Inter-Firm Relationship Leading Towards Social Sustainability in Export Manufacturing Firms

Abstract

The recognition and move of social sustainability practices are emerging as one of the essential practical management issues of the latter half of the 20th century. Social sustainability remained the focus of considerable supply chain management and marketing research,supporting the idea that inter-firm capabilities are important antecedents to lead towards social sustainability. In September 2015, the United Nations presented 17 Sustainable Development Goals (SDGs), adopted by all the Member States of the UN. The concept of partnership as an agenda of sustainable development goals emerged at the World Commission of United Nation Sustainable Development Goal 17, which emphasizes the importance of global partnership for sustainable development. The existing research on the success of governance mechanism examines the institutional environment, transaction characteristics, and national culture, while some advocate the need for specific organizational culture impact on the inter-firm relationships. So far, less attention has been paid to the specific organizational culture on the success of governing inter-firm relationship. An essential understanding is needed, how different organizational capabilities weigh the importance may help both the suppliers and buyers’ firms to develop and maintain a successful relationship.

The research aims to provide an examination of how export manufacturing firms pursue social sustainability. Specifically, a) this study examines the relative importance of the factors in achieving success in the inter-firm relationships in cross-culture relationship, and b) how does it affect social performance. This study tests a conceptual model with a survey research design of export manufacturing firms from Pakistan, using structural equation modelling (SEM) to test the model. The survey data collected from 239 export manufacturing firms in different industries. The findings of the thesis contribute to the empirical literature on international relationship management as well as contribute to the operations management literature by investigating the independent effects of the relational and contract governance on a commitment to sustainability and collaboration. Taking a theoretical perspective, the current study contributes to transaction cost economics (TCE) literature by showing that the firms with better administrative efficiency experience can increase the execution of the contract governance. The result of the study is modestly supporting the role of cultural intelligence (CQ) on the relationship between relational governance and contract governance as they relate to developing commitment and collaboration. Specifically, relational governance is more effective at developing more commitment to metacognitive cultural intelligence (acquire and understand other cultural knowledge) and behavioural cultural intelligence (individual exhibit an appropriate enacted selected verbal and nonverbal behaviours). Conversely, the contract governance is more effective at developing more collaboration with meta-cognitive cultural intelligence and motivational cultural intelligence (an individual interest to direct attention and energy in learning other cultural differences).

The role of cultural cognition in a managerial decision related to governing inter-firm relationships is increasingly growing in sustainability literature. As regards to the findings, cultural intelligence is a key to maintain an inter-firm relationship across the border, and it has a positive impact on social performance. The findings support that benefits of cultural intelligence in exploiting the embedded cultural knowledge in interfirm relationships. A significant contribution of the thesis is that distinct governance mechanism modes require distinct dimensions of cultural intelligence for a successful inter-firm relationship. The findings show that aligned governance mechanisms and cultural intelligence context are important in the success of inter-firm relationships leads towards social sustainability. Therefore, the success of the inter-firm relationship depends upon the contract governance with coordination clauses with reliable cultural intelligence, which enhance more collaboration and expand the firm’s social sustainability. Therefore, this thesis concludes that in achieving social sustainability, manufacturing firms would require governance mechanisms which aligned their cultural norms with reliable cultural intelligence to enhance collaboration among different global buyers. The results conclude that partnership between buyer and supplier firms that mobilise knowledge resources and expertise support the United Nations Sustainable Development Agenda 17.

I also hope this thesis could inspire practitioners, scholars and policy initiators in emerging economies to achieve a better understanding of governance mechanism effectiveness and its consequences on the social sustainability outcomes. Although cultural intelligence and collaboration are necessary, they may not be able to solve the social sustainability problems completely, so further investigation is required to investigate what are the other factors that may improve the sustainable development of companies. Finally, it hopes that other academic scholars will seek to establish the validity of the findings in this thesis by replicating the research design across industries 4.0 with the internet of things. Industry 4.0 attracting attention and future researchers should investigate the evolution of trust in buyer-supplier relationships and how does it affect on the governance of international relations in the context of internet of things(IoT) and blockchain technologies.