Governance requirements in supply chain finance: The need for a dual-layered semipermeable boundary

Abstract

To define and investigate the governance requirements of supply chain finance (SCF). A qualitative analysis of 849 news articles published in UK newspapers (2000-2022) using the Gioia method. SCF governance relies on developing capacities for reflexive scrutiny at two stages: 1) prior to entering into a SCF relationship; and, 2) during its operation. Based on the notion of SCF as a complex adaptive system, we theorise SCF governance requirements as a dual-layered semipermeable boundary. The semi-permeability of the two layers allows for a dynamic exchange between the SCF system and its environment. The first layer is a capacity to selectively enable or control the entry and access of certain actors and practices into the SCF system. The second layer is a capacity for ongoing scrutiny of the SCF operation and its development. Further, we identify five aspects of governance to be enabled, i.e. enhancing adaptability, building confidence, improving efficiency, advancing technology, and promoting transparency; and four aspects to be controlled, i.e. preventing abuse of power, curbing fraud risk, constraining operational risk, and restricting risky extensions to SCF practices. Our dynamic framework can guide supply chain members in making decisions about whether to participate, or continue to operate in, a SCF relationship. Moreover, the findings have implications for policymakers and authorities who oversee entry/access and the involvement of SCF providers, particularly fintech firms. The study contributes to both the supply chain and governance literatures by providing a systematic analysis of what SCF governance has to accomplish. Our novel contribution lies in its analysis of SCF governance based on a complex adaptive system approach, which expands the existing literature where SCF is described in rather static terms. More specifically, it suggests a need for a dynamic duality of SCF governance through the semi-permeable boundary that selectively enables and controls certain SCF actors and practices.</p