Base of the chain (BoC) sourcing challenges: The role of institutional voids and social agency problems

Abstract

Due to various factors, including the institutional context of suppliers, the successful implementation of sustainability initiatives remains a persistent challenge for purchasing and supply management (PSM) professionals. Sourcing from the Base of the Chain (BoC) requires buyers to be cognizant of and assess challenges inherent in engaging with the Bottom of the Pyramid (BoP) institutional context. Designing governance structures that facilitate the simultaneous pursuit of economic and social goals demands a thorough understanding of these challenges and their contextual antecedents. The literature has addressed institutional voids and incompatibilities between buyer-BoC supplier institutional contexts as critical factors informing interventions aimed at overcoming sourcing challenges. Drawing upon social agency theory, our study advances these debates. We argue that the broader institutional and social context serves as the contextual antecedents to principal-agent (P-A) relationships established between buyers and their BoC suppliers. This perspective provides a more enriched explanation for the antecedents of BoC sourcing challenges. We draw on a multiple case study incorporating 31 interviews and archival data of five BoC sourcing programs within the Australian agribusiness sector. Our findings shed light on how BoC institutional voids cause BoC sourcing challenges across supplier and product domains by inducing hidden information, hidden action, and hidden logic as social agency problems. Hidden logic, a new type of social agency problem identified in our study, refers to the agents' socially constructed sets of assumptions, values, beliefs, and traditions that are invisible to the principals. Consequently, we present insights into why governance structures addressing BoC sourcing challenges may vary across institutional contexts, providing practical guidance for buyers in developed economies concerning the subsequent design and execution of effective BoC sourcing strategies.

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