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Industrial Marketing Management 33 (2004) 57 – 64

An institutional analysis of supply chain innovations in global


marketing channels
Daniel C. Bello*, Ritu Lohtia, Vinita Sangtani
Department of Marketing, Georgia State University, Unit 4, 33 Gilmer Street, Atlanta, GA 30303, USA

Abstract

The adoption of sophisticated supply chain innovations by trading partners in global channels of distribution is often limited by the
institutional context of the international transaction. In particular, the regulatory, normative, and cultural – cognitive elements of institutional
environments around the world can enhance or inhibit the ability of trading partners to craft the contractual, ownership, and social elements of
institutional arrangements required by an innovation. Because supply chain innovations often require costly, new investments and activity
sets, firms may be reluctant to participate in an innovation unless a new institutional arrangement can be crafted to provide adequate
safeguards and guarantees. A conceptual model is developed to explain the role of institutions in the successful deployment of supply chain
innovations in global marketing channels.
D 2003 Elsevier Inc. All rights reserved.

Keywords: Supply chain innovations; Global marketing channels; Innovation

1. Introduction differential ease of deploying supply chain innovations


between domestic and international distribution partners.
Discussions with U.S.-based logistic managers often Fig. 1 introduces a model of these innovations that
focus on the major cost savings and service improvements addresses the way different institutional environments (IE)
that accrue to domestic trading partners adopting supply around the world moderate the ability of exchange partners
chain innovations (Bowersox, Closs, & Cooper, 2002). By to craft the institutional arrangements necessary to support
implementing the latest information technology (IT) and supply chain innovations. In particular, the regulatory,
logistic innovations, manufacturers, distributors, and normative, and cultural –cognitive elements of IE around
retailers are able to lower inventory requirements, achieve the world are shown either to enhance or inhibit the ability
operating economies, and greatly improve service perfor- of trading partners to craft the contractual, ownership, and
mance in domestic U.S. channels of distribution. However, social elements of institutional arrangements (IA) required
similar discussions with logistic managers responsible for by an innovation. As will be shown, supply chain innova-
global marketing channels are often characterized by frus- tions often require costly, new investments and activity sets
tration and failure in attempts to implement sophisticated such that firms are reluctant to participate in an innovation
supply chain innovations with international trading partners unless a new IA can be crafted to provide adequate
(Schary & Skjott-Larson, 2001). What might account for the safeguards and guarantees.
relative ease of implementing supply chain innovations
among domestic U.S. partners and for the relative difficulty
of deploying the same technology among global distribution 2. Supply chain innovations
partners?
This article develops a comprehensive analysis of the Supply chain innovations combine developments in
many institutional differences that largely account for the information and related technologies with new logistic and
marketing procedures to improve operational efficiency and
* Corresponding author. Tel.: +1-404-651-4190; fax: +1-404-651- enhance service effectiveness. Innovations include ECR
4198. (efficient consumer response), CR (continuous replenish-
E-mail address: dbello@gsu.edu (D.C. Bello). ment), automated ordering utilizing scanner data, and many

0019-8501/$ – see front matter D 2003 Elsevier Inc. All rights reserved.
doi:10.1016/j.indmarman.2003.08.011
58 D.C. Bello et al. / Industrial Marketing Management 33 (2004) 57–64

Fig. 1. Supply chain innovations in global marketing channels.

other technology-enhanced processes and procedures in the ‘‘pull’’ system (see Fig. 2). In the traditional channel,
out-bound supply chain. Importantly, these innovations product is pushed down the channel as firms at each level
consist of allocating new investments and activity sets to are isolated decision-making units holding speculative in-
channel participants to maximize joint profit by reducing ventory based on their sales forecasts. Each holds inventory
costs through greater operational efficiency and by increas- to buffer its own internal operations from uncertainties of
ing revenue through greater service effectiveness. upstream supply and downstream demand. Ordering and
Innovations such as point-of-sale (POS) scanner-based transport functions between distributor and retailer are
automatic ordering and a CR system can transform a handled by retailer-initiated orders that are shipped in large
traditional ‘‘push’’ distribution channel into a demand lots to the retailer’s central warehouse for consolidation and

Fig. 2. Traditional ‘‘push’’ channel of distribution and ‘‘pull’’ channel with supply chain innovations. Traditional ‘‘push’’ distribution: Retail chain initiates
orders that distributor ships to retailer’s central receiving warehouse. Innovative ‘‘pull’’ distribution: Real-time sales data trigger distributor replenishment
shipments directly to each store in chain.
D.C. Bello et al. / Industrial Marketing Management 33 (2004) 57–64 59

reshipment to individual stores within the chain. Innovative in reorganizing its order processing procedures to support
POS ordering and CR can dramatically reduce system-wide the frequent, small-lot deliveries needed for CR. In turn, CR
inventory, transportation and warehousing costs, and stock- requires the retailer to adjust its operations and invest in the
out problems at retail. By deploying IT and new logistical hardware/software systems required by the distributor’s
procedures inventory can be shifted to the distributor unique POS system.
enabling the retailer to close its central receiving warehouse Transaction cost theorists (Williamson, 1996) note spe-
and receive direct-to-store shipments based on real-time cific investments create exchange difficulties due to their
sales data. POS scanner data trigger replenishment that the non-redeployability and subsequent lock-in effects. Safe-
distributor is authorized to assemble and ship directly to guarding problems due to risks of opportunism make simple
each store in the retail chain. By employing such innova- contracting among trading partners impractical and may
tions, operational improvements that dramatically lower motivate firms to preemptively avoid such potentially ‘‘pro-
costs and improve service are technically feasible. However, ductive’’ investments. Once a retailer is locked-in to a
the characteristics of specific exchanges often make it distributor’s POS/CR system, it is vulnerable to opportunis-
difficult, and occasionally impossible, for the trading part- tic price increases and other self-serving actions by the
ners to deploy the required investments and adopt the new distributor. Potentially, a distributor could shirk on the cost
activity sets required by the innovations. and quality of its logistic services, leaving the retailer
vulnerable to poor order fulfillment and stock-out problems.
Likewise, a distributor’s large investment in specialized
3. Exchange characteristics inventory leaves it vulnerable to the retailer’s order volatility
and volume declines. In addition, the distributor is vulner-
Depending on the particular content of an exchange, the able to unexpected and rising costs in the customized direct-
new investments and efforts required by a supply chain to-store delivery system it has developed and dedicated to
innovation may pose serious challenges and difficulties to its retail customer.
channel members. According to Carson, Devinney, Dow- Finally, ownership problems occur when it is difficult to
ling, and John (1999), a new investment is problematic transfer ownership and ensure property rights such as is the
when it is ‘‘(1) difficult to measure and verify, (2) specific to case for tacit assets and other learning-by-doing processes
the intended task or parties to the transaction, and (3) and knowledge. That is, a POS/CR system requires the
nontransferable in ownership across parties’’ (p. 122). parties to invest in many costly, nonstandard assets whose
Verification problems occur for investments in difficult-to- ownership is not easily shifted between firms. As will be
assess assets such as knowledge, quality, and other subtle shown, exchanges characterized by poor measurement,
and not easily observable processes. Likewise, an effort or specificity, and nontransferability pose serious problems to
costly activity may not be verifiable when its result is not the adoption of supply chain innovations.
visible or easily revealed by third-party inspection. In the
above example, an import distributor investing in a ware-
house compatible with POS ordering and small-lot ship- 4. Institutional arrangements
ments achieves efficient scale by serving many customers
from the high fixed-cost facility resulting in an inability to Institutional arrangements refer to the rules of exchange.
attribute specific ‘‘costs’’ to any individual retailer’s ship- A central role of an IA is to induce cooperation and
ment. Likewise, a distributor’s investments in quality determine a division of gains sufficient to motivate all firms
improvements by training workers, realigning its material to participate in their assigned activity sets and investments.
handling procedures and equipment, and other ‘‘invisible,’’ The IA must induce sufficient cooperation among the self-
but costly, enhancements to its internal operations yield interested parties to ensure that each independently imple-
long-run benefits that affect all of its customers. Hence, the ments the investments and activity sets required in the case
distributor’s investments required to optimize the POS/CR of a supply chain innovation. A new IA is required to support
system are difficult to pass along to an individual customer a fair reallocation of the profits because supply chain
since the specific benefits to a particular customer’s ship- innovations often require one firm to incur sizable invest-
ment cannot easily be demonstrated and verified. ments and engage in costly activities that primarily lower the
In turn, specificity refers to investments in equipment, costs of a partner or generate system-wide benefits. In this
human resources, and other assets that are dedicated to a way, an efficient new IA enables the parties not only to
partner or transaction. For example, if a distributor must maximize the economic value from an innovation but also to
employ unique material handling equipment and customized equitably share the joint profits that are generated. A new IA
warehousing facilities to service a particular retail client, consists of new contracting, ownership, and social elements
such investments in specific assets are vulnerable to finan- that the parties deploy to support an exchange arrangement
cial loss if the retailer switches suppliers. Likewise, a CR incorporating an innovation (Carson et al., 1999).
system requires a distributor to make large investments in Contracting can tightly bind firms to their activity sets
inventory dedicated to a particular retailer as well as invest and specify compensation due to the possibility of fine-
60 D.C. Bello et al. / Industrial Marketing Management 33 (2004) 57–64

grained support from the legal facets of the IE. In the United chain might be the most logical owner – investor for a
States, legal devices such as the Uniform Commercial Code different problematic asset, such as the truck fleet, associ-
and ‘‘an independent judiciary strengthen the predictability ated with the joint POS/CR system.
of the law and make contract enforcement easier . . . this Social elements are informal rules such as social norms
enlarges the scope of contracting possibilities’’ (Carson et that bind parties to their activity sets. Reputational effects and
al., 1999, p. 119). Parties can confidently contract many expectations of future interaction govern behavior by com-
complex responsibilities due to the relative ease and cer- pelling obedience to the norms of a relationship. Social
tainty of enforcement by U.S. courts. For example, to avoid enforcement is based on the shared understandings of the
exposure to opportunistic price increases, a retailer locked in parties where compliance to social expectations directs
to a distributor’s CR system might contract with the distrib- behavior in a pro-social way (Heide, 1994). Social elements
utor for a cost-plus price agreement. The parties might agree of an IA may be crucial for certain noncontractible activities
that the retailer would pay, say, a 10% premium over and investments where ownership is not easily transferred.
manufacturer invoice prices to the distributor. As for the Reallocating ownership among partners may be infeasible
retailer’s exposure to poor order fulfillment, the parties when tacit knowledge or other subtle information compo-
could contract for logistic performance guarantees with nents are central to an asset or activity. An asset may not be
specified penalty payments. Likewise, to address the dis- transportable because ‘‘corporate knowledge can be so com-
tributor’s inventory risk, the retailer could contract for plex and embedded that causal ambiguity makes transference
minimum purchase volume guarantees under a take-or-pay impossible’’ (Carson et al., 1999, p. 125). In addition to poor
agreement. However, some activities are subject to serious mobility, ownership transfer may be impractical because the
contracting problems making them unsuited to this IA new IA may be too costly to the receiving party.
element. Activities where effort or output is difficult to Hence, social elements may be the most feasible gov-
measure or assess are not contractible since an objective ernance mechanism to manage and organize immobile,
third-party cannot verify compliance with contract terms. noncontractible resources. Relational contracting theory
Verifiable effort or output is a key requirement for an (Macneil, 1980) identifies many specific social norms that
activity to be contractible since this aspect of an IA consists govern behaviors of exchange partners. The IA utility of
of pay-for-performance. Effective measurement is critical norms such as information sharing (willingness to exchange
for contract feasibility since parties must be able to measure proprietary information), flexibility (willingness to adapt
costs incurred and value received (Carson et al., 1999). procedures), and solidarity (desire to maintain relationship)
Ownership relies on broad support from the legal and have been demonstrated in marketing exchange contexts
political facets of the IE to realign property rights with the (Heide & George, 1992). For a POS/CR system to operate
investments associated with required activity sets. For non- effectively, a strong information exchange norm may be
contractible activity sets, ownership reorganization may required to enable a retailer to access a distributor’s account-
provide the investment incentive needed for unverifiable ing records relevant to a cost-plus pricing contract. A great
activities. Shifting ownership to the most appropriate invest- deal of flexibility may be required to adjust the procedures
ing party provides strong property rights that empower linking the distributor-owned warehouse with the retailer-
claims to residual income and rights to redirect use of owned truck fleet. Likewise, a strong solidarity norm may be
assets. In the absence of ownership, the value created by required to sustain the supply chain innovation during a
investment and effort associated with unverifiable activities prolonged economic downturn that drops retailer volume
is not easily claimed prompting a firm to reduce its well below the minimum efficient scale requirements of the
investment preemptively (Carson et al., 1999). Because distributor. Without strong relational norms, the contractual
ownership guarantees returns and control to an investor, and ownership arrangements by themselves may not be
activities critical to an innovation but lacking easy measure- adequate to sustain the POS/CR system between the parties.
ment are more likely to be undertaken when the investor is
also the owner. For example, to optimize performance of a
POS/CR system, many subtle investments in learning, 5. Institutional environment
training, and procedures must be made to develop the most
effective warehouse layout and material handling processes. Referring to the macrolevel aspects of society, the IE
The time and money devoted to improving the quality and consists of the various building blocks of a national setting
coordination of warehouse logistics to support CR are and context. Forces within an IE may pressure local firms to
difficult to quantify and the inputs only ambiguously linked retain traditional channel systems that are suboptimal from
to outcomes. Hence, an investor would find it difficult to the perspective of supply chain innovations. Specifically,
earn a fair return solely by pricing out such ambiguous theorists (Scott, 2001) recognize three elements composing
benefits to a buyer. In contrast, an investor –owner could the IE: regulative, normative, and cultural –cognitive.
easily claim the residual profit stream from such difficult-to- Regulative element refers to the demands of governments
verify activities and investments. Thus, a distributor might and regulatory bodies to comply with laws and other require-
own and operate the centralized warehouse while the retail ments. Regulatory institutions such as the courts and gov-
D.C. Bello et al. / Industrial Marketing Management 33 (2004) 57–64 61

ernment bureaucracies interpret societal standards in a way 6. A model of supply chain innovations in global
that reflect the power of political and societal constituents. marketing channels
Channel structures and processes are influenced by regula-
tive elements through the two basic mechanisms of imposi- When U.S. distribution partners are able to adopt supply
tion and inducement (Grewal & Dharwadkar, 2002). chain innovations, it is because the regulatory, normative,
Imposition refers to the coercive power of institutions to and cultural –cognitive elements of the domestic IE support
impose restrictions directly through authoritative orders and an IA that motivates firms to participate fully in the
indirectly through rules. Inducements are incentives in the innovation. For successful adoptions, firms invest in the
form of subsidies, tax, tariff, or other concessions provided required assets and perform required new activity sets
to influence business behaviors. By imposing constraints or because risks and vulnerabilities associated with a supply
providing inducements, the legal and regulatory mechanisms chain innovation are fully addressed by contracting, own-
in a country effectively shape channel member actions. In ership, and social elements of the newly crafted IA. Given
the United States, partners to a joint POS/CR system are the legal and cultural supports in the United States, domestic
confident that contract clauses such as cost-plus pricing, distributors and retailers often are able to devise contracts,
penalty payments associated with logistic performance, and ownership arrangements, and social agreements needed to
minimum purchase volume guarantees are enforceable. support the investments and activities required by supply
The certainty of court imposed sanctions for contract chain innovations.
violations effectively disciplines parties to adhere to their However, as Fig. 1 suggests, the ability of trading
agreed upon activity sets and investments. partners to craft a new IA supporting a supply chain
Normative element refers to a society’s values and norms innovation is contingent upon the relevant IE and exchange
that direct behavior through social obligations and expect- characteristics. In global marketing channels, an on-going
ations (Scott, 2001). Normative expectations prescribe how cross-border trading arrangement between firms is charac-
specified actors are to behave, imposing constraints as well terized by an incumbent IA. Prior to the introduction of a
as empowering social action. Channel member behaviors supply chain innovation, the terms of trade between the
are influenced by normative elements through the mecha- partners have been previously established through contract,
nisms of authorizing and acquisition (Grewal & Dharwad- ownership, and social elements that support their on-going
kar, 2002). Authorizing involves the development of trading arrangement. As Fig. 1 illustrates, the partners’
socially appropriate codes of conduct while acquisition ability to successfully adopt a supply chain innovation is
refers to mimicking the behaviors of other firms that are constrained by any limitations the IE and exchange charac-
deemed legitimate. Normative elements impact channels as teristics place on the partners’ ability to transition from their
local firms adopt certain modes of conduct and mimic the incumbent IA to a required new IA.
structures and processes of businesses that they consider Since every global channel has a certain commercial
legitimate. In the United States, shared understandings of context—consumer or industrial, commodity or highly dif-
business ethics and notions of proper ‘‘businessmanship’’ ferentiated, etc.—its exchange characteristics shape the
support the high degree of trust and cooperation needed to particular investments and activities necessary for the adop-
execute many aspects of joint POS/CR programs. Likewise, tion of a supply chain innovation. The specific character-
many distributors and retailers in the United States tend to istics of a global exchange may require such new
support supply chain innovations due to simple mimicking investments and activities that the partners will require
of successful programs by respected, leading companies in substantial contract, ownership, and social safeguards before
similar domestic industries. adopting the innovation. Given a commercial context, the
Cultural –cognitive element refers to the socially mediat- key constraints on the global partners’ ability to transition to
ed construction of a common framework of meaning that a new, supportive IA are the specific elements of the IE
provides templates and scripts for action (Scott, 2001). surrounding the international exchange. As discussed below,
Cultural – cognitive institutions achieve compliance by pro- a global channel may suffer from a fragile IE in terms of
viding actors with ‘‘prefabricated organizing models and regulatory, normative, and cultural – cognitive elements that
scripts’’ (Scott, 2001, p. 58) making other types of behavior prohibit the parties from developing a new IA. When a
inconceivable. Cultural control is habitualized and yields fragile IE fails to support the transition to a new IA, the
programmed actions through two mechanisms, imprinting trading partners become unwilling and unable to commit to
and bypassing (Grewal & Dharwadkar, 2002). Imprinting is the required investments or activities and, as a consequence,
organizational inertia where past practices are sacrosanct do not adopt the innovation.
while bypassing occurs where actors are so highly socialized
into their role expectations that habitualized responses by-
pass formal organizational controls. Examples where culture 7. Regulatory problems in global channels
embeds local channel member expectations include the
keiretsu system in Japan, guanxi in China, blat in Russia, Legal systems around the world are based on principles
among others (Grewal & Dharwadkar, 2002). derived from common law, civil or code law, Islamic law, or
62 D.C. Bello et al. / Industrial Marketing Management 33 (2004) 57–64

Marxist –socialist tenants (Cateora & John, 2002). Conse- recent acceptance into the WTO (World Trade Organization)
quently, global trading partners from countries with differ- has lead to the gradual reduction of logistic barriers.
ent legal traditions often find it difficult to craft contracting Because China has until 2005 to bring its regulatory
and ownership elements that unequivocally provide safe- structure into alignment with international standards, Chi-
guards while motivating and binding firms to assigned na’s IE will become gradually more supportive of the
investments and activities. For example, many of the contracting and ownership elements needed to support
transitional economies of Eastern Europe continue to strug- supply chain innovations.
gle to overcome their communist past and establish work-
able judiciary and regulatory systems. The contemporary
institutional context in Eastern Europe is unique because 8. Normative problems in global channels
‘‘actors in the post-socialist context are rebuilding organ-
izations and institutions not on the ruins of communism but Since the normative component of institutions refers to a
with the ruins of communism as they re-deploy available country’s social beliefs and values, normative expectations
resources to respond to their immediate practical dilemmas’’ regarding business behaviors differ greatly around the world
(Stark, 1997). As these countries continue the process of leading to inconsistent support for complex IAs. Impor-
decentralization and privatization, progress is hampered by tantly, normative expectations are not simply anticipations
their unstable and evolving regulatory and legal systems, of behaviors but are often rigidly held prescriptions:
creating an ambiguous context for contract formation and
enforcement. Hence, the regulatory element of these IEs is . . .of how the specified actors are supposed to behave.
fragile and unsupportive of complex IAs because uncertain- The expectations are held by other salient actors in the
ty exists regarding the enforceability of contract clauses and situation and so are experienced by the focal actor as
claims to property rights. external pressure. Also, and to varying degrees, they
In the case of China, the regulatory element of the IE is become internalized by the actor (Scott, 2001, p. 55).
also fragile, greatly limiting the ability of foreign and
domestic firms to adopt supply chain innovations. Govern- Consequently, a foreign firm may be unable to convince
mental constraints and inducements have inhibited the a local partner to adopt an innovation because the required
development of modern logistics in the sense that ‘‘China’s contracting, ownership, and social elements are inconsistent
underdeveloped infrastructure, government regulations, and with local concepts of legitimate business arrangements. For
regional protectionism fragment distribution channels example, in Japan, authorizing and acquisition mechanisms
throughout China’’ (Jiang & Prater, 2002, p. 783). Although have lead many domestic Japanese firms to respect tradi-
since the 1980s China has been gradually shifting from a tional practices that have resulted in long channels and
centralized, socialist mode toward a free market mode, strong loyalty among incumbent partners (Lohtia & Mur-
national and local governments continue to restrict the akoshi, 1999). By mimicking traditional behaviors and
distribution rights of firms to transport, warehouse, and internalizing legitimate codes of conduct, domestic channel
store goods within the Chinese market. In fact, regional members are resistant to change and highly skeptical of
protectionism has lead local provinces to erect tariff, licens- unfamiliar practices, resulting in inefficient supply chains
ing, and other political/legal barriers that greatly disrupt when viewed from the perspective of modern logistic and IT
long-haul shipments and supply chain innovations. A patch- innovations. One example of how many domestic Japanese
work of local jurisdictions have made trucking and ware- firms resist cost-efficient, new activity sets is the slow
housing so difficult that ‘‘the average freight distance by adoption of POS technology by retailers, except for newer
highway in China is only 58 km, 8 percent of the US level’’ retailing formats such as convenience stores and general
(Jiang, 2002, p. 185). While supply chain costs can be up to mass merchandising stores that have embraced the technol-
40% of wholesale prices in China, compared to 20% or less ogy. Most traditional formats such as department stores
in the United States, regulatory restrictions continue to typically depend on manufacturers and various wholesalers
inhibit the introduction of cost-efficient logistic innovations. for assortment, inventory, merchandising, and other operat-
Government constraints and incentives have also greatly ing decisions and resources. Further, retailers can simply
shaped the Chinese supply chain system by granting limited return all unsold goods and avoid the risk of unsold
trading rights to foreign firms in the coastal area free trade merchandise (JETRO, 1995). The normative expectations
zones (FTZs). Foreign firms operating within the FTZs can of this traditional system cause many members to reject
obtain limited permission from local governments to estab- innovations such as POS/CR because the new activity sets
lish distribution centers to support export-oriented produc- require extensive disintermediation, giving up privileges of
tion facilities. Further, governments offer tax and other unlimited product returns, and accepting responsibility for
concessions to foreign firms to encourage local sourcing merchandising and other operating decisions.
of components. However, disjointed logistics and onerous Likewise, the normative element in many Eastern Euro-
regulations discourage foreign firms from focusing on the pean countries is inconsistent with the IA required to
vast, inland domestic Chinese market. Importantly, China’s successfully implement some supply chain innovations.
D.C. Bello et al. / Industrial Marketing Management 33 (2004) 57–64 63

Due to the regions socialist history of collectivism, author- connections among the Chinese can greatly inhibit the
itarianism, and central economic planning, the legacy of the diffusion of logistic innovations in this vast country. Inter-
Communist era continues to pervade many aspects of the estingly, even after 2005 when China should be in full
normative element of contemporary Eastern European insti- compliance with WTO trade regulations, the unique cultural
tutions (Batra, 1997). Societal values and social norms features of doing business in China will likely remain
reflect attitudes and work styles that do not support some unchanged.
of the contracting, ownership, and social elements required
for logistic and IT innovations. In particular, expectations of
centralized and formalized authority tend not to support the 10. Conclusions
informal cooperation, initiative, and role responsibilities
necessary for firms to deploy ECR and other supply chain Deploying supply chain innovations in cross-border
innovations. trading arrangements poses many constraints and chal-
lenges for international marketers. Within the boundaries
of the United States, it is relatively easy to rearrange the IA
9. Cognitive– cultural problems in global channels to accommodate the adoption of supply chain innovations.
Internationally though, the task is much more difficult
Culture, the collective programming of the mind that given the complex and fragile nature of the IE, especially
distinguishes the members of one human group from in developing and transitional economies. Investments in
another (Hofstede, 2001), directly impacts the willingness innovations and other risk exposures by either partner
and ability of firms to develop contracting, ownership, and require safeguards and guarantees through the development
social aspects of trading arrangements with international of suitable IAs. However, the many regulatory, normative,
trading partners. According to Hofstede (2001), the United and cultural – cognitive elements in these economies make
States is characterized as high on individualism, low on their IEs so complex and fragile that they may not support
power distance, and weak on uncertainty avoidance whereas the transition to a suitable new IA. Consequently, supply
Japan is considered a collectivist, high-power distant, and chain managers must realistically assess the constraints an
strong uncertainty avoidance culture. Hence, major differ- IE might have on developing a workable IA before
ences regarding the looseness of social ties (individualism), attempting global deployments of IT and logistics-related
tolerance for social inequalities (power distance), and ac- innovations.
ceptance of future risk (uncertainty avoidance) can greatly
limit the nature of the IA parties can craft to govern the
implementation of a supply chain innovation. In addition,
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