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Buyer-supplier challenges arising from local, EU, and transcontinental sourcing: Applying Principal-Agent Theory

Moeradji, Shannon (2021) Buyer-supplier challenges arising from local, EU, and transcontinental sourcing: Applying Principal-Agent Theory.

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Abstract:In the past few decades, the acknowledgement of global sourcing has grown exponentially. However, there is still a research gap where global sourcing can be differentiated into transcontinental and continental sourcing. These two global sourcing strategies along with the countertrend of local sourcing, all present their own challenges and risks caused by the geographical distance between the buyer and its suppliers and therefore must be assessed separately. Hence, this research investigates the challenges that buying firms face when sourcing within the home country, within the same continent, and across continents applying the Principal-Agent Theory (PAT). The research aimed to find in all three sourcing locations, different types of opportunistic challenges caused by three different information asymmetries (hidden characteristics, hidden intention, hidden action) between the buyer and the supplier and which methods can be used to mitigate such challenges. Analyses are created based on the empirical findings of 21 semi-structured interviews with buying firms from diverse industries established in the Netherlands and Germany and whose suppliers are located locally, within the European Union (EU), and across continents. The results showed different risk levels of opportunistic challenges that buyers face, affected by suppliers, depending on location. Hidden intentions showed the most significant results for opportunistic behavioural activities where suppliers showed signs of changed behaviour after contracting qua performance such as reduced qualities, unpunctual deliveries, and increased prices after contracting. Results also showed different supplier selection, contracting, and monitoring methods such as performance evaluation systems/ programs and emphasized the necessity of on-site checks to mitigate opportunistic supplier challenges. Based on the findings, suggestions are provided for the “best sourcing location” considering all the challenges and risks presented for each supplier location.
Item Type:Essay (Bachelor)
Clients:
Unknown organization, Enschede
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:International Business Administration BSc (50952)
Link to this item:http://purl.utwente.nl/essays/86743
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