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Article
Buyer Perceptions of Supply Disruption Risk: A Behavioral View and Empirical Assessment
Journal of Operations Management
  • Scott C. Ellis, Clemson University
  • Raymond M. Henry, Cleveland State University
  • Jeff Shockley, Radford University
Document Type
Article
Publication Date
1-1-2010
Keywords
  • Supply Chain Management,
  • Information Systems
Abstract
As supply chains become more complex, firms face increasing risks of supply disruptions. The process through which buyers make decisions in the face of these risks, however, has not been explored. Despite research highlighting the importance of behavioral approaches to risk, there is limited research that applies these views of risk in the supply chain literature. This paper addresses this gap by drawing on behavioral risk theory to investigate the causal relationships amongst situation, representations of risk, and decision-making within the purchasing domain. We operationalize and explore the relationship between three representations of supply disruption risk: magnitude of supply disruption, probability of supply disruption, and overall supply disruption risk. Additionally, we draw on exchange theories to identify product and market factors that impact buyers’ perceptions of the probability and magnitude of supply disruption. Finally, we look at how representations of risk affect the decision to seek alternative sources of supply. We test our model using data collected from 223 purchasing managers and buyers of direct materials. Our results show that both the probability and the magnitude of supply disruption are important to buyers’ overall perceptions of supply disruption risk. We also find that product and market situational factors impact perceptions of risk, but they are best understood through their impact on perceptions of probability and magnitude. Finally, we find that decisions are based on assessments of overall risk. These findings provide insight into the decision-making process and show that all three representations of risk are necessary for fully understanding risky decision-making with respect to supply disruptions.
DOI
10.1016/j.jom.2009.07.002
Version
Postprint
Citation Information
Ellis, S. C., Henry, R. M., Shockley, J. (2010). Buyer Perceptions of Supply Disruption Risk: A Behavioral View and Empirical Assessment. Journal of Operations Management, 28, pp. 34-46.