Political affinity and opportunism in global supply chain: The mediating role of contractual and relational governance

Abstract

The dynamic international relations reflect a world that global supply chains are challenged by the political environment in which they are embedded, especially for emerging market firms (EMFs). Drawing on legitimacy-based view and supply chain management literature, this study investigated how political affinity between home and host country affect the use of governance in deterring opportunism of local distributors in the host market, as well as the moderating role of directionality of institutional distance. Using a survey dataset of 403 Chinese export firms at two time points and two secondary datasets, we find that political affinity increases the opportunistic behavior of local distributors by impeding contractual governance and facilitating relational governance. In addition, the effect of political affinity on governance strategies is conditional on the directionality of institutional distance. That is, negative institutional distance strengthens the impact of political affinity on contractual governance, while the influence of political affinity on relational governance is attenuated in the presence of positive or negative institutional distance. Our findings provide important insights for academic research and managerial practice.