Virtual Integration: Antecedents and Role in Governing Supply Chain Integration

The integration and coordination of strategic suppliers becomes increasingly important as the manufacturer relies on external transactions to build up collaborative advantages. By conceptualizing virtual integration as an efficient and effective vertical coordination mechanism, the study discussed in this chapter developed a model to examine the role virtual integration plays in improving manufacturing performance and the antecedent factors that can lead supply chain members to rely on virtual integration to govern supply chain integration. Based on the resource-based view and transaction costs theory, the suppliers’ specific investments and environmental uncertainty are identified as critical antecedents to virtual integration. The results show that the suppliers’ specific investments can significantly improve the manufacturers’ achievement of manufacturing goals, thereby motivating the manufacturer to rely on virtual integration to better coordinate with the suppliers who made significant idiosyncratic investments for enhancing transaction value while controlling the potential hazards.