Behavioural Risks in Supply Networks

International Perfomiance Research Institute, Rotebiihlstr 121,70178 Stuttgart, Germauy 

The literature review shows a gap in empirical evidence about the effects of instmments which are designed to prevent opportunistic behaviour in supply networks. This chapter contributes to addressing this gap in two ways. Firstly, the instruments which are used most frequently in practice to avoid opportunistic behaviour will be identified from the empirical study. This empirical approach is necessary at this stage as it is not yet clear whether the proposed instruments are really in use in practice. Subsequent to this first objective, the second objective is to test the effect of identified instruments on the prevention and management of opporturustic behaviour. 

A model is developed initially based on the Principal-Agent Theory. The results of the empirical study are incorporated in the development of this model. The model is then employed to evaluate the effects of the instruments on opportunistic behaviour, both the direct and the indirect effects. The indirect effects are evaluated by introducing the construct asyrmnetric information as a mediating variable. The model is then tested against data from a questionnaire-based study. A structural equation modelling approach is employed as this is considered to be especially suited for this purpose. 

The remainder of this chapter is divided into four parts. Initially, the model is developed and explained. The details of the methodological approach employed are articulated followed by the presentation and arralysis of the empirical results. The fourth section discusses the managerial and theoretical implications including the limitations of the present study. 

The Principal-Agent Theory serves as the theoretical basis for the model (Eisenhardt 1989). This theory helps to explain the occurrence of opportunistic behaviour between a principal and an agent as a resrrlt of asynrmetric infomration between partners within the supply network. Actiorts to reduce asymmetric information within supply networks are proposed as an approach to coping with or managing the risks of opporttmistic behaviottr. 

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