Process Integration and Information Sharing in Supply Chains

This study examines whether the potential for hold-up in supply chains influences the extent of process integration and information sharing between partners. The analysis uses performance scorecards and financial performance data collected from a major manufacturer regarding its contractual arrangements with 156 distributors. I find that distributors engage in less extensive process integration and information sharing with the manufacturer as the potential for hold-up increases, measured by the asymmetry of interdependence between partners. I also find that distributors engage in more extensive process integration and information sharing as the potential for hold-up decreases, measured by the magnitude of interdependence between partners. Additional evidence shows that more extensive process integration and information sharing have favorable financial performance implications for supply chain partners and enhance the likelihood of distributor contract renewal. Overall, the results indicate that the potential for hold-up can restrict the performance benefits available to partners from developing more extensive supply chain integration practices.