Ambidextrous Governance in Supply Chains: The Impact on Innovation and Cost Performance

• Published date: 01 October 2013
• DOI: http://doi.org/10.1111/jscm.12033
• Author: Tobias Schoenherr,Constantin Blome,Matthias Kaesser
• Date: 01 October 2013

AMBIDEXTROUS GOVERNANCE IN SUPPLY CHAINS: THE

IMPACT ON INNOVATION AND COST PERFORMANCE

CONSTANTIN BLOME*

Universit

e Catholique Louvain

TOBIAS SCHOENHERR

Michigan State University

MATTHIAS KAESSER

Institute for Supply Chain Management –Procurement and Logistics (ISCM)

Ambidexterity has been gaining attention among supply chain scholars

due to its potential for overcoming trade-offs. Associated with these com-

plexities is the choice of an appropriate governance mechanism in buyer–

supplier relationships, which can include relational and contractual

approaches. Extending ambidexterity research to the supply chain manage-

ment domain, we focus in the present study on ambidextrous governance,

which we define as the simultaneous pursuit of both relational and con-

tractual governance elements. We investigate the effect of ambidextrous

governance on innovation and cost performance. In addition, as this rela-

tionship is highly dependent on the ambidexterity that may be present on

the firm level, we theorize about the moderating effect of organizational

ambidexterity. We further consider external contextual factors as influenc-

ing the ability of ambidextrous governance to effectuate performance, rec-

ognizing that the former may not be as effective under conditions of

greater demand uncertainty and product complexity. We delineate our

hypotheses based on extensions of complementarity theory, and test

them, taking a buyer’s perspective, with data collected in a multirespon-

dent survey of manufacturing firms. Our results demonstrate the positive

relationship between ambidextrous governance and both innovation and

cost performance, and highlight the critical role of organizational ambi-

dexterity as an enabler for innovation performance. We furthermore detect

mixed effects for the contextual variables considered—demand uncertainty

and product complexity—as moderators, emphasizing that the impact of

ambidextrous governance on performance is subject to dynamics that are

more complex than originally perceived. With our investigation, we extend

ambidexterity research to the supply chain management domain and offer

important implications for research and practice.

Keywords: ambidextrous governance; organizational ambidexterity; innovation

performance; cost performance; complementarity theory

INTRODUCTION

“We know from our history that while promotions

may win quarters, innovation wins decades,” Bob

McDonald, CEO of Procter & Gamble (Brown &

Anthony, 2011).

The paradigm that innovativeness positively impacts

company performance seems to be true today more

so than ever (Menguc & Auh, 2010). However, the

combination of this paradigm with the increasing

* The two first authors are listed in alphabetical order.

October 2013 59

complexity and speed of new product development

initiatives requires the integration of external partners

with specialized knowledge and skill sets (Bercovitz &

Feldman, 2007). The cradle for innovations is there-

fore often to be found in the supply base, which has

progressively taken over more responsibilities for both

product and process innovations (Simpson, Siguaw, &

White, 2002; Tyndall, Gopal, Partsch, & Kamauff,

1998). To better manage and promote such interac-

tion, companies aspire to engage in closer supplier

collaboration, for example in the form of innovation

alliances (Muller & Valikangas, 2002) and “open

innovation” networks (Chesbrough, 2003). Together

with the trend of companies to focus on their core

competencies, this has elevated the supply chain man-

agement function, especially in terms of the procure-

ment of new technologies and innovations, and

positioned it as a key strategic element for the com-

petitive performance of firms (Hill & Rothaermel,

2003; Nicholls-Nixon, 1995; Rothaermel & Alexandre,

2009). As such, the development of supply chain

management capabilities focusing on innovation is

seen as a key competitive weapon (Craighead, Hult, &

Ketchen, 2009; Wynstra, van Weele, & Axelsson,

1999). This stands, however, in stark contrast to the

traditional, more cost-focused approach of supply

chain management, which may have penalized inno-

vative suppliers for their higher cost structures (Verma

& Pullman, 1998).

Recently, pursuing the objective of “getting the best

of both worlds,” the concept of ambidexterity has

gained momentum not only as organizational ambi-

dexterity on the firm level, but also in the area of

supply chain management (Kristal, Huang, & Roth,

2010). The origin of ambidexterity research can be

traced back to Duncan (1976) and Tushman and

O’Reilly (1996), who put forward the notion that

ambidexterity can help to unite two apparently con-

tradicting objectives or capabilities for improved firm

performance. The concept has been applied primarily

in the area of organizational learning and organiza-

tional adaption and design (Raisch & Birkinshaw,

2008), where scholars focused on the trade-off situa-

tions of (innovation) exploration versus (innovation)

exploitation (e.g., He & Wong, 2004; Levinthal &

March, 1993; March, 1991) or the trade-off between

efficiency and flexibility (e.g., Duncan, 1976; Thompson,

1967). Common to most of these studies, however,

was their focus on a single organization, calling for an

extension to examine organizational ambidexterity

across company boundaries, that is, across the supply

chain (Kristal et al., 2010; Raisch, Birkinshaw, Probst,

& Tushman, 2009). The present study follows this call.

Early advances of placing ambidexterity within the

wider context of supply chain management were

made by Im and Rai (2008), who looked at

knowledge sharing in long-term supplier relationships,

and by Kristal et al. (2010) and Tokman, Richey,

Marino, and Weaver (2007), who examined exploita-

tion and exploration in supply chain management. In

addition, the performance impact of ambidexterity in

strategic alliance formations was investigated by Lin,

Yang, and Demirkan (2007), and Rothaermel and

Alexandre (2009) studied ambidexterity in technology

sourcing. Recently, Patel, Terjesen, and Li (2012)

investigated the role of ambidexterity with respect to

manufacturing flexibility. Despite these recently added

insights, the literature is still lacking an investigation

of ambidextrous governance in buyer–supplier rela-

tionships impacting innovation and cost performance,

as well as contingencies that may moderate this

impact. We address this research gap with the present

study.

Specifically, basing our arguments on complemen-

tarity theory as well as on transaction cost economics

(TCE) and relational exchange theory (RET), we posit

that to achieve innovation and cost performance,

ambidextrous governance is essential in the buying

organization. In delineating our expectations, we bor-

row from the research stream on governance mecha-

nisms in supply chain management, which has shown

that the simultaneous pursuit of multiple governance

mechanisms, such as relational and contractual gover-

nance, can overcome trade-offs and lead to synergistic

results (e.g., Bradach & Eccles, 1989; Cannon, Achrol,

& Gundlach, 2000; Poppo & Zenger, 2002). We thus

conceptualize the pursuit of both relational and con-

tractual governance mechanisms as being indicative of

ambidextrous governance. In combining the research

streams on ambidexterity and governance mecha-

nisms, we seek to answer the question of whether

ambidextrous governance leads to higher levels of

innovation and cost performance within a supply

chain context.

We further integrate the notion that ambidexterity is

a complex phenomenon that can manifest itself at the

organizational level (Bledow, Frese, Anderson, Erez, &

Farr, 2009). As such, we conceptualize organizational

ambidexterity as the simultaneous pursuit of both

innovation exploration and innovation exploitation.

While the former refers to the pursuit of innovation

practices, for example to enter new product domains,

the latter considers the pursuit of practices increasing

the market efficiency of existing products. Using this

concept, we theorize about its contingent (moderat-

ing) role in the relationship between ambidextrous

governance and performance dimensions.

Extending the contingency perspective to external

contextual factors, we further theorize that there is a

moderating impact of demand uncertainty and prod-

uct complexity on the governance–performance rela-

tionship. Motivation to include these contingencies

Volume 49, Number 4

Journal of Supply Chain Management

60