The Evolution of Inter-Firm Collaboration in Supply Chain Networks

Introduction

Supply chain and logistics integration and collaboration have become by-words for achieving competitive advantage across firms (Frohlich & Westbrook, 2001; Gustin, Daugherty, & Stank, 1995; Stock, Greis, & Kasarda, 1999). Traditional supply chain perception prescribes increased information sharing as the means of integrating and collaborating effectively. The evidence for the efficacy of the “integration prescription” leading to higher potential benefits is oft-cited (cf. Daugherty, Ellinger, & Gustin, 1996; Lee, Padmanabhan, & Whang, 1997b; Lummus & Vokurka, 1999; Narasimhan & Jayaram, 1998; Stank, Keller, & Closs, 2001; Tan, Kannan, & Handfield, 1998), although at least one systematic review has found that the evidence of the connection between supply chain integration and performance is limited (Fabbe-Costes & Jahre, 2008). Impeding the research into the benefits of integration is the presence of hypercompetitive environments characterized by the rapid rise and fall of firms (McNamara, Vaaler, & Devers, 2003; Wiggins & Ruefli, 2005). These hypercompetitive environments constitute a powerful “disintegration” force—technological and market forces powerful enough to pull apart even the most integrated supply chain across not only high tech industries, but across a wide range of industries. Missing from the dialogue is research into the factors that influence integration and disintegration of interfirm integration, which these authors view as synonymous with interfirm knowledge management processes.

In terms of interfirm integration and collaboration, much past research has evaluated the impact of product-market factors such as manufacturing plant network configuration (Kulkarni, Magazine, & Raturi, 2004), flexible capacity investment (Van Mieghem, 1998), and variable demand (Bish, Muriel, & Biller, 2005) from the supply perspective, a few studies have evaluated such factors from the demand perspective, and very rarely studies assess the interaction of demand and production capacity (e.g., Nyaga, Closs, Rodrigues, & Calantone, 2007). However, research into the effects of the interaction of supply and demand factors on supply chain integration and disintegration is sorely lacking. Additionally, the body of knowledge about the influence of different types of interfirm relationships on supply chain performance remains weak (Frohlich & Westbrook, 2001). Furthermore, most past work has been static in nature or relied on assumptions that environmental conditions remain constant. Few studies have assessed longitudinal evolution of supply chains despite the important potential public policy and strategic contributions of such research.

This research draws upon production literature and exchange governance theory to simulate the interaction of supply and demand environment factors on the growth and development of supply chains. The use of simulation to build new theory goes back to Forrester’s (1958, 1961) work and has received renewed interest recently (Davis et al., 2007). Using simulation to explore the interaction of empirically-validated theories, several experiments were conducted with the purpose of extending existing explanations of supply chain evolution to explain cycles of integration and disintegration in supply chain networks. The simulation mirrors the history of many industries including the semiconductor industry by starting with firms in a stable oligopoly characterized by slow changes to the product. Experiments were conducted to study the effects of different rates of product change, different demand environments, and different economies of scale on the level of integration between firms at different levels in the supply chain.