Interfirm Control Mechanisms Between Logistics Service Supply Chain Enterprises

Logistics Service Supply Chain (LSSC) is a new form of supply chain emerged under theconditions of the rapid development of logistics outsourcing, and researches about LSSCmanagement has made great progress in the past decade. However, there has been extremelylimited research that studies for the management control of LSSC. On the other hand, theresearch of management control in interfirm relationships is still in its infancy, and there hasgreat theoretical space to be developed.As there were two Inconsistent interpretations about the meaning and structure of LSSCin previous literature, this paper first reanalyzed what is the really meaning and reasonablestructure of LSSC in according to the progress of logistics outsouring practice, thenconstructed an overall framework model of management control between LSSC enterprises.We extracted out two important levels of intefirm management control relationships in LSSCenterprises from this framework model, namely: logistics outsourcer (LO) with logisticsservice Integrator (LSI) and logistics service Integrator (LSI) with logistics servicesubcontractor (LSS). Subsequently, this paper proposed an interfirm management controlmechanism model between two levels enterprises in LSSC and a series of theoreticalassumptions. And then, we conducted structural equation modeling analysis with the surveydata of management control of LO to LSI and LSI to LSS.Empirical research gained four key findings. First, there are four main factors couldaffect the management control strategy of logistics buyer, they are transaction complexity,supplier’s capability, dependency to the supplier and the experience of cooperation, and theimpact of these four variables to contract control, institutional control and social control aredifferent; Second, the result shows that contract control has negative effect on institutionalcontrol and positive effect on social control. Institutional control has positive effect on socialcontrol in LO controls on LSI, but this effect is not significant in LSI controls on LSS. Third,the path coefficients in the revised structural model suggests contract control, institutionalcontrol, and social control all have significant positive effect on cooperation performance bothin the control relation of LO to LSI and LSI to LSS. As for the effect degree, institutional control is the strongest factor in the control of LO on LSI, and contract control is the strongestfactor in the control of LSI on LSS. Fourth, in general, the impact of formal controls oncooperative performance is greater than social control.The study has four main theoretical or managerial implications. First, we reanalyzed thestructure of LSSC in according to contradictory interpretation about the meaning and structureof LSSC in previous literature, then constructed an overall framework model of managementcontrol between LSSC enterprises based on interfirm management control patterns researchliteratures. This contribution may help us to clearly recognize the practical meaning of LSSCand lay a consolidate foundation to LSSC management-related researches. Obviously, thecontrol relationship of LO on LSI and LSI on LSS are the two most import relationship ofinterfirm management control relationship in LSSC.Second, we clearly proposed institutional control as one form of formal control measuresand extend the notion of formal control in interfirm management control into contract controland institutional control. This clarification not only offers insights on the operationalmeasurement of the concept of formal control and social control, but also paves the way toverify the dispute opinions on whether the relationship between formal control and socialcontrol is substitute or complement.Third, this paper extended the theoretical model of interfirm management controlmechanisms in review of previous studies, then tested this theoretical model by survey data oftwo levels of interfirm management in LSSC enterprises. Since most of the model elementsand theoretical hypotheses were proposed for the first time, the testing result gives out manynew conclusions to interfirm management control mechanism theory and offers concreteinsights to LSSC management.Fourth, based on the empirical analysis by interfirm management control date in LSSC,we found that institutional control is a substitute to contract control and social control is acomplement to formal control in achieving cooperation performance goals. These finding willhelp to revise the dispute about the relationship between formal control and social control.