Does obligational contracting lead to better performance? A comparison of global carmakers’ supply chain management approaches in Australia

Supply chain management (SCM) has been recognised as key to automobile manufacturers’ (‘buyers’) competitive advantage. However, the performance implication of two different approaches towards SCM, obligational contracting (OCR) vs. arm’s length contracting (ACR), remains inconclusive in the current literature. By focusing on examining how multiple global automobile manufacturers’ SCM practices result in different performance outcomes in the one-country setting of Australia, we are able to ascertain the direct impact of SCM approaches on buyers’ performance. We also provide detailed analysis on the specific influence of each distinguishing feature of the OCR/ACR approaches on different aspects of performance. Through a more nuanced investigation of the links between SCM approaches and automobile manufacturers’ performance at the firm level, this research contributes to a better understanding of the topic with managerially applicable insights.