This dissertation examines how managers make and perceive supply chain governance decisions. A plethora of supply chain management literature suggests that managers will a priori choose a governance form that will manage risks while pursuing benefits. A number of theories have been used to inform this view: agency, resource-based view and transaction cost economics. Agency theory, the resource-based view and transaction cost economics all share the common assumption that a manager is considering both the risks and benefits of their decisions. In addition each of these perspectives assumes managers are boundedly rational. Taken together these two assumptions suggest managers have imperfect information, the inability to explicate the perfect contract, or limits on their ability to process relevant information when they consider risks and benefits. Yet, other than suggesting that managers have limited cognitive ability (bounded rationality), these perspectives are silent about the influence of cognitive processes on managers consideration of risks, benefits, and ultimately their decision-making. Thus there is a gap in the extant supply chain management literature of our understanding of how cognitive processes such as attention, emotions, feeling, memory or social context may result in a cognitive or decision-making bias. Specifically, evidence from psychology suggests that managers may inadvertently overlook or misperceive risks and benefits because of biased attention and memory (i.e., availability and salience), emotions and feelings, and social considerations (e.g., bandwagon pressure). As a result of a gap in our understanding, supply chains may be overly risky (costly), while not receiving offsetting benefits (value creation). This dissertation addresses this gap.
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