustrating HBR article, It may be cheaper to manufacture at home, de Treville and Trigeorgis (2010) argue that supply chain managers “typically rely on the discounted cash flow (DCF) model to help them value the alternatives”. However, this model undervalues flexibility and, thus, supply chain managers “may end up with supply chains that are lean and low cost under normal circumstances – but extremely expensive if the unexpected occurs”. The authors demonstrate that it is better to rely on the real options model. Applying this model enables supply chain managers “to put dollar figures on flexibility in the supply chain and on the ability to manage production problems directly rather than from afar”.
de Treville, S. & Trigeorgis, L. (2010). It may be cheaper to manufacture at home. Harvard Business Review, 88 (10), 84-87
Resource-based Theory vs. Supply Chain Management
There is an ongoing debate in supply chain management research about whether or not resource-based theory suggests that supply chain management can be a source of sustained competitive advantage for a firm. Among those who have denied this suggestion is Ramsay (2001), whereas, in his recent essay, Barney (2012) has argued that SCM can, “at least in some settings”, be such a source. In his insightful article, The competitive advantage of interconnected firms: An extension of the resource-based view (AMR, Vol. 31, No. 3), Lavie (2006) follows the relational view, an extension of the resource-based view to networked environments (read my previous text about the relational view). He integrates and extends this view and social network theories, “contrasting the formulation of the traditional [resource-based view] with a reformulated version of the [resource-based view] that takes into account the impact of network resources”. Given the ongoing debate in our field, should SCM researchers adopt Lavie’s reformulation?
Lavie, D. (2006). The competitive advantage of interconnected firms: An extension of the resource-based view. Academy of Management Review, 31 (3), 638-658 https://doi.org/10.5465/AMR.2006.21318922
Supply Chain Management Definition
SCM definitions are a dime a dozen. An early definition comes from Cooper et al. (1997): “Supply chain management is the integration of business processes from end user through original suppliers that provides products, services and information that add value for customers.” However, this definition assumes that integration – the Emperor’s new suit? – is always good and that the unit of analysis is a customer-focused rather than a closed-loop system. Mentzer et al. (2001) argue that SCM has “the purposes of improving the long-term performance of the individual companies and the supply chain as a whole”. Here, it should be stated more explicitly that performance means “triple bottom line” performance. The CSCMP’s definition of SCM acknowledges that SCM is focused on interacting business entities. But, this definition violates some of Wacker’s (2004) eight rules for a “good” formal conceptual definition. Future SCM definitions should be focused on the coordination of business entities in closed-loop supply and demand networks.
