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Making sense of supply disruption risk research: a conceptual framework grounded in enactment theory.


In 2000, a Philips NV semiconductor fabrication plant in Albuquerque, New Mexico was severely damaged by fire caused by a lightning strike (Lee 2004; Sheffi and Rice 2005). At the same time, the two major customers of this plant--Nokia Corp. and Ericsson LM--were launching a new generation of cell phones (Sheffi and Rice 2005). Nokia developed alternate sources of supply and worked with Philips to develop production capability in other chip fabrication centers around the world. Ericsson adopted a different strategy of buffering with inventory to "ride out" the perceived short-term loss in capacity (Schmitt 2008). During the period of the disruption, which extended far longer than Ericsson originally thought, Nokia increased market share while Ericsson suffered significant losses and was ultimately forced to exit select cell phone markets.

Supply disruptions can significantly reduce operational performance, profitability and shareholder value over the long term (Hendricks and Singhal 2003, 2005a, b; PricewaterhouseCoopers 2008). Moreover, supply chain managers expect that their vulnerability to supply disruptions will only increase in coming years (Juttner 2005). The operational and strategic implications of effective supply disruption risk (SDR) management have motivated scholars to explore a range of issues including the types of supply disruptions, assessment models and risk mitigation strategies. However, consistent with the views of Blackhurst, Craighead, Elkins and Handheld (2005), our review of 79 scholarly publications suggests that extant supply risk management research is highly fragmented. In particular, our findings indicate that the SDR stream of research incorporates several theories and constructs across disparate studies, but lacks a unifying framework. Further, the psychological and social theoretical underpinnings of SDR are in their incipient stages of development. As such, per the vignette above, it remains unclear why firms that are seemingly faced with the same nominal SDRs act in such different ways.

We address this gap in extant literature by applying Karl Weick's (1969, 1995, 2001) enactment theory to the study of the SDR decision-making process. Central to enactment theory is sense-making--a closed-loop, socio-psychoiogical process that describes how individuals resolve equivocality. As conceived by Weick (1969), the sense-making process is predicated on the notion that an individual's actions enable enhanced understanding of the environment, which in turn, influences future actions. Guided by enactment theory, we develop an integrative framework in which SDR decision-making is conceptualized as a specialized case of the sense-making process. Accordingly, we suggest that organizational buyers use the sense-making process to cope with equivocality that stems from the supply environment. Through our framework and related propositions, we advance substantive theory that explains how attributes of the (supply) environment, organization (i.e., firm) and individual (i.e., buyer) affect SDR decision-making and its efficacy.

Our research contributes to the body of SDR research in three important ways. First, our application of enactment theory facilitates the integration of disparate studies of SDR into a cohesive conceptual framework. Accordingly, we offer a comprehensive view of SDR decision-making that is grounded in phenomenological studies of SDR and supported by rationale culled from enactment theory. Second, our conceptual framework supports the notion that the perception of risk, rather than actual risk, influences the SDR decision-making process. As such, we advance a theoretical rationale that accounts for differences in objective versus perceptual views and explains why perceptions and mitigation actions vary across individuals faced with the same nominal risk. Third, our study builds on seminal models of risky decision-making (e.g., Sitkin and Pablo 1992; Yates and Stone 1992) by suggesting that equivocality affects how individuals process SDR decisions. Further, our substantive theory provides novel insights into the social and psychological theoretical mechanisms that underlie the formation of risk perceptions and adoption of specific risk mitigation tactics.

The remainder of this paper proceeds as follows. In the following two sections, we present a review of the SDR literature and describe enactment theory, respectively Subsequently, we propose a conceptual framework that integrates key environmental, organizational and individual factors that affect the SDR decision-making process and draw from enactment theory to advance propositions that support our framework. In the final section, we discuss the theoretical and practical implications of our study.


While the focus of our literature review is SDR, we recognize that the study of risk permeates the boundaries of several fields of academic research. Given the breadth of extant SDR research, we used two rules to constrain our review. First, we limited our review to articles that were published within peer-reviewed academic journals. Second, we constrained our review to those articles in which supply risk and/or disruption is the primary consideration. As such, we omit related streams of research, such as those addressing supply chain agility (e.g., Braunscheidel and Suresh 2009) and opportunism (e.g., Hallikas, Puumulainen, Vesterinen and Virolainen 2005), from our review. Application of these heuristics resulted in the identification of 79 SDR articles. In Table 1, we briefly describe the risk elements, referenced theories, methodology, research focus and conclusions advanced within each of these articles.

Supply Disruption Risk (SDR) Research

Studies Figure 1 Referenced Method (c)
 Framework Theories (b)

Altay and 1 Supply chain Empirical
Ramirez (2010)

Babich, 2 Supply chain Analytical modeling
Burnetas and

Bhattacharyya 1,2,3 Transaction Empirical
et al. (2010) cost

Berger et al. 1,2,7 Decision Analytical modeling
(2004) analysis

Blackhurst, 2,5,7 Supply chain Empirical
Elkins and

Burke, Carrillo 2,7 Decision Analytical modeling
and Vakharia analysis

Cachon (2004) 4,5,7 Contract Analytical modeling

Choi and Krause 2,3,7 Complexity Conceptual
(2006) and

Chopra and 2,3,4,7 Supply chain Conceptual
Sodhi (2004)

Christopher and 2,5,6,8 Supply chain Conceptual
Lee (2004)

Cohen et al. 3,6 Supply chain Analytical modeling
(2003), Li

Craighead et 2,3,7 Supply chain Conceptual
al. (2007)

Cucchiela and 1,2,3,7 Real options Analytical modeling

Dalgleish and 4,5 Control Case
Cooper (2005)

Ellis et al. 2,3,7,8 Behavioral, Empirical
(2010) resource

Faisal, Banwet 2,4,5,7 Supply chain Interpretive/empirical
and Shankar

Gaudenzi and 4,6,8 Behavioral Conceptual

Giunipero and 1,2,3,4,7 Supply chain Conceptual

Gupta (1996), 2,7 Supply Analytical modeling
Meyer et al. management
Moinzadeh and

Haksoz and 4,5 Contract Conceptual
Kadam (2008)

Hallikas, 2,3,6,8 Transaction Case
Virolainen and cost and
Tuominen network

Harland, 4,7 Behavioral Case
Brenchley and
Walker (2003)

Hendricks and 2 Supply chain Empirical
Singhal (2003,
2005a, b),
Belke, Elliot,
Lee, Lowe and
Feldman (2003)

Hendricks et 1,2,3,4 Supply chain Empirical
al. (2009)

Ho (1996) 2,3,4,5,6,7 Contingency Empirical

Hult et al. 6,8 Real options Empirical

lankova and 1,7 Supply chain Case
Katz (2003)

Juttner (2005) 1,2,3 Supply chain Empirical

Juttner, Peck 1,2,3,4,7 Supply chain Case
and Christopher

Khan and Burnes 7,8 Transaction Conceptual
(2007) cost

Khan et al. 3,7 Transaction Case
(2008) cost

Kleindorfer and 2,4,7 Supply chain Empirical/case
Saad (2005)

Knemeyer, Zinn 4 Chaos and Conceptual
and Eroglu resource
(2009) dependence

Kraljic (1983) 2,3,4 Supply Conceptual

Kull and Closs 7 Resource Analytical modeling
(2008) dependence

Leopoulus and 4,5,7 Supply chain Case

Lev (1975) 2,7 Supply Empirical

Lewis (2003) 2,3,5,7 Control Case

Li (2007) 3,6 Decision Analytical modeling

Li and Kouvelis 5,7 Contract and Analytical modeling
(1999) decision

Li et al. 7 Supply chain Analytical modeling

Manuj and 1,2,3,4,7 Supply chain Conceptual

Manuj and 1,2,3,7 Behavioral Case

Mitchell 6,7,8 Behavioral Conceptual

Narasimhan and 4,7 Supply chain Conceptual
Talluri (2009)

Norrman and 1,2,3,4,7 Supply chain Case
Jansson (2004)

Parlar and 2 Supply chain Analytical modeling
Perry (1995)

Peck (2005) 1,2,3,4,5 Systems Case

Peck (2006) 1,2,3,4,5,7 Behavioral Conceptual

Pettit, Fiksel 1,2,5 Supply chain Focus group
and Croxton

Rao and Goldsby 1,2,3,4,6 Supply chain Conceptual

Ritchie and 1,2,3,5,8 Agency Case

Ritchie and 1,2,3,6,7,8 Behavioral Case

Ritchie, 1,2,3,4 Agency Conceptual
Brindley and

Sinha et al. 1,4,5,7 Supply chain Case

Smeltzer and 2,3,4,7 Transaction Conceptual
Siferd (1998) cost and

Spekman and 1,2 Supply chain Conceptual
Davis (2004) and

Sutton (2006) 4 Systems Conceptual

Talluri et al. 2,7 Decision Analytical modeling
(2006) analysis

Tang (2006a) 7 Supply chain Conceptual

Tang (2006b) 1,2,3,4,5,7 Supply chain Conceptual

Tomlin (2006), 4,6,7 Supply chain Analytical modeling
Tomlin and Wang

Treleven and 2,7 Supply chain Conceptual

Wagner and Bode 1,2,3 Behavioral Empirical
(2006) and resource

Wagner and Bode 1,2,3,7 Behavioral Empirical
(2008) and

Watson (2004) 2,5 Contract and Case

Zsidisin 2,8 Behavioral Case
(2003a) and

Zsidisin 1,2,3 Behavioral Case

Zsidisin and 1,2,7 Behavioral Empirical
Ellram (2003)

Zsidisin et al. 2,3,4,5,8 Agency Case

Zsidisin, 1,2,7,8 Supply chain Conceptual
Melnyk and
Ragatz (2005)

Zsidisin et al. 2,3,7 Supply chain Case

Zsidisin and 7,8 Agency Case
Smith (2005)

Studies Research Focus Conclusions

Altay and Examines the cross-sector Disaster impact is felt
Ramirez (2010) impact of different types across all sectors of the
 of natural disasters on supply chain and the
 firm financial performance impact of a natural
 using secondary source disaster is felt more so
 data on 3,500 natural by downstream supply chain
 disasters over a 15-year members. The authors
 period suggest that supply
 chain-wide mitigation
 should be practiced, which
 is hazard-specific, and
 offer a model for managers
 to use to better
 understand the impact a
 disaster will have on
 their business

Babich, Examines disruption risks Retailers may be able to
Burnetas and in a supply chain; one manage supplier default
Ritchken retailer with competing rates to take advantage of
(2007) risky suppliers who may both supplier competition
 default on their and diversification.
 production lead times

Bhattacharyya Examines (across 81 The third-party indices
et al. (2010) countries) how accurately individually provide an
 commonly used third-party incomplete view of the
 indices assess a country's operational risk of doing
 operational risk, and how business in a country.
 this level of risk affects These indices should be
 the volume of both its used together and with an
 import and export supply understanding of mediating
 chains variables to accurately
 assess the true
 operational risk of doing
 business in a country.

Berger et al. Uses decision tree Increasing the number of
(2004) approaches (probability suppliers is a
 modeling) to determine the cost-effective strategy
 optimal number of only when suppliers are
 suppliers considering the extremely unreliable.
 likelihood of a supply These models assess the
 disruption (or partial impact on system
 disruption) for performance when partial
 independent sets of sets of suppliers are
 suppliers down.

Blackhurst, Conducts a multi-industry Key issues in supply chain
Craighead, study of perceived causes management and several
Elkins and and practiced mitigation researchable propositions
Handfield strategies for supply are identified based on
(2005) chain disruptions supply manager interviews
 motivated by a model of
 disruption recovery,
 discovery and supply chain

Burke, Carrillo Examines single-period, Single supplier sourcing
and Vakharia single-product sourcing is the dominant strategy
(2007) decisions under demand when supplier capacities
 uncertainty are large relative to the
 product demand and when
 the firm does not obtain
 diversification benefits.
 Selection tradeoffs exist
 between supplier minimum
 order quantities, costs
 and supplier

Cachon (2004) Examines how push, pull Distribution of inventory
 and advance-purchase risks across supplier and
 contracts, and associated retailer significantly
 inventory and supply affects the efficiency of
 risks, affect supply chain the supply chain. Shifts
 efficiency in inventory risk can
 increase both supply chain
 efficiency and profit for
 both the supplier and

Choi and Krause Explores supply chain Complexity reduction may
(2006) complexity and its lead to lower transaction
 management costs, as well as
 increases in supplier
 efficiency and
 responsiveness, but it may
 also increase supply
 disruption risk and reduce

Chopra and Categorizes the sources of Presents a framework for
Sodhi (2004) risk and describes stress testing the supply
 strategies that may be chain to achieve higher
 used to mitigate these risk-reward tradeoffs.
 risk sources Proposes a means to tailor
 risk mitigation

Christopher and Examines the role of Successful supply chain
Lee (2004) confidence and supply risk managers quickly
 chain visibility as an restore confidence to the
 effective mitigation supply network after a
 strategy disruption.

Cohen et al. Examines effect of lead Risk aversion, as well as
(2003), Li time, lead time knowledge of the buyer's
(2007) uncertainty and risk demand distribution,
 aversion on the optimal determines when the
 time to produce in a supplier chooses to
 supply network optimally produce or delay

Craighead et Explores supply chain Severity of supply chain
al. (2007) disruption severity disruptions is impacted by
 density, complexity and
 node criticality.
 Considers two supply chain
 mitigation capabilities:
 recovery and warning.

Cucchiela and Offers a real options Framework to evaluate
Gastaldi approach to supply risk multiple risk
(2006) mitigation characteristics using a
 real options model.

Dalgleish and Provides an analysis of A number of strategic
Cooper (2005) the key issues to be risks specific to the
 addressed in implementing water industry are
 a risk management system, identified. Shows the
 based on the experiences essential requirements for
 of a water authority in an integrated approach to
 Australia managing risks for a water

Ellis et al. Examines buyer Model shows how
(2010) decision-making under situational risk factors
 risk. Presents a risk affect buyer's
 decision-making model decision-making processes
 through their perceived
 probability and magnitude
 of loss. Also shows how
 buyers' perceptions of
 risk influences their
 forward decision-making.

Faisal, Banwet Examines supply chain risk Develops a nomological
and Shankar mitigation by network of internal
(2006) understanding the dynamic enablers of risk
 relationships among risk mitigation (e.g.,
 mitigation enabling information sharing,
 practices agility) and shows the
 order of development of
 such internal capabilities
 using a binary matrix.

Gaudenzi and Uses a process model to The most critical supply
Borghesi identify supply chain risk chain risks are identified
(2006) factors from the from a careful evaluation
 perspective of customer of the effect of
 value disruptions on the
 customer value
 proposition. Involving key
 decision makers is

Giunipero and Provides managerial Situational factors such
Eltantawy guidelines on evaluating as the degree of product
(2004) the situational factors technology, security
 that cause supply risk needs, the relative
 importance of the supplier
 and/or the purchasers'
 prior experience with a
 risky situation should
 determine how much risk
 management is needed in
 the supply chain to avoid
 unforeseen losses and
 anticipate risks.

Gupta (1996), Examines various Inventory can be used as
Meyer et al. inventory-based mitigation an effective risk
(1979), strategies for managing mitigation strategy under
Moinzadeh and supply disruptions. a number of circumstances,
Aggarwal Considers system but the reliability of the
(1997) reliability and downtime supply base, total number
 as inputs for optimal of suppliers and yield
 inventory buffering randomness drives the
 strategies optimal policy.

Haksoz and Examines contracts, Too much production is far
Kadam (2008) contract penalties and more likely to produce
 production in supply losses and the reaction to
 chains uncertainty should be to
 decrease contracted
 volumes. While breach
 penalties mitigate risk to
 the buyers, they can also
 significantly increase the
 variance in profits.
 Moreover, penalty
 selection should be a
 prudent decision that
 reflects not just expected
 profits but also this

Hallikas, Develops qualitative tools Probability of cause and
Virolainen and to assess the risks event and severity/effect
Tuominen associated with supplier of cause on company are
(2002) networks the key representations of
 supply risk. Suggests
 deeper understanding of
 causes and effects of
 risky events is critical
 to effective risk

Harland, Examines risk assessment Supply network risk
Brenchley and and management tools for assessment tools
Walker (2003) complex supply networks facilitate six activities:
 mapping the supply
 network, identifying risk,
 assessing risk, managing
 risk, forming
 collaborative supply
 network risk strategy and
 implementing the

Hendricks and Explores how supply chain Supply disruptions
Singhal (2003, disruptions impact firm significantly affect firm
2005a, b), operating and financial operating and financial
Kleindorfer, performance performance. Firms do not
Belke, Elliot, recover quickly from
Lee, Lowe and supply disruptions.
Feldman (2003)

Hendricks et Examines how firm Business diversification
al. (2009) operational slack, has no significant effect
 business diversification, on the stock market
 geographic diversification reaction. Firms that are
 and vertical relatedness more geographically
 influence the stock market diversified experience a
 reaction to supply chain more negative stock market
 disruptions reaction. Firms with a
 high degree of vertical
 relatedness experience a
 less negative stock market

Ho (1996) Examines environmental Develops a research
 factors that drive framework for learning
 uncertainty in organizations under risk
 manufacturing production and uncertainty.

Hult et al. Contrasts how real options The fundamental mechanics
(2010) are addressed for both of several options operate
 firm-level and supply differently for "supply
 chain decisions chain decisions" than they
 do for "firm-level

lankova and Presents political risk Companies pursue either
Katz (2003) management strategies in low-involvement strategies
 emerging economies where they work with a
 consortium or they develop
 a diverse network of
 public, private and
 government partners to
 help them navigate the
 political environment.

Juttner (2005) Conducts a survey of Managers are concerned
 purchasing managers about risk in their supply
 regarding the business chains but lack specific
 requirements for understanding on how to
 purchasing risk manage risk.

Juttner, Peck Develops a framework for The essential constructs
and Christopher exploring the nature of of supply chain risk
(2003) supply chain risk management are: risk
 sources, supply chain risk
 consequences, supply chain
 strategy and supply chain
 risk mitigation. Presents
 a robust agenda for future
 supply chain risk
 management research.

Khan and Burnes Reviews risk theory The key debates
(2007) applied to the study and surrounding supply risk
 management of supply management are examined,
 chains and argues that empirical
 models of subjective
 supply chain risk are in
 their infancy.

Khan et al. Examines how product The assessment tools used
(2008) design may be leveraged to by Marks and Spencer
 mitigate supply chain effectively characterize
 risk the probability and
 severity of supply chain
 risk and develop product
 design strategies to
 manage risks

Kleindorfer and Develops a framework for Company characteristics
Saad (2005) supply risk assessment and and industry regulatory
 mitigation programs have a
 significant direct effect
 on frequency and severity
 of accidents.

Knemeyer, Zinn Proposes a proactive The process for managing
and Eroglu process for managing catastrophic risk consists
(2009) catastrophic supply chain of four general steps:
 risk identification of
 locations and threats for
 each key location,
 estimation of
 probabilities and
 potential losses,
 evaluation of
 countermeasures and
 selection of counter

Kraljic (1983) Proposes that two Supply risks can be
 criteria, importance of managed by understanding
 purchase and complexity of buying firms' strengths
 supply market, are relative to suppliers'.
 important determinants of Based on relative
 firms' approaches to strengths, study
 managing direct material recommends exploitation,
 purchases balanced or
 diversification supply
 management approaches.

Kull and Closs Analyzes holding inventory Increasing inventory does
(2008) as a risk reduction not always reduce, and may
 strategy even increase, supply
 risk. Firms may derive
 more benefit from
 establishing inventory
 policy parameters,
 increasing coordination
 and reducing second-tier
 supplier lead times.

Leopoulus and Examines how risk An analytical hierarchy
Kirytopoulus assessment may be process may be used to
(2004) integrated into the identify the best supplier
 purchasing competitive (that minimizes overall
 bidding process risk) from a pool of
 potential suppliers that
 vary in terms of technical
 and managerial

Lev (1975) Examines the "smoothness" Inventory buffering helps
 of various performance firms manage the negative
 measures and its impact on effects of environmental
 stock prices uncertainty.

Lewis (2003) Assesses cause and effect Firms need to understand
 relationships of risk factors (causes), the
 disruptive events on consequences of those
 internal (operational) and factors and develop a
 external (customer) losses control mechanism for
 and examines a series of those factors. A framework
 causal events for a series of pre-, during and ex
 of disruptive cases post mitigation strategies
 is presented for each

Li (2007) Examines risk and risk Risk aversion causes firms
 aversion when a supplier to be conservative and to
 is producing customized deviate from the optimal
 capital goods production strategy.

Li and Kouvelis Examines the impact of Contracts that are
(1999) different contracting time-flexible,
 strategies in uncertain quantity-flexible, along
 price environments with supplier selection
 and risk sharing can
 reduce the sourcing cost
 in environments of price

Li et al. Analyzes value of By sharing supply
(2006) information sharing in a information, downstream
 simulated supply chain firms can alert a
 disruption at an upstream
 stage, derive the correct
 early warning time and
 make proper decisions to
 offset the negative impact
 of the disruption.

Manuj and Integrates Supply, operational and
Mentzer multi-disciplinary demand risks are the
(2008a) research to develop a risk primary risks in the
 management and mitigation extended supply chain. A
 framework for global five-step framework is
 supply chains developed that examines
 global supply chain risks
 through risk
 identification, risk
 assessment, assessment of
 risk management
 strategies, implementation
 of risk management
 strategy and mitigation of
 supply chain risks.

Manuj and Examines the effectiveness The adoption of
Mentzer of six risk mitigation postponement, speculation,
(2008b) strategies within the hedging and integration
 context of global supply strategies is a function
 chain management of supply chains' supply
 and demand risk and all
 supply chains will
 increase use of security
 and avoidance strategies.

Mitchell Provides a review of the Supply risk is defined as
(1995) organizational buying the product of the
 behavior literature probability of loss and
 significance of loss to
 the individual or buying
 organization. Identifies a
 list of supply
 management-related factors
 that are risk-enhancing
 and risk-reducing.

Narasimhan and Identifies four main areas Risk assessment and
Talluri (2009) of supply chain risk: mitigation are key focus
 value-focused process areas of future supply
 engineering, labor chain research.
 management in the supply
 chain, catastrophic events
 planning and agility and

Norrman and Investigates how Ericsson, Ericsson implemented a
Jansson (2004) after a major supply risk identification
 disruption, implemented process that includes
 new supply chain risk mapping of product/service
 management tools flows of upstream
 suppliers. Risk
 identification is followed
 by structured, risk
 assessment, ongoing
 management and monitoring
 activities. Probability
 and consequence of supply
 disruptions determine
 incident handling and
 continuity plans.

Parlar and Models supply line process A series of models is
Perry (1995) where one or more subjected to different
 suppliers may not be assumptions of supply
 available due to availability and show
 disruption (e.g., strike) effects on production

Peck (2005) Examines the sources and Risk is embedded in four
 consequences of supply levels of the supply
 chain risk chain: value stream,
 product and process level,
 asset and infrastructure
 level, organizations and
 inter-organizational level
 and environment level.

Peck (2006) Integrates supply chain Supply chain risk is a
 vulnerability, risk and complex issue due to its
 management literature multi-disciplinary and
 multi-firm nature.
 Suggests that extant
 corporate risk management
 tools are ineffective at
 managing complexities of
 supply networks.

Pettit, Fiksel Explores lessons learned Findings confirm seven
and Croxton from actual supply chain distinct supply chain
(2010) disruptions to develop a vulnerabilities:
 conceptual framework to turbulence, deliberate
 evaluate and improve threats, external
 supply chains pressures, resource
 limits, sensitivity,
 connectivity and

Rao and Goldsby Reviews extant literature Identifies five generic
(2009) on supply chain risks to sets of factors that
 find under-investigated contribute to "overall
 issues, and develops a risk" in the supply chain:
 typology to specifically environmental risk,
 investigate risk industry risk,
 identification in the organizational risk,
 supply chain problem-specific risk and
 decision-maker risk.

Ritchie and Explores the interaction Develops a three-stage
Brindley between supply chain risk risk management framework
(2007a) and supply chain in which risk and
 performance performance drivers affect
 risk and performance
 consequences, which in
 turn, influence risk
 management responses.

Ritchie and Explores supply chain risk Develops a supply chain
Brindley management tools risk assessment framework
(2007b) that consists of five
 domains: risk context and
 drivers, risk management
 and influencers, decision
 makers, risk management
 responses and performance
 outcomes. Proposes that
 decision makers'
 perceptions, risk profile,
 attitudes and experience
 affect decision-making

Ritchie, Uses a portfolio risk Supply chain managers must
Brindley and management approach to manage a full portfolio of
Armstrong develop a risk assessment risk drivers. Framework is
(2008) framework for supply provided to construct a
 chains risk management

Sinha et al. Explores the dimensions of A five-step process is
(2004) supply chain risk: lack of used to evaluate risk in
 trust, information the aerospace industry,
 transparency, dependence including problem
 on outsourcing and identification and
 standardization of assessment, failure modes
 contracts analysis and continuous
 improvement programs.

Smeltzer and Examines "proactive "Proactive purchasing"
Siferd (1998) purchasing" practices, helps mitigate supply
 such as supplier risks, but only if such
 certification and quality practices are ongoing.

Spekman and Presents a typology of More than just
Davis (2004) risk in extended logistics-related risk
 enterprises should be considered in
 risk management

Sutton (2006) Focuses on enterprise Present a risk assessment
 risks external to the firm framework for extended
 (from supply chain enterprise systems.

Talluri et al. Evaluates vendor Develops a method for
(2006) performance by considering considering vendor
 the variability of vendor performance using a
 attributes as key inputs multi-attribute approach
 to risk analysis to vendor selection and

Tang (2006a) Examines strategies that Advances several risk
 mitigate the effects of mitigation tactics
 supply chain disruptions including postponement,
 strategic stock, flexible
 supply base, make-and-buy,
 economic supply
 incentives, flexible
 transportation, revenue
 management, dynamic
 assortment planning and
 silent product rollover.

Tang (2006b) Integrates four areas of Supply risk is a function
 supply chain risk of supply network design,
 management literature: supplier relationships,
 supply management, demand supplier selection
 management, product processes, supplier order
 management and information allocation and supply
 management contracts.

Tomlin (2006), Analyzes different Firms' optimal disruption
Tomlin and Wang mitigation strategies for mitigation strategy is
(2005) managing disruption risk. determined by the amount
 Compares reliable vs. of downtime and risk
 unreliable dual suppliers attitude of the firm.
 using a periodic review Contingent rerouting is
 inventory system. often a component of the
 Considers behavioral optimal
 effects on choice of disruption-management
 mitigation strategies strategy.

Treleven and Examines the effect of Identifies the risk of
Schweikhart single vs. multiple sourcing options using a
(1988) sourcing strategies on multi-factor risk
 risk and performance assessment framework.

Wagner and Bode Examines how select supply Supplier dependence,
(2006) chain characteristics single sourcing, and
 affect demand-side risk, global sourcing are
 supply-side risk, and determinants of
 catastrophic risk supply-side risk; customer
 dependence and supplier
 dependence influence
 demand-side risk; and
 supplier dependence and
 global sourcing affect
 catastrophic risk.

Wagner and Bode Examines how different Risk management positively
(2008) types of supply chain affects supply chain
 disruption risks and risk performance but demand and
 management approaches supply risk are negatively
 affect supply chain associated with supply
 performance chain performance.

Watson (2004) Examines contracting and Risk can be controlled in
 power relationships within the contracting phase if
 the film industry market timing issues and
 competition are considered
 when constructing the
 initial supply contract.

Zsidisin Defines supply risk based Scope of supply risk is
(2003a) on interviews with determined from the
 managers in seven firms sources of risk the firm
 faces, whether
 environmental or
 firm-specific sources.

Zsidisin Explores factors that Proposes a classification
(2003b) affect managers' of supply risk that
 perceptions of supply relates item, market and
 risk supplier characteristics
 of supply risk.

Zsidisin and Examines supply risk and Suggests that choice of
Ellram (2003) its relationship to the mitigation technique
 use of behavior-based (outcome or
 and/or buffering behavior-based) might be
 mitigation strategies determined by the type of
 risk a firm faces.

Zsidisin et al. Synthesizes common risk Firms use a variety of
(2004) assessment techniques techniques to assess
 supply risk; techniques
 may be categorized as
 formal processes, supplier
 improvement-based or
 Identifies and defines
 eight risk assessment
 attributes that range from
 design to

Zsidisin, Examines factors affecting Business continuity
Melnyk and very low planning is adopted for
Ragatz (2005) probability-of-occurrence very low
 disruptions probability-of-occurrence

Zsidisin et al. Explores how technology, Finds that firms tend to
(2000) supplier and functional use multiple suppliers to
 risk factors affect risk mitigate risk associated
 assessment, contingency with strategic purchases.
 planning and risk However, only four out of
 management the nine SBU's studied use
 formal risk assessment to
 form contingency plans.

Zsidisin and Explores role of early Early supplier involvement
Smith (2005) supplier involvement as a indirectly leads to
 risk reduction tactic product failure reduction
 and supplier failure

(a) Framework categorization codes: (environment) 1--geopolitical
factors, 2--supply factors, 3--product factors; (organization)
4--structure and systems, 5--controls; (individual) 6--attributes,
7--enactment, 8--selection and retention.
(b) Extant research uses both formal theories (e.g., agency,
behavioral, chaos, complexity, contract, control, decision analysis,
network, real options, resource dependence, systems and transaction
cost) and substantive theories (e.g., supply chain and supply
management). Whereas formal theories are fairly ubiquitous and may be
applied to a range of contexts, substantive theories are
context-specific. Supply chain theories involve risk phenomena
associated with both supplier (i.e., upstream) and customer (i.e.,
downstream) transactions; supply management theories generally adopt a
buyer perspective and address upstream risk phenomena only.
(c) We use the term "empirical" to describe large-scale interview,
survey and archival data collection/analysis approaches.

Theoretical Perspectives

Organizational perspectives, such as transaction cost economics (TCF) and resource dependence (RD) theories, as well as real options approaches have played a central role in studies of SDR. Whereas TCF. logic lends conceptual support for the links between SDR and (i) uncertainty and (ii) asset specificity, RD theory suggests that SDR is a function of dependence. Accordingly, previous research has used these organizational theories to examine the effects of supply base complexity, market thinness, technological dynamism, supply uncertainty, product customization, product importance and inventory buffering strategies on supplv risk (Choi and Krause 2006; Wagner and Bode 2006; Khan, Christopher and Burnes 2008; Kull and Closs 2008; Ellis, Henry and Shockley 2010). Alternately, real options theory links postponement and SDR mitigation, suggesting that delayed investment reduces uncertainty by permitting more informed decision-making. Using this approach, Cuc-chiela and Gastaldi (2006) explain how defer, stage, explore, lease, outsource and other options may be used to mitigate risks stemming from internal and external sources of uncertainty. In the same vein, Hull, Craighead and Ketchen (2010) find that the use of deferral options, under conditions of high uncertainty, is positively related to supply chain project return on investment.

A burgeoning stream of SDR research has incorporated a behavioral perspective, which advances a perceptual view of risk and considers the psychological and social factors that affect the formation of risk perceptions. Such emphasis on risk perceptions stems from (i) the notion that perceptions of risk play a formative role within an individual's cognitive decision-making process (Yates and Stone 1992) and (ii) findings that managers' assessments of risk are often imprecise and different from those predicated on traditional decision theory (March and Shapira 1987). Accordingly, behavioral studies conceptualize SDR in terms of perceived probability and magnitude of loss and examine factors that influence overall perceptions of SDR (Zsidisin 2003a). Using a behavioral approach, Mitchell (1995) proposes several individual-level factors, such as buyer demographics and personality, that affect organizational buyers' risk perceptions. In the same vein, Ellis et al. (2010) find that environmental factors affect perceptions of probability and magnitude of loss, which in turn influence views of overall SDR.


The variety of theoretical perspectives has facilitated the development of SDR-related definitions that are both objective and behavioral in nature. For example, Hendricks and Singhal (2005b, p. 35) adopt an objective view and define a supply chain disruption as "an indicator of a firms inability to match demand and supply"; the authors assert that supply disruptions may be due to many reasons ranging from poor forecasting and planning to part shortages and production problems. Similarly, Craighead, Blackhurst, Rungtusanatham and Handfield (2007, p. 132) postulate that supply chain complexity is positively related to disruption severity; in their study, supply disruptions are defined as "unforeseen events that interfere with the normal flow of materials and/or goods within the supply chain." Other studies incorporate behavioral elements into definitions of SDR-related constructs. For example, Zsidisin (2003a, p. 222) defines supply risk as "the probability of an incident associated with inbound supply from individual supplier failures or the supply market occurring, in which its outcomes result in the inability of the purchasing firm to meet customer demand or cause threats to consumer life and safety." Ellis et al. (2010, p. 36) build on this work and define SDR as "an individual's perception of the total potential loss associated with the disruption of supply of a particular purchased item from a particular supplier."

Constructs and Findings

Several aspects of risk, including antecedents and consequences of risk as well as risk assessment frameworks, have been explored in prior research. In aggregate, the SDR literature suggests many supply market-, supply base-, supplier- and pro duct-related antecedents of SDR. Whereas supply market antecedents include factors such as market thinness, entry barriers and capacity availability (Kraijic 1983), supply base antecedents include the number of suppliers, density of the supply network, differentiation of suppliers and interrelationships between suppliers (Choi and Krause 2006; Craighead et al. 2007). Extant research further suggests that supplier attributes, such as supplier capabilities, performance and size (Mitchell 1995; Cohen, Ho, Ren and Terwiesch 2003; Zsidisin 2003a), and product characteristics, like level of customization and pace of technological change (Kraljic 1983; Giunipero and Eltantawy 2004; Ellis et al. 2010), influence SDR.

Several studies find a significant relationship between supply disruption and firm performance. In particular, results from empirical research indicate that supply disruptions are negatively related to buying firms' stock performance (Hendricks and Singhal 2003, 2005b; Hendricks, Singhal and Zhang 2009) and operational performance (Hendricks and Singhal 2005a). These studies have motivated a related stream of research that proposes risk assessment methodologies and tactics to mitigate SDR. Within this research stream, Kleindorfer and Saad (2005) develop a comprehensive, stepwise approach to identifying and mitigating risks. Similarly, Sheffi and Rice (2005) propose the use of vulnerability maps to aid in the identification and mitigation of supply risks. Several mitigation tactics, such as early supplier involvement (Zsidisin and Smith 2005), information sharing (Li, Lin, Wang and Yan 2006), buyer-supplier relationship management (Sinba, Whitman and Malzahn 2004), contingency planning (Tomlin and Wang 2005; Tomlin 2006), sourcing policy and philosophy (Treleven and Schweikhart 1988; Smeltzer and Siferd 1998; Zsidisin, Panelli and Upton 2000) and inventory policy (Meyer, Rothkopf and Smith 1979; Gupta 1996; Moinzadeh and Aggarwal 1997; Kull and Gloss 2008), may reduce the likelihood and/or severity of supply disruption.

Gaps and Trends

Our review of the SDR literature leads us to draw three important conclusions. First, we find that risk drivers, consequences of risk, risk mitigation tactics and risk assessment represent important elements of a comprehensive model of SDR. However, these important components are not well integrated in existing research. Second, our review suggests the growing importance of incorporating organizational and individual factors into SDR research. However, this effort is only in its incipient stages; we find few empirical studies of SDR that draw on such variables to explain disruption risk phenomena. Third, our findings indicate a developing consensus that behavioral views are important to our understanding of SDR. However, extant SDR research provides limited insight into the social and psychological mechanisms that underlie SDR perceptions and the SDR decision-making process.


Enactment theory concerns the psychological and social processes through which individuals and organizations derive meaning, or "make sense," from their experiences (Weick 1969, 1995, 2001). Fundamental to this theory is sense-making--a closed-loop process comprised of enactment, selection and retention activities that enable individuals to resolve equivocality (Weick 1969). Equivocality denotes the extent to which multiple meanings are linked with situation and arises when (i) derived meanings are subject to infinite revision as events unfold and conflicting individual and social explanations are invoked and (ii) the relative superiority of a particular explanation remains ambiguous (Weick 2001, p. 10). With high levels of equivocality, the environment is un-analyzable and enactment becomes the primary means of understanding (Weick 2001).

Sense-making Process

Within the sense-making process, enactment represents the execution of actions that are guided by preconceptions but may not be fully understood by the actor (Weick 2001). Accordingly, enactment incorporates previous understanding and provides the raw material for subsequent clarification of understanding. Selection refers to the interpretation process in which individuals attach meanings to actions by constructing plausible stories that explain current accounts of enactment (Weick 2001). In effect, an individual "selects" a contextually rational explanation, from those available, that best utilizes past wisdom and experiences. Through the selection process, past experiences constrain and preconceptions influence, current understanding. As such, the selection process accounts for the extent to which the perceived, enacted environment matches an objective reality and is critical to the accurate judgment of risk.

Through enactment and selection, salient entities are identified and cause-effect relationships are developed; in the subsequent retention process, these entities and their cause-effect relationships are stored within cognitive cause maps. The resulting cognitive cause map exists within the mind of the individual and represents (i) past wisdom, that is, "knowledge of what one thinks" (Weick 2001, p. 189), (ii) the criteria that influences what is noticed versus ignored, and how one will act (Weick 1969) and (iii) the enacted environment (Weick 2001). Through closed-loop process feedback, retained wisdom may constrain future actions and/or influence how future actions are interpreted (Weick 2001). As such, through the enactment-selection-retention process, action is informed and the capacity for judgment is developed.

Organizations augment the sense-making process through aggregating cognitive mechanisms such as group mind and collective cause maps. Group mind refers to the cognitive interdependence that forms among individuals that maintain close relationships; through such relationships, individuals "enact a single transactive memory system, complete with differentiated responsibility for remembering different portions of common experience" (Weick 2001, p. 260). Commonalities across individuals' cognitive cause maps form the basis for organizational values and goals that guide enactment and selection activities (Weber and Glynn 2006). As such, collective cause maps, supported by organizational structure, systems and controls, facilitate reductions in equivocality by constraining the number of acceptable meanings that may be attached to an event.

Core Principles

Enactment theory employs two salient principles, involving rationality and interaction, which facilitate the development of our conceptual framework. The first principle holds that individuals behave with constrained rationality that is retrospective in nature. Constrained rationality implies that individuals "act rationally within the limits of the [cognitive cause] maps they build" (Weick 2001, p. 322). Simplifying procedures applied to cognitive cause maps suggest that individuals pursue reasonable rather than economically optimal strategies to cope with equivocality. The retrospective nature of rationality focuses on justifying enactment rather than planning future action; in this post hoc view, rational behavior is situation-dependent and involves justification of enactment that facilitates legitimacy with important members of the social unit (i.e., leaders of the organization).

A second underlying principle of enactment theory suggests that interaction, and associated committed action, represent the fundamental elements of social organization. Interaction refers to the action-response dyad that interlocks individuals' behaviors and provides the context for committed action--action that is irrevocable, public and volitional and to which individuals become bound (Weick 2001, p. 17). Committed action gives rise to organization as individuals become dependent on those with whom they interact in order to achieve desired outcomes. Coordination results as individuals (i) adopt shared goals that justify committed actions and (ii) conduct actions heedfully while envisioning the joint actions of the organization (Weick 2001). Thus, the principles of rationality and interaction, coupled with the need to cope with equivocality, render the individual, organization and environment inextricably intertwined.


Through the lens of enactment theory, we develop a conceptual framework that advances understanding of the SDR decision-making process. As shown in Figure 1, our framework integrates extant SDR research (see categorization references in Table 1 that link SDR studies with Figure 1) with constructs culled from organizational and behavioral literature. We adopt three units of analysis--environment, organization and individual--to serve as the fundamental building blocks of our framework and use double-headed arrows to represent the interdependent nature of these units of analysis. The interdependence among individual, organization and environment is driven by three principles culled from enactment theory: (i) environments are enacted through individuals' actions, (ii) organizations, which represent individuals' social structures, interact with the environment through individuals' actions and (iii) through the sense-making process, organizations augment individuals' ability to understand the environment (Weick 2001). We conceptualize an "organization" as a firm and suggest that the "environment" consists of entities external to the firm that are not subject to direct control through ownership or fiat. The "individual" is a buyer of direct materials; buyers enact their environments through the adoption of risk mitigation actions and the meaning that is derived from these actions.


In the context of SDR decision-making, we draw from enactment theory to suggest that the socio-psychological sense-making process underlies the formation of buyers' SDR perceptions and decisions to mitigate such risks. At the individual level, we conceptualize the SDR decision-making process as a specialized case of sense-making in which judgments and evaluations of risk and adoption of risk mitigation tactics may be viewed as situation-specific enactment, selection and retention activities. We posit that equivocality, and its reduction, link environmental, organizational and individual factors to the SDR decision-making process. Whereas equivocality stems from the supply environment, buyers invoke the sense-making process to resolve such equivocality. In the course of sense-making, buyers enact risk mitigation strategies (i.e., enactment) and form judgments and overall appraisals of SDR (i.e., selection) which are retained to inform subsequent enactments (i.e., retention). Further, we posit that individual and organizational factors affect how equivocality is resolved and, subsequently, how SDR perceptions are formed and managed. Thus, the level of equivocality inherent in the supply environment, coupled with the organizational and individual factors that affect the equivocality resolution process, cause the SDR decision-making process to vary significantly across buyers and their firms.


Traditionally, the environment has been defined in terms of resources, complexity, interdependence and markets (Porac, Thomas and Baden-Fuller 1989; Scheid-Cook 1992). An important distinction lies in the contrast between "enacted environment" and "environment." Whereas the enacted environment refers to a mental model stored within the mind of an individual, the concept of environment is much broader in nature. The narrow scope of enacted environment is attributable to the notion that individuals, due to their bounded rationality, cannot attend to and interpret all possible environmental cues; through the sense-making process, an individual forms a mental model of the environment that is only a "partial representation of a larger transactional network" (Porac et al. 1989, p. 399). In contrast, the broader notion of environment extends beyond an individual mind and represents an objective reality that may not be fully known or accurately understood by an individual. Within our framework, we conceptualize the broader environment in terms of geopolitical, supply market and product factors and suggest that these factors serve as an expansive source of uncertain, complex, dynamic and interdependent cues that drive equivocality within the SDR decision-making process.

Geopolitical Factors. Geopolitical factors can generally be classified as governmental, natural and societal disruptions (Iankova and Katz 2003) and involve equivocality "arising from supply chain distance such as disruption caused by political (e.g., fuel crisis), natural (e.g., foot and mouth disease outbreak, fire, earthquake) or social (e.g., terrorist attacks) uncertainties" (Juttner 2005, p. 121). A government's formal policies, such as nationalization and confiscation mandates, exchange controls, workforce safety laws and local content requirements, and informal policies, which may tacitly allow bribery and corruption, drive uncertainty through the creation of a problematic or overly regulated exchange environment (lankova and Katz 2003; Peck 2005). Uncertainty is exacerbated when transactions involve international exchange; in such cases, asymmetries of information render monitoring difficult and permit deception in contracting (Bhattacharyya, Datta and Offodile 2010). Further, international exchange increases the complexity of transactions as buyers must bridge disparate political, legal, monetary, logistical and cultural systems (David 2004).

Natural disasters, such as fires, floods, windstorms and earthquakes, and societal disruptions, which include excess violence, outbreak of disease, terrorist attacks, revolutions, strikes, war and protest, similarly introduce higher levels of equivocality into the SDR decision-making process (Berger, Gerstenfeld and Zeng 2004; Giunipero and Eltantawy 2004; Sheffi and Rice 2005). Such events may directly or indirectly affect flows of direct materials by rendering suppliers' production facilities or supporting infrastructure (e.g., roads, ports and communication systems) inoperable (Wagner and Bode 2008). Uncertainty driven by the inability to predict the onset, severity or impact of natural disasters and societal disruptions renders both a priori and ex post mitigation difficult (Altay and Ramirez 2010). Further, the relative infrequency of these exogenous events suggests that buyers accumulate limited retained understanding that may be drawn upon to resolve the equivocality that stems from these situations (Spekman and Davis 2004). Accordingly, extant research is rich with examples which suggest that multiplicity of perceptions and actions typify emergency situations (Weick 2001; Sheffi and Rice 2005).

Supply Factors. Whereas geopolitical factors incorporate a global view of the transactional environment, supply factors involve supplier, supply network and supply market attributes. Extant SDR research suggests that supplier factors, such as supplier performance variation and supplier proximity, introduce complexity and uncertainty into the SDR decision-making process. Inconsistent suppler performance, stemming from suppliers' inadequate product and/or pro duct-related capabilities, materializes in the form of insufficient supply capacity, poor product quality, lack of product innovation and inability to reduce costs; such problems complicate buyers' coordination efforts (Zsidisin 2003a; Spekman and Davis 2004; Zsidisin, Ellram, Carter and Cavinato 2004). The level of uncertainty and complexity increases as buyers source direct materials with distant suppliers. Whereas proximal suppliers facilitate higher levels of buyer-supplier coordination (Kaynak 2002), coordination of distant suppliers is complicated by the increased likelihood of (i) higher transportation lead times and (ii) multimodal shipments (Peck 2005). Further, longer lead times increase the need to manage higher inventory levels and difficulty of responding to demand variation in product volume and mix (Zsidisin and Ellram 2003).

The supply network refers to the current members of a firm's upstream supply chain. Supply network attributes, such as complexity and density, may also increase the equivocality associated with the supply environment. Drawing from Choi and Krause (2006), we conceptualize supply network complexity as a multidimensional concept that includes the (i) number of suppliers, (ii) differentiation of suppliers and (iii) interrelationships among suppliers in the supply chain. The number of suppliers reflects the size of a firm's direct materials supply base; whereas too many suppliers increase the complexity of coordination and control, too few suppliers (as with thin markets) may result in overdependence and increased equivocality that stems from supplier opportunism and limited information flows. Differentiation of suppliers concerns the extent to which suppliers within a supply base do not share common culture, practices or systems. As in the case of the keiretsu, low levels of differentiation facilitate shared understanding which limits complexity; however, complexity increases as buying firms manage suppliers whose cultures and practices are more heterogeneous in nature (Choi and Krause 2006). Interrelationships are defined as supplier-supplier relationships that exist within a firm's supply base; to the extent that interrelationships facilitate the alignment of culture, practices and systems, supplier-supplier relationships mitigate the complexity inherent in a supply network (Choi and Krause 2006). Supply network density refers to the geographic spacing of suppliers comprising the upstream supply chain (Craighead et al. 2007). A densely located supplier network, through its interaction with geopolitical factors, may have a significant effect on equivocality as a greater portion of the supply network may be simultaneously impacted by government action, natural disaster or societal disruption.

The supply market is comprised of all current and potential suppliers of a firm's direct material. Supply market attributes, such as thinness and dynamism, may also contribute to the level of equivocality that stems from the environment. Whereas thinness refers to the number of suppliers capable of supplying a direct material (Cannon and Perreault 1999), dynamism represents the fluctuation in the manufacturing capacity or price of purchased goods in the supply market (Zsidisin 2003a). In thin markets, where there are fewer suppliers, buyers are more dependent on existing suppliers; the resulting dependence increases the likelihood that suppliers will behave opportunistically (Bensaou and Anderson 1999). Further, thin markets offer buyers fewer opportunities to gain market insights from alternate suppliers (Cannon and Perreault 1999). Together, the increased likelihood of supplier opportunistic behavior and reduced information flow introduce equivocality as buyers' ability to understand the motives that underlie suppliers' actions are severely inhibited. Alternately, dynamic supply markets, characterized by rapid structural change, infuse uncertainty into the underlying value proposition of a purchased good. Such dynamism may be structural in nature; low barriers to entry and rapidly changing product technology may facilitate the rise of new entrants (Porter 1980). Conversely, supply markets characterized by mature product technologies and high levels of competition are subject to consolidation and exit of existing firms which cause the competitive landscape to change (Hallikas and Varis 2009). In a dynamic market, equivocality ensues as changes in the market outpace growth in a buyer's retained understanding of potential suppliers, available products offered by the market and the prevailing price per product feature.

Product Factors. Product attributes, such as customization and the nature of underlying technology, may also affect the level of equivocality inherent within the SDR decision-making process. Product customization refers to the extent to which the specifications of the direct materials are singular to the buying firm (Perdue and Summers 1991) and necessitates relationship-specific investments with suppliers to develop capabilities that match customers' specific needs (Stump, Athaide and Joshi 2002). Buyers' dependence on suppliers increases as suppliers' investments in specialized plants, equipment and personnel effectively reduce the number of available sources of supply (Hallen, Johanson and Seyed-Mohamed 1991). Equivocality stems from product customization as (i) the resulting thin markets permit suppliers' opportunistic behavior and limit information flows (Hedge, Kekre, Rajiv and Tadikamalla 2005) and (ii) the deviation from standard product designs necessitates proprietary interfaces, increasing the complexity of coordination between buyer and supplier (Novak and Eppinger 2001). The dynamism of product technology--the rate of technological change for a particular product technology in an industry (Droge, Claycomb and Germain 2003)--also impacts the level of equivocality inherent in the supply environment (Weick 2001). Rapid technological change obfuscates performance expectations as buyers must learn the intricacies of new technologies to adequately evaluate supplier capabilities and effectively resolve supply chain issues. With rapidly changing technologies, standards for price and value assessments become ambiguous as retained understanding lags technological advancement (Ellis et al. 2010).

Equivocality. In aggregate, we assert that uncertainty, complexity, dynamism and interdependence represent overlapping properties of the supply environment that affect the level of equivocality of the SDR decision-making process. Whereas uncertainty raises the prospect for equivocality due to "a lack of information about cause-effect relationships" (Milliken 1987, p. 134), complexity, which captures "the number of elements within the system and the degree to which these elements are differentiated" (Choi and Krause 2006, p. 5), increases the likelihood that a buyer will confront the unknown. In the same vein, dynamism suggests that an individuals' extant knowledge, conceptualized as retained understanding, may not keep pace with the rapidly changing environment (Achrol and Stern 1988). Further, interdependence requires close interlocking behaviors, which impose complexities of coordination (Weick 2001). Through these mechanisms, we suggest that geopolitical, supply and product attributes associated with the supply environment impose difficulty in establishing a singular meaning that informs decision-making.

Proposition 1: The level of uncertainty, complexity, dynamism and interdependence associated with geopolitical, supply market and product factors is positively associated with the level of equivocality inherent in the SDR decision-making process.


The predominant view in the sense-making literature is that organizations are an "internal cognitive constraint" (Barley and Tolbert 1997) or "structures that constrain sense-making by making some actions unimaginable and others self-evident" (Weber and Glynn 2006, p. 1641). Organizing serves to reduce the level of equivocality from the environment by "[shaping] what people say and do, [shaping] what people notice in their deeds and discourse, and [shaping] the thoughts, presumptions, and labels that people treat as their beliefs" (Weick 2001, p. 96). Previous supply risk research suggests that two general sets of organizational factors may play an important role in the management of supply disruptions: (i) systems and structures and (ii) controls (Mitchell 1995). We propose that these sets of organizational factors serve to reduce equivocality through policies, procedures, information and social interactions that affect an individual's sense-making process. Organizational structures, systems and controls influence what buyers pay attention to and what justifications of the enacted environment are considered appropriate. Through their effect on the sense-making process, organizational factors facilitate buyers' capacity to cope with equivocality inherent in SDR decisions.

Organizational Structure and Systems. Organizational structure and systems act to reduce environmental equivocality by facilitating sensible interpretation (i.e., selection) and group mind (i.e., retention). Weick (2001) identifies several aspects of organizational structure that are germane to the sense-making process: level of decentralization, composition of work teams and staffing level. Decentralization refers to the extent to which authority for decision-making is distributed throughout lower levels of the organization (Lee and Choi 2003). Relative to centralization, decentralized structure facilitates understanding as (i) actions are not impeded by vertical communication flows and requests for approval and (ii) authority to act resides with those most knowledgeable to act. Accordingly, decentralization promotes more frequent enactment and subsequent interpretations that make sense of previous actions while leading to appropriate future actions (Weick 2001). Composition of work teams reflects the nature and distribution of knowledge and underlying experience of those who collaborate to accomplish organizational goals. Both breadth of knowledge and knowledge overlaps facilitate development of comprehensive group mind (Weick 2001). Whereas breadth of knowledge increases the likelihood of the team's familiarity with current circumstances, knowledge overlaps provide the mutual understanding that enables group mind (Weick, Sutcliffe and Obstfeld 2005). As such, teams having broad, overlapping knowledge and experiences may leverage a richer group understanding to resolve equivocality. In a similar vein, understaffing limits the capacity to cope with equivocality as the number of individuals available to act, interpret and form group mind is reduced (Weick 2001).

Organizational information systems provide additional means to cope with equivocality that stems from the environment (Mitchell 1995; Zsidisin et al. 2004). Rich information systems, and their related technologies, facilitate the collection, storage and processing of information that enables the characterization of the supply environment through (i) analytical and decision support, (ii) identification and presentation of environmental cues, (iii) support of group mind, (iv) information presentation and (v) timely feedback. Whereas transaction systems facilitate the assessment of historical data, decision support tools permit further understanding of the environment through simulation and what-if analyses (Murphy and Wood 2004). Accordingly analytical and decision support tools augment retained understanding and facilitate sensible interpretation of prior actions. Information systems also affect the specific cues to which individuals attend. Given the infinite number of ways in which continuous experience may be parsed, information systems can identify and present salient cues that support meaningful interpretation and effective action while dismissing those cues that are superfluous (Craighead et al. 2007). Further, information sharing facilitates the development of group mind; through information sharing, relevant pieces of related experience can be pooled across multiple members of the organization such that integrated organizational understanding is enhanced. In addition, information systems influence how information is represented to actors; data format, presentation and context influence both preference and judgment (Tversky and Kahneman 1981; Stone, Yates and Parker 1994). Thus, through data representation, information systems reduce equivocality by constraining (i) preference that guides enactment and (ii) interpretation that influences judgment of prior actions. Finally, information systems promote equivocality reduction by facilitating timely transmission and receipt of messages. Timely feedback enables prompt revisions to interpretation and swift updates to retained understanding that enable further sense-making efforts (Weick 2001).

Organizations may further increase the capacity to resolve equivocality through the use of risk assessment systems that formalize scanning and information processing efforts (Lewis 2003). Scanning refers to the breadth and depth to which the external environment is examined for salient cues; alternately, information processing reflects the translation of cues into meaningful information that promotes shared understanding (Weick 2001). Together, scanning and information processing reduce equivocality by advancing organizational knowledge (Brown, Stacey and Nandhakumar 2007). In general, formal risk assessment systems use a four-step process in which (i) top management approves resources to support the risk management process, (ii) vulnerable key processes, assets, facilities and human populations are identified, (iii) specific vulnerabilities, probabilities of occurrence and risk reducing activities are evaluated and (iv) an ongoing reporting and auditing team is implemented (Kleindorfer and Saad 2005). The output from this process may enhance organizational understanding such that a comprehensive representation of the supply environment is shared within the organization.

Proposition 2: Decentralized structure, diverse work teams with overlapping knowledge, staffing level and systems that enable rich information flows and formal assessment are negatively associated with the level of equivocality inherent in the SDR decision-making process.

Organizational Controls. Organizational controls, such as rules, roles, reward systems and culture, represent social mechanisms that facilitate interpretation of the environment and shape behavior. Identity and identification are central components of sense-making (Weber and Glynn 2006). Weick et al. (2005, p. 416) assert, "who we think we are (identity) as organizational actors shapes what we enact and how we interpret." One element of identity construction can be found in the roles that are established for organizational actors. Roles emerge from justifications of committed action and reflect a "set of both expected and enacted behaviors" that facilitate heedful interaction among members of an organization (Zigurs and Kozar 1994, p. 277). As such, roles reduce equivocality by guiding enactment and defining appropriate types of response. Whereas roles generally describe duties associated with a particular position, rules reflect general policy and preset responses to standardized situations (Scott 2001). The capacity of the organization to cope with equivocality increases as (i) the "severity, number, latitude for deviations and clarity" of rules intensifies, (ii) agreement on "the content of rules, the nature of violations and how violations will be handled" increases and (iii) the speed with which "people learn about the effects of their actions" increases (Weick 2001, p. 43). Thus, roles and rules affect organizational capacity to cope with equivocality by defining appropriate action and aiding recognition and interpretation of cause-effect relationships.

Rewards systems reinforce the alignment between employees' actual and expected behavior through three mechanisms: (i) performance definition, (ii) performance appraisal and (iii) performance feedback (Summers 2005; Noe, Hollenbeck, Gerhart and Wright 2008). Through performance definition, employee goals that are congruent with those of the organization are identified and set (Folan and Browne 2005). Whereas appraisal involves the assessment of employee performance, feedback facilitates adjustment in employee behavior. Thus, reward systems, when linked to employee performance, affect enactment by motivating desired organizational behaviors (Rynes, Gerhart and Parks 2005; Ritchie and Brindley 2007b). In addition, behavior-based reward systems may promote organizational learning by (i) rewarding nonevents (i.e., the absence of crisis), enactment and communal behaviors and (ii) permitting failure (Weick 2001; Zsidisin and Ellram 2003); by facilitating an organizational environment that promotes learning, the capacity to reduce equivocality is increased.

Culture refers to the enduring beliefs of an organization (Scott 1998) and is embodied within organizational values, paradigms and stories (Bruner 1991). Organizational values represent social agreement on the criteria that distinguishes acceptable action, sensible interpretation and effective performance (Oyserman 2002). Organizational values reside in group mind and guide heedful, coordinated action by affecting preferences for action and providing capacity for judgment (Weick 2001). Further, values enhance organizational sense-making by driving the need to explain behavior to one's important peers in a socially acceptable manner (Weick 2001). In a similar vein, organizational paradigms are dominant beliefs about underlying patterns or models and arise from strong socially accepted justifications (Isabella 1990). A dominant model within an organization "improves prediction, [and] allows a higher level of agreement on cause-effect relationships and/or preferences" (Weick 2001, p. 80); in this way, paradigms facilitate equivocality reduction. Stories provide means to propagate values and paradigms throughout the organization; stories are particularly useful supplements to experience when trial and error is not possible (Bruner 1991). As an equivocality coping tool, shared stories "provide general guidelines within which they [individuals] customize diagnoses and solutions to local problems" (Weick 2001, p. 341). In sum, because rules, roles and reward systems rely on precedence for effect, culture represents a particularly powerful means to reduce equivocality.

Proposition 3: Organizational controls, such as roles, rules, rewards systems and culture, are negatively associated with the level of equivocality inherent in the SDR decision-making process.


Within the context of SDR, we suggest that the sense-making process serves as the basis for the SDR decision-making process in which the adoption of risk mitigation tactics, judgments and evaluations of SDR, and understanding of the supply market are closely linked. Although these linkages exist within an individual's mind, the activities associated with the underlying sense-making process are both psychological and social in nature.

SDR Decision-Marking as Sense-Making Process. In highly equivocal situations, the sense-making process begins with enactment. Faced with multiple potential interpretations of environment, "people often don't know what the 'appropriate action' is until they take some action and see what happens" (Weick 2001, p. 225). Enactment involves actions that provide the stream of episodes that may be singled out for subsequent interpretation. During enactment, preconceptions guide actions aimed at managing a situation; through such actions, equivocality--the raw material of sense-making--is introduced into the sense-making process (Weick 1969). Equivocality is reduced through (i) subsequent stages of the sense-making process and (ii) later enactments, which incorporate feedback from previous enactments and simplify problem structure (Weick 2001). Thus, through action, individuals both determine and affect the situation and develop knowledge of a previously equivocal environment; in this way, an enacted environment is created.

In the context of SDR, buyers enact risk mitigation practices under the preconception of effectively shaping the supply environment. Several risk mitigation practices, such as early supplier involvement, logistics integration and supplier development, rely on extensive joint buyer-supplier efforts to eliminate disruptions caused by poor product quality, late delivery and excessive costs (Waters-Fuller 1995; Krause, Scannell and Calantone 2000; Giunipero and Eltantawy 2004; Zsidisin and Smith 2005). Early supplier involvement is a collaborative activity in which buyers involve suppliers in the initial stages of the product development cycle (Zsidisin and Smith 2005). Through early involvement in buyers' product development processes, suppliers may leverage internal expertize to influence buyers' product designs (Primo and Admundson 2002). Supplier involvement requires extensive bilateral sharing of proprietary information and joint problem solving, which is often facilitated by the colocation of supplier personnel at buyers' design centers (Clark and Fujimoto 1991). Similarly, logistics integration refers to buyer and supplier efforts to coordinate the flows of goods, services and related information throughout the supply chain (Lambert, Cooper and Pagh 1998). Extant research has identified two facilitators of logistics integration: buyer-supplier information sharing and colocation (Handfield 1993). In the same vein, supplier development involves buyers' direct investment in the improvement of current or potential suppliers' performance or capabilities (Krause 1999). Through supplier development efforts, supplier improvement is achieved through buyer's provisions of on-site technical assistance, training and investment in plant and equipment (Krause 1999). In general, early suppler involvement, logistics integration and supplier development activities aim to mitigate SDR through extensive buyer-supplier joint efforts.

Similarly, comprehensive supplier selection and formal ongoing evaluation activities advance a buyer's understanding of the supply environment by fostering supplier interactions before and following the sourcing decision, respectively. Supplier selection is a multistaged process in which buyers (i) identify a pool of potential suppliers, (ii) develop a short-list of acceptable suppliers and (iii) award business to suppliers that offer superior value propositions (Fawcett, Ellram and Ogden 2006). The use of comprehensive selection criteria and rigorous selection methodology facilitates the identification of suppliers that best support the firm's value creation process. Accordingly comprehensive selection processes use (i) inclusive sets of concrete performance and behavioral selection criteria (Kannan and Tan 2002), (ii) cross-functional teams to develop selection criteria and evaluate suppliers against the selection criteria (Fawcett et al. 2006) and (iii) extensive primary and secondary data obtained through supplier self-assessment, historical databases, audits, interviews and direct observation (Talluri, Narasimhan and Nair 2006). Formal supplier evaluation involves continued periodic broad-based monitoring of suppliers following selection and the timely communication of performance feedback to suppliers (Krause et al. 2000). Thus, comprehensive supplier selection and formal evaluation resolve equivocality through significant interfunctional and interorganization joint efforts.

In contrast, contingency planning involves activities that are executed with little buyer-supplier interaction. In general, contingency planning activities involve securing excess supply capacity or holding inventory at key positions within the supply chain (Giunipero and Eltantawy 2004; Tomlin 2006). Firms may secure excess capacity using several approaches: (i) contracting with multiple suppliers, (ii) contracting with suppliers with low capacity utilization or with suppliers that maintain redundant manufacturing systems that are globally distributed (Lewis 2003) or (iii) investing in in-house manufacturing capacity (Chopra and Sodhi 2004; Tomlin 2006). Alternately, contingency plans may direct firms to hold raw material, work-in-process or finished goods inventory to mitigate the effects of a supply disruption (Zsidisin and Ellram 2003; Giunipero and Eltantawy 2004).

SDR mitigation practices, therefore, vary in terms of their focus, level of buyers' and suppliers' involvement, and subsequently, the extent of inherent committed action. Drawing from enactment theory, we suggest that the degree to which the adoption of a particular mitigation approach facilitates sense-making is contingent upon the level of commitment inherent in the risk mitigation practice. Committed action plays an important role in conceptually linking SDR mitigation enactments and richer understanding of the supply environment. In particular, SDR mitigation actions characterized by higher levels of organizational visibility and investment are more difficult to undo or disown. Such conditions bind individuals to their actions, increase the tenacity of socially acceptable justification, and, as with self-fulfilling prophecies, motivate future enactments that validate the initial justification and desired ends (Weick et al. 2005). Thus, each interaction in the series of related enactments provides additional opportunities for sense-making, which serves to further reduce equivocality, bolster retained understanding and facilitate the development of a richer enacted environment.

Proposition 4: Buyer's use of risk mitigation tactics that invoke higher levels of committed action is negatively associated with the level of equivocality inherent in the SDR decision-making process.

Selection and retention are the underlying activities that enable the formation and storage of judgments and evaluations of SDR. Judgment refers to the "the appraisal and choice of values, intrinsic goods, and ends" and involves making comparisons (Weick 2001, p. 363). Similarly, as conceptualized by Yates and Stone (1992), judgment and evaluation activities force meaning upon situation. In particular, Yates and Stone (1992) assert that judgments of risky situations materialize in the form of perceptions of loss, loss significance and loss likelihood. Accordingly, judgments represent the synthesis of feedback from prior enactment, changes in context and retained understanding. Through cognitive processes, judgments of loss are aggregated to form the basis for an overall evaluation of risk (Yates and Stone 1992). In the context of SDR decision-making, equivocal supply situations are processed by buyers as they (i) enact SDR mitigation actions, (ii) integrate feedback with retained understanding to form and refine judgments and evaluations of SDR and (iii) advance their retained understanding of the supply environment as cognitive cause maps are updated.

Our view of SDR decision-making as sense-making departs from prior behavioral models. Most notably, Yates and Stone (1992) articulate a four-stage sequential process in which situation affects judgments of loss, which influence overall evaluations of risk, which drive risk mitigation action. In contrast, we posit a process of risky decision-making that consists of similar activities, but processed by the individual in modified order. Further, we suggest that this apparent incongruence is attributable to the moderating role of equivocality. Situations characterized by little equivocality are measurable, determinant, logical and analyzable whereby the relationship between cause and effect is more easily defined (Weick 2001). Such situations diminish the role of action as a means of understanding and are conducive to the rational decision-making process in which risk assessment strategies refine retained understanding to guide SDR mitigation actions. However, equivocal environments are unanalyzable; the absence of meanings renders judgments and evaluations difficult. When faced with equivocality, individuals must take action to develop a reasonable representation of the external environment that makes sense of previous actions and suggests future actions. As such, the order of activities that comprise the risky decision-making process is a function of the level of equivocality inherent within the environment.

Proposition 5: The level of equivocality moderates the order of activities that comprise the SDR decision-making process. Under conditions of high equivocality, adoption of risk mitigation tactics precedes formation of risk judgments and evaluations, which precedes retained understanding of the supply environment. Under conditions of low equivocality, formation of risk judgments and evaluations refine retained understanding of the supply environment, which precedes adoption of risk mitigation tactics.

Individual Attributes. Individual attributes, such as personality, values, experience and cognitive abilities, affect how buyers engage and cope with equivocality. According to Weick (2001), personality traits, which include confidence in skill, disposition toward communion and emotion, play a significant role in guiding enactment within an equivocal situation. Confidence in skill is the belief that actions will be deemed effective per the criteria set forth by the organization and is borne by the presumption of logic, which motivates individuals to act more forcefully in order to validate initial presumptions (Mitchell 1995). Similar to a self-fulfilling prophesy, forceful action imposes order onto the situation, facilitating interpretations that confirm initial presumptions (Weick et al. 2005). Further, through persistent action, confident individuals resolve equivocality by enacting their view of the environment onto others. Disposition toward communion refers to an individual's innate preference for social versus independent action "and is about tolerance, trust, and non-contractual cooperation" (Weick 2001, p. 213). As the preference for communal behavior increases, individuals become more tolerant of and receptive to new ideas and experiences; accordingly, incidences of learning, which enable the development of a richer enacted environment, concomitantly increase (Weick 2001). In addition, a preference for communion enables the development of group mind, which leverages a broader shared understanding to further process equivocality (Taylor and van Every 2000). Emotion represents a feeling that follows a salient stimulus and precedes response (Berscheid, Gangestad and Kulakowski 1984). Intense negative emotions, such as threat or fear, narrow attention; thus, a propensity for intense emotional negative response limits an individual's capacity to reduce equivocality.

At the individual level, values refer to the "internalized social representations or moral beliefs that people appeal to as the ultimate rationale for their actions" (Oyserman 2002, p. 16151). Values differentiate good from bad, natural from unnatural and truth from falsity, and facilitate the alignment of goals of the individual with those of the organization (Oyserman 2002). Like personality, values provide a guide for enactment and the assumptions that drive interpretation (Weick 2001); as such, strong values facilitate equivocality reduction.

Cognitive ability and experience represent integrated attributes that affect individuals' capacity to process equivocality (Giunipero and Eltantawy 2004). Cognitive ability refers to the capacity to retrospectively draw from a wide range of resources and represents a maximum bound for retained understanding (Weick 2001). The capacity to link constructs with meaningful patterns and store both constructs and their associations in memory underlies cognitive ability (Porac et al. 1989). Whereas cognitive ability represents potential, knowledge gained through prior experience enables individuals to cope with equivocality. Further, individuals are more likely to act when they have the cognitive capacity and knowledge to effectively respond; this, in turn, heightens the accuracy of perceptions and motivates individuals to "pay attention to a wider variety of inputs because, whatever they see, they will have some way to cope with it" (Weick 2001, p. 230). Accordingly, cognitive ability and breadth of experience interact to provide the base knowledge that is available to support broader enactment and equivocality resolution.

Proposition 6: Individual attributes, such as confidence in skill, disposition toward communion, values, experience and cognitive abilities, are negatively associated with the level of equivocality inherent in the SDR decision-making process. Alternately, intensity of negative emotional response is positively associated with the level of equivocality inherent in the SDR decision-making process.

As individuals enact and interpret their actions, new knowledge of the environment is retained. Thus, buyers who (i) possess the aforementioned individual attributes and (ii) act within organizations having the aforementioned structure, systems and controls that facilitate equivocality reduction are more likely to possess greater knowledge in the form of a more comprehensive, richer mental representation of the supply environment. Further, learning is self-reinforcing; gains in knowledge facilitate sensible enactment and meaningful interpretation that further improve the capacity to retain new understanding. Because retained understanding provides the platform for subsequent enactment and selection, the efficacy of SDR mitigation tactics and accuracy of SDR judgment and evaluation is directly related to the capacity to resolve equivocality through the sense-making process. Our assertion facilitates a richer interpretation of the opening vignette whereby we suggest that Nokia Corp., through its extensive joint efforts with Philips NV, resolved considerably more equivocality than did Ericsson LM. Accordingly, Nokia Corp, enacted a more comprehensive and accurate representation of the supply environment that accounts for the relative effectiveness of their mitigation actions.

Proposition 7: Equivocality reduction is positively associated with the efficacy of risk mitigation tactics and accuracy of risk judgments and evaluations.


We draw from enactment theory to develop a conceptual framework that meaningfully integrates extant SDR research. Through our framework, we suggest that the sense-making process underlies SDR decision-making and provides the theoretical underpinnings that logically link the environment, organization and individual. Further, through our application of enactment theory, we introduce the central role that equivocality and its resolution play within the SDR decision-making process. In aggregate, the development of the psychological and sociological mechanisms drawn from enactment theory facilitates a richer understanding of the nomological network that integrates novel organizational and individual constructs with those previously considered within the SDR literature. The resulting conceptual framework advances new insights into the importance of perceptual views of risk, the risky decision-making process and managerial practice.

Perceptual Views of Risk

In accordance with a behavioral view of risk, our study reinforces the importance of conceptualizing risk as a perceptual rather than objective phenomenon. Consistent with an influential stream of previous research (March and Shapira 1987; Sitkin and Pablo 1992; Yates and Stone 1992), we suggest that risky decision-making is an idiosyncratically satisfying rather than rationally optimizing activity. This salient point is borne within our conceptual framework whereby we differentiate "environment" from "enacted environment." Whereas environment is consistent with a rational, objective view (e.g., Khan and Burnes 2007) that exists independent of the individual and organization, enacted environment refers to an idiosyncratic, perceptual view (i.e., mental model) that is developed and revised through the sense-making process (Weick 2001). The idiosyncratic nature of the sense-making process reaffirms previous assertions that substantive differences may exist (i) between an individual's perceptions and the objective reality of the broader environment (Boyd, Dess and Rasheed 1993) and (ii) across individuals' perceptions of the broader environment (Yates and Stone 1992). Accordingly, our use of enactment theory further substantiates the importance of understanding perceptual views of SDR. More importantly, enactment logic provides an overarching theoretical rationale that lends new insights into how perceptual biases of risk are formed.

Risky Decision-Making

With respect to the broader risky decision-making literature, our substantive theory lends new insights into the nature of the relationship between risk perception and behavior. At first glance, the SDR decision-making as sense-making process appears to conflict with dominant risky decision-making models proposed in extant research. Whereas previous studies (e.g., Sitkin and Pablo 1992; Yates and Stone 1992) explicitly assert that perceptions of risk drive behaviors or actions, enactment theory suggests that behaviors drive risk perceptions. This apparent conflict in directionality is resolved by suggesting that the incipient stage of the sense-making process is a function of the level of equivocality inherent in a situation. For situations characterized by low levels of equivocality, whereby individuals can readily relate an event to a meaningful underlying pattern, sense-making may begin with the selection process; as such, judgments and evaluations of SDR are formed, retained memory is updated and risk mitigation tactics are enacted. This is consistent with the traditional view whereby perceptions of risk precede action. However, in situations characterized by high levels of equivocality (as is the focus of Weick's enactment theory), enactment precedes understanding; that is, in equivocal situations, buyers advance their understanding of SDR through their adoption of risk mitigation tactics. Much like the doctor who makes a diagnosis through the application of treatment, buyers have little comprehension of the SDR inherent in a highly equivocal supply situation until mitigation policies are enacted.

Our adoption of enactment theory also allows us to build upon previous seminal work that studies how social influence affects risky behavior. Within their conceptual model, Sitkin and Pablo (1992) conceptualize social influence in terms of organizational culture and role model behavior. Through the lens of enactment theory, we advance the notion that social interaction is critical to sense-making and, subsequently, the risky decision-making process. In particular, we assert that social mechanisms, such as committed action and the development of group mind, significantly influence the formation of buyers' risk perceptions and behaviors. Committed action drives the need to justify enactment in a manner deemed acceptable by the focal social structure; similarly, group mind refers to the extent to which cognitive cause maps are shared across individuals within the same social structure (Weick 2001). Significant overlap of cognitive cause maps suggests that individuals share similar goals and values and indicates the prevalence of a shared organizational culture (Weick 2001). Consistent with Sitkin and Pablo's (1992) conceptual development, these social mechanisms (e.g., group mind and committed action) reinforce the assertion that culture and role model behavior influence risky decision-making. However, enactment theory suggests that the theoretical underpinnings for this assertion are attributable to the extent to which individuals are compelled to justify their enactments to other individuals in the same social structure who, by virtue of overlapping cognitive cause maps, share the same values and goals.

Similarly our conceptual framework lends further insight into the relationship between problem domain familiarity and risky decision-making. Sitkin and Pablo (1992, p. 22) define problem domain familiarity as "the familiarity that results from increased levels of past experience in a given problem domain." In our conceptual framework, we explicitly link experience with the sense-making process and suggest that experiences enable individuals to develop richer cognitive cause maps. However, we draw from enactment theory to suggest that the diversity of an individual's experience, in addition to the number of experiences within a focal problem domain, facilitate sense-making. A broader range of experiences, which facilitate varied capabilities and diverse logics, provides additional guidance to an individual's interpretation process (Weick 2001). Thus, as with the bricoleur--a creator of solutions that use only those resources at hand, buyers that maintain both breadth and depth of knowledge are likely to successfully cope with the SDR inherent in an equivocal situation.

Managerial Implications

Our conceptual framework and associated theoretical development also contribute to managerial practice in several important ways. Our developed theory suggests that it is important for purchasing organizations to recognize transactions that are characterized by high levels of equivocality. For such cases, situational understanding may be enhanced by tasking buyers who have significant and broad experience in purchasing with these transactions. Further, organizational structure and systems may augment buyers' equivocality reduction processes by promoting accurate views of environment and steering committed action in the desired direction. Accordingly, organizations should (i) facilitate cross-functional interaction, (ii) provide data that supports interpretational clarity and (iii) implement risk assessment systems that prompt buyers to make sense of the known and probe the unknown. Similarly, organizational systems should (i) promote the breadth and depth of buyers' knowledge through training, cross-training and job rotation, (ii) support simulation and what-if analyses to increase breadth of knowledge, (iii) ensure that roles, goals, and culture constrain buyer behavior such that total life cycle costs associated with purchases are minimized and (iv) use measurement and reward systems that provide incentives for buyers to interact with suppliers and cross-functional colleagues to effectively manage equivocality. More broadly, our study suggests the importance of maintaining a professional social structure that extends beyond the firm's boundaries. Interaction with external purchasing professionals, through purchasing-centric organizations or trade groups, may help buyers (i) perceive a situation in a manner that is more congruent with an objective reality and (ii) establish a richer social structure that may be drawn upon when faced with conditions beyond comprehension.


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Author:Ellis, Scott C.; Shockley, Jeff; Henry, Raymond M.
Publication:Journal of Supply Chain Management
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Date:Apr 1, 2011
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