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Governance Mechanisms for Green Supply Chain Partnership

The literature has recognized the value of green supply chain management in achieving the goals of environmental management. Yet developing and fostering sustainability partnerships among supply chain organizations remains challenging. Bounded rationality and opportunistic behaviors are likely to hinder joint sustainability collaboration and performance. The literature has called for a better understanding of the governance of green supply chain collaboration. This study applies transactional cost economics as a conceptual framework to investigate the relationships among transaction features, governance mechanisms, and environmental performance. Using the data collected from 969 plants in 17 countries, the statistical analysis compares and validates the effectiveness of three alternative governance mechanisms: contractual governance, problem-solving cooperation governance, and information-sharing governance. The statistical results reveal significant performance differences in how firms apply alternative governance mechanisms to mitigate opportunism, manage adaptation problems, and improve green supply chain collaboration and performance. Overall, this study makes research contributions by confirming the mediation effects of governance mechanisms on green supply chain practices. For green supply chains to be a viable practice, firms should apply governance mechanisms in proper alignment with the nature of the collaborative and environmental conditions.