Toward a theory of supply chain fields – understanding the institutional process of supply chain localization

Abstract

Abstract When western multinational enterprises (MNEs) build end‐to‐end supply chains (SCs) to produce and distribute a product or deliver a service in emerging economies, the process is called supply chain localization. These companies encounter institutional environments with regulative, normative and cognitive characteristics very different from those in their home countries. SC localization uncovers and creates institutional voids; we argue that SC localization is a process of institutional change, requiring the MNE to build new institutional infrastructure. To the best of our knowledge, little is known about the institutional process of SC localization and its effects. We carry out a longitudinal case study to investigate SC localization of four MNEs in China. These MNEs are leaders of sustainable business practices in their industries, a distinction that highlights institutional voids in their SC settings. Based on the idea of fields in institutional theory, we build a mid‐range theory by introducing the notion of the supply chain field. Our study identifies and contextualizes the key elements of an SC field. It recognizes MNEs, government and semi‐government entities, and other participants as institutional actors who serve as architects and builders of the new SCs. We find that SC localization is an institutional process, taking place at both actor and field levels, where continuous ideation of new operations practices leads to structuring of the both the SC and SC field.

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