This research examines how firms in competitive and technologically uncertain markets use formal contracts and centralized control to manage supply disruptions, and how these mechanisms enhance firms' ability to respond swiftly in the immediate aftermath of a disruption.
We develop a conceptual framework anchored in transaction cost economics (TCE) to examine how competitive intensity and technological uncertainty influence the transaction mechanisms firms use to enable expeditious responses to supply disruptions. The study combines primary survey and secondary archival data from 171 firms. The hypotheses are tested using partial least squares structural equation modeling.
Competitive intensity and technological uncertainty shape firms' use of formal transaction mechanisms in distinct ways. Firms under high competitive intensity rely more heavily on formal contracts, while competitive intensity does not significantly increase reliance on centralized control. Technological uncertainty strengthens firms' use of centralized control and is also positively associated with formal contracts. Both mechanisms are positively associated with expeditious supply disruption response. However, formal contracts exhibit diminishing returns, indicating that excessive contractualization may constrain rapid adaptation as disruptions evolve.
This study contributes to the supply disruption literature by shifting attention from preparedness and resilience outcomes to the expeditiousness of response. Applying TCE to a disruption context, it shows that formal transaction mechanisms shape not only ex ante alignment but also execution speed once disruptions occur. Their executional effects are asymmetric and context-dependent, with contractual safeguards exhibiting diminishing returns and centralized control becoming especially valuable under high technological uncertainty. The study clarifies how firms should align governance arrangements with context-specific execution demands.
