The selection of capable suppliers in emerging markets raises an interesting dilemma. It might be risky if capable partners grow and behave opportunistically; on the other hand, it might be beneficial to form a relationship with a capable local supplier in an emerging market. To select capable local suppliers with expected increasing power, there is potential for more research on how foreign buyers govern their relationships with various governance modes to influence their capable suppliers’ behavior.
The partial least squares method was used to analyze and find direct support for the authors’ hypotheses based on cross-sectional data from a sample of 134 Taiwanese manufacturers.
The empirical results of this study indicate that local suppliers with greater supply chain integration and better supply chain agility directly increase power relative to that of buyers and indirectly have a positive impact on two relational development models adopted by buyers (relationship learning and codevelopment) through collaborative communication.
While selecting capable suppliers can enhance a buyer’s competitive edge, it is important to carefully consider and manage potential negative effects, such as increased dependency and power imbalances. This research demonstrates that two capabilities of local suppliers, i.e. local supply chain agility and local supply chain integration, influence the power of local suppliers.
