Supply chain governance |
Medium to weak |
Medium |
Strong |
Strong |
Unilateral/unified governance reduces transaction costs involving specific assets (WilliamsonWilliamson, O.E. (1979). Transaction cost economics: The governance of contractual relations. Journal of Law and Economics, 22, 233-261. Available from https://www.jstor.org/stable/725118
https://www.jstor.org/stable/725118...
, 1979, 1985Williamson, O.E. (1985). The economic institutions of capitalism: firms, markets, relational contracting. New York, NY: Free Press.) |
Bilateral governance – relational contract. Focus on business relationship |
Bilateral governance – relational contract. Mostly based on business relationship |
Unilateral governance – bilateral contract. Centralized in the automaker (chaebol) |
Unilateral governance – bilateral contract. Centralized in the automaker (shareholding control, State or mixed) |
Reliability |
Medium |
Medium to high |
High |
High |
Reliability is an alternative safeguard that reduces transaction costs (Dyer & Chu, 2003Dyer, J.H., & Chu, W. (2003). The role of trustworthiness in reducing transaction costs and improving performance: Empirical evidence from the United States, Japan, and Korea. Organization Science, 14, 57–68.; Gulati & Singh, 1998Gulati, R., & Singh, H. (1998). The architecture of cooperation: Managing coordination costs and appropriation concerns in strategic alliances. Administrative. Science Quarterly, 43, 781–814. http://dx.doi.org/10.2307/2393616
http://dx.doi.org/10.2307/2393616...
; WilliamsonWilliamson, O.E. (1979). Transaction cost economics: The governance of contractual relations. Journal of Law and Economics, 22, 233-261. Available from https://www.jstor.org/stable/725118
https://www.jstor.org/stable/725118...
, 1979, 1985Williamson, O.E. (1985). The economic institutions of capitalism: firms, markets, relational contracting. New York, NY: Free Press.) |
|
Physical installation near or inside the automaker gives greater long-term relationship reliability |
Belonging to the same nationality and the same economic group reinforce reliability |
Belonging to the same nationality and the same economic group reinforce reliability |
Information exchange |
Medium to weak |
Medium to high |
High |
High |
Greater exchange of information reduces asymmetry of information and opportunism, reducing transaction costs (Dyer, 1997Dyer, J.H. (1997). Effective interfirm collaboration: How firms minimize transaction costs and maximize transaction value. Strategic Management Journal, 18, 535–556. Available from http://hdl.handle.net/1721.1/1442
http://hdl.handle.net/1721.1/1442...
; Dyer & Chu, 2003Dyer, J.H., & Chu, W. (2003). The role of trustworthiness in reducing transaction costs and improving performance: Empirical evidence from the United States, Japan, and Korea. Organization Science, 14, 57–68.) |
|
|
Lower number of members in the chain and centralized planning facilitate the exchange of information |
Lower number of members in the chain facilitates the exchange of information |
Long-term relationship |
Medium to long term |
Long term |
Long term |
Long term |
The longer the relationship between a buyer and a supplier, the greater the likelihood of consolidating social relationships, generating reliability (Gulati & Nickerson, 2008Gulati, R., & Nickerson, J. A. (2008). Interorganizational trust, governance choice, and exchange performance. Organization Science, 19, 1–21. https://doi.org/10.1287/orsc.1070.0345
https://doi.org/10.1287/orsc.1070.0345...
) |
There is a tendency to prioritize the value of the transaction in the negotiations (decision based on cost) |
Physical presence ensures long-term relationship |
Belonging to the same economic group ensures long-term relationship |
Belonging to the same economic group ensures long-term relationship |
Return period for specific investments |
Medium |
Medium to High |
High |
High |
Longer return periods on specific investments reduce transaction costs (Dyer, 1997Dyer, J.H. (1997). Effective interfirm collaboration: How firms minimize transaction costs and maximize transaction value. Strategic Management Journal, 18, 535–556. Available from http://hdl.handle.net/1721.1/1442
http://hdl.handle.net/1721.1/1442...
) |
Investment based on specific project, with amortization period fixed by the supplier (usually a minimum period guarantee by contract with automaker) |
Investment based on specific project, with amortization period fixed by the supplier (physical proximity ensures longer terms) |
Investment based on specific project, with a longer amortization period determined by the automaker |
Investment based on specific project, with a longer amortization period determined by the automaker |
Number of suppliers belonging to the Chain |
Medium |
Medium |
Low |
Medium to low |
Lower number of vendors reduces transaction costs (Dyer, 1997Dyer, J.H. (1997). Effective interfirm collaboration: How firms minimize transaction costs and maximize transaction value. Strategic Management Journal, 18, 535–556. Available from http://hdl.handle.net/1721.1/1442
http://hdl.handle.net/1721.1/1442...
) |
Concentrated on multinationals |
Concentrated on multinationals |
Belonging to the chaebol |
State control, stock control or mixed control |
|
Competencies of the automaker in auto parts, subsystems, systems and modules |
Low |
Low |
High |
High |
Loss of important competencies affects competitiveness (McIvor, 2009McIvor, R. (2009). How the transaction cost and resource-based theories of the firm inform outsourcing evaluation. Journal of Operations Management, 27, 45-63. https://doi.org/10.1016/j.jom.2008.03.004
https://doi.org/10.1016/j.jom.2008.03.00...
; Prahalad & Hamel, 1990Prahalad, C. K., & Hamel, G. (1990). The core competence of the corporation. Harvard Business Review, 68, 79–91. Available from https://hbr.org/1990/05/the-core-competence-of-the-corporation
https://hbr.org/1990/05/the-core-compete...
) |
Developed by suppliers (third parties) |
Developed by suppliers (third parties) |
Developed within the chaebol, high investments in R&D and qualified labor facilitated by the macroeconomic policies of the country |
Developed within the supply chain u sing joint ventures with Western companies and government support on R&D investments |
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Intellectual Properties/Patents for auto parts, subsystems, systems and modules |
High |
High |
High |
High |
High volume of Intellectual Properties generates vendor opportunism (McIvor, 2009McIvor, R. (2009). How the transaction cost and resource-based theories of the firm inform outsourcing evaluation. Journal of Operations Management, 27, 45-63. https://doi.org/10.1016/j.jom.2008.03.004
https://doi.org/10.1016/j.jom.2008.03.00...
) - it also generates a force for vertical integration (Cacciatori & Jacobides, 2005Cacciatori, E., & Jacobides, M. G. (2005). The dynamic limits of specialization: vertical integration reconsidered. Organization Studies, 26(12), 1851–1883.; McIvor, 2009McIvor, R. (2009). How the transaction cost and resource-based theories of the firm inform outsourcing evaluation. Journal of Operations Management, 27, 45-63. https://doi.org/10.1016/j.jom.2008.03.004
https://doi.org/10.1016/j.jom.2008.03.00...
) |
Large majority belongs to Tier 1 |
Large majority belongs to Tier 1 |
Large majority belongs to the automaker |
Large majority belongs to the automaker |
|
Economy of scale |
Medium |
Medium |
High |
High |
|
Dependence on global projects |
Dependence on global projects |
Suppliers under stock control provide parts to other automakers (competitors) |
Due to the production volumes involved (supplier can provide parts to more than one Chinese automaker) |
|
Supply chain organization |
Horizontalization |
Horizontalization |
Vertical integration with Tier 1 suppliers and eventually Tier 2 |
Vertical integration with Tier 1 and Tier 2 suppliers |
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