The dual effect of environmental dynamism on proactive resilience: can governance mechanisms negate the dark side?

Environmental dynamism can drive the need for proactive supply chain resilience capabilities by requiring the supply chain partners to stay focused and vigilant about potential changes and disruptions through early detection and projection. However, environmental dynamism can also simultaneously play a negative role as it could increase confusion, mismatch, and disagreement within buyer-supplier relationships. This research empirically tests this paradoxical effect of environmental dynamism on proactive resilience. Using the tenets of the relational view, this research examines the role of output-based contracts and trust in mitigating the adverse effects of environmental dynamism. Specifically, this research tests a moderated-moderated-mediation model based on survey data collected from manufacturing firms within the USA and the UK. The results show that a plural governance form of output-based contract guided by trust could reduce the possibility of conflicts and allow supply chains to take better advantage of the dynamism in their environment. When it comes to supply chain managers, this research provides a clear understanding of the dual role of environmental dynamism. Additionally, by demonstrating the benefits of strategic balance among plural governance mechanisms, the findings could enable managers to take better advantage of the dynamic environment and be proactively resilient.