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  • PURE_Phraknoi-et-al_IJOPM_2022

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The relational focus of small and medium sized actors’ understandings of supply chain finance (SCF)

Research output: Contribution to Journal/MagazineJournal articlepeer-review

E-pub ahead of print
<mark>Journal publication date</mark>4/07/2022
<mark>Journal</mark>International Journal of Operations and Production Management
Publication StatusE-pub ahead of print
Early online date4/07/22
<mark>Original language</mark>English

Abstract

Purpose – This paper aims to investigate small and medium-sized upstream suppliers’ and downstream
distributors’ understandings of supply chain finance (SCF) arrangements and their decisions to adopt such schemes.

Design/methodology/approach – In this paper grounded theory-informed methods are employed, involving
56 in-depth interviews with informants from small and medium-sized enterprises (SMEs), banks and subject
experts in the United Kingdom (UK) and Thailand. A category structure for the data is developed. The findings
are then examined systematically from both a transaction cost economics (TCE) and non-TCE perspective.

Findings – SME members made sense of SCF through a core distinction between dyadic and triadic SCF
arrangements. The former maintains independence between physical and financial supply chains, whereas the
latter causes them to be closely coupled or even entangled. The SCF adoption decisions of SMEs were based on
a consideration of four related aspects: relationality, awareness, control and context. The authors demonstrate
the limits of TCE in explaining the findings, leading to a proposed combined theory of the transactional and,
importantly, non-transactional influences on how SMEs make decisions about SCF.

Practical implications – Focal firms wanting their SME suppliers and distributors to participate in triadic
SCF (TSCF), i.e. reverse factoring and distributor finance, need to understand that transitioning to such
schemes involves the unwinding of existing financing arrangements, which may be problematic for SMEs.
Moreover, it is important to be aware of SMEs’ concerns, such as about what accessing TSCF might signal to
the focal firm about their financial health and about the potential loss of control that might result from
entangling the physical and financial aspects of supply chains.

Originality/value – This paper unpack the perspectives of both SME suppliers and distributors of large focal
firms in supply chains. These firms appear less concerned with the economic advantages (transaction costs) of
SCF and more concerned with the relational consequences or non-transactional costs of participation in a TSCF
arrangement. The dyadic-triadic distinction provides a new and meaningful way of categorising SCF
mechanisms, which also broadens the service triads’ literature from a focus on outsourcing services for a focal
firm’s customers to outsourcing financing for its suppliers or distributors. The paper also addresses gaps
identified by Gelsomino et al. (2016) regarding the need for a general theory of SCF, for empirically-based
holistic studies of SCF applications, and a tool for selecting SCF mechanisms