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Risk sharing in supplier relations: an agency model for the Italian air‐conditioning industry

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  • Arnaldo Camuffo
  • Andrea Furlan
  • Enrico Rettore

Abstract

This study of risk sharing in the Italian high precision air conditioning (AC) industry confirms agency theory predictions that buyers absorb risk to a non‐negligible degree, and that they absorb more risk (a) the greater the supplier's environmental uncertainty, (b) the more risk averse the supplier, and (c) the less severe the supplier's moral hazard. The analyzed buyers accommodate for unforeseen and uncontracted‐for cost fluctuations, which is consistent with relational contract theory. The study clarifies the relationship between risk sharing and the supplier's size, technological capability, financial stability, and cost fluctuation. It also suggests how buyers may adjust their risk‐sharing strategy as suppliers grow, develop technological capabilities, and change financial structure. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Arnaldo Camuffo & Andrea Furlan & Enrico Rettore, 2007. "Risk sharing in supplier relations: an agency model for the Italian air‐conditioning industry," Strategic Management Journal, Wiley Blackwell, vol. 28(12), pages 1257-1266, December.
    • Handle: RePEc:bla:stratm:v:28:y:2007:i:12:p:1257-1266
    DOI: 10.1002/smj.635
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    Cited by:

    1. Cuervo-Cazurra, Alvaro & Rui, Huaichuan, 2017. "Barriers to absorptive capacity in emerging market firms," Journal of World Business, Elsevier, vol. 52(6), pages 727-742.
    2. Sebastian Heise, 2016. "Firm-to-Firm Relationships and Price Rigidity - Theory and Evidence," CESifo Working Paper Series 6226, CESifo.
    3. João Teixeira, 2014. "Outsourcing with debt financing," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 13(1), pages 1-24, April.
    4. Alvaro CUERVO-CAZURRA & Luis Alfonso DAU, 2008. "Structural Reform And Firm Profitability In Developing Countries," William Davidson Institute Working Papers Series wp940, William Davidson Institute at the University of Michigan.
    5. Dan Dhaliwal & Paul N. Michas & Vic Naiker & Divesh Sharma, 2020. "Greater Reliance on Major Customers and Auditor Going‐Concern Opinions," Contemporary Accounting Research, John Wiley & Sons, vol. 37(1), pages 160-188, March.
    6. Lina Ma & Min Wan & Yushen Du, 2021. "The Effect Mechanism of Tie Strength of Supply Networks on Risk Sharing: Based on the Empirical Data of China’s Automobile Manufacturing Industry," Sustainability, MDPI, vol. 13(8), pages 1-24, April.
    7. Anna Cabigiosu & Diego Campagnolo & Andrea Furlan & Giovanni Costa, 2012. "Balancing customization and standardization in knowledge intensive business services: The use of modular service architectures," Working Papers 11, Department of Management, Università Ca' Foscari Venezia.
    8. Lee, Su-Yol & Klassen, Robert D. & Furlan, Andrea & Vinelli, Andrea, 2014. "The green bullwhip effect: Transferring environmental requirements along a supply chain," International Journal of Production Economics, Elsevier, vol. 156(C), pages 39-51.
    9. Anna Cabigiosu & Arnaldo Camuffo, 2012. "Beyond the “Mirroring” Hypothesis: Product Modularity and Interorganizational Relations in the Air Conditioning Industry," Organization Science, INFORMS, vol. 23(3), pages 686-703, June.

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