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

Abstract

Ambidexterity has been gaining attention among supply chain scholars due to its potential for overcoming trade-offs. Associated with these complexities is the choice of an appropriate governance mechanism in buyer-supplier relationships, which can include contractual and relational approaches. Extending ambidexterity research to the supply chain management domain, we focus in the present paper on ambidextrous governance, which we define as the simultaneous pursuit of both relational and contractual governance elements. We investigate the effect of ambidextrous governance on innovation and cost performance. In addition, as this relationship 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 influencing the ability of ambidextrous governance to effectuate performance, recognizing 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 multi-respondent 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 ambidexterity as an enabler of 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 further 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