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How the blockchain enables and constrains supply chain performance

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This is a preprint version of our paper now accepted for publication in the NOFOMA Special Issue of the International Journal of Physical Distribution & Logistics Management (21 Feb 2019) Forthcoming 2019.
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How the blockchain enables and constrains supply
chain performance
Hald, K.S. and Kinra, A.
Kim Sundtoft Hald
Professor (mso)
Copenhagen Business School, Department of Operations Management
Solbjerg Plads 3, 2000 Frederiksberg, Denmark
Tel: +45 23 72 23 03
E-mail: ksh.om@cbs.dk
Aseem Kinra
Associate Professor
Copenhagen Business School, Department of Operations Management
Solbjerg Plads 3, 2000 Frederiksberg, Denmark
Tel: +45 38 15 35 29
E-mail: aki.om@cbs.dk
Preprint version of paper accepted for publication in the NOFOMA Special Issue of the
International Journal of Physical Distribution & Logistics Management (21 Feb 2019)
Forthcoming 2019.
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How the blockchain enables and constrains supply chain performance
Abstract
Purpose – The purpose of this paper is to understand the enabling and constraining roles of
blockchain technology in managerial work practices and to conceptualise the technology–
performance relationship in supply chain management.
Design/methodology/approach A structured literature review and a theory-driven
approach are used. A set of propositions are developed, suggesting how the use of blockchain
technology in supply chains can be understood to simultaneously enable and constrain supply
chain management and performance.
Findings The analysis identifies four enabling and three constraining blockchain identities
to explain how the technology either ‘facilitates’ or ‘impedes’ supply chain management and
supply chain performance. Traceability which emanates from its ability to provide data
immutability ranks highly as a core innovation of the technology. The blockchain is mainly
seen as an opportunity to exploit existing supply chain resources and competencies.
Research limitations/implications – One limitation of the research is its conceptual nature.
Future research should test the developed propositions empirically. Further research should
focus on blockchain technology as an opportunity to explore and as a relationship-building
technology. More research is also needed focussing on the complex and simultaneous
enabling and constraining effects of blockchain technology in supply chains.
Originality/value – The paper shows the important and complex Janus-faced implications of
embedding blockchain technology in supply chains and demonstrates how organisational
theory can be applied to explore the relationship between blockchain and supply chain
management.
Keywords Blockchain technology, distributed computing, supply chain performance, supply
chain management, enabling and constraining effects.
Paper type Research paper.
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1. INTRODUCTION
Blockchain technology (BCT) is gaining momentum, with an increasing number of diverse
applications, as well as with more and more actors involved in its applications (Nowiński and
Kozma, 2017). It is one of the select, emerging technologies which is expected to enable
transformational platform-based business models to enhance competitive advantages (Burkett
and Johnson, 2016). Popularly hailed as ‘the most important invention since the Internet’
(Tapscott and Tapscott, 2016a), BCT has been identified as one of the top ten strategic
technology trends (Panetta, 2016). With mainstream adoption of the technology expected
within five to ten years, it will be possible to see its widespread applications in terms of
monetary remittances, academic credential systems, land title systems, tracking the origin and
provenance of products and many more areas (Panetta, 2017). The technology is expected to
have profound and disruptive effects on society as a whole and has therefore triggered an
international policy response calling for a joint technological infrastructure (Pedersen, 2018).
With the global blockchain in the supply chain market poised to reach USD 424 million by
the year 2023 (Dyble, 2018), academic and practitioner interest from a supply chain
management (SCM) perspective is also growing exponentially (Kshetri, 2018). Blockchains
within SCM have been addressed by case descriptions of its use or potential use in different
industrial settings. Blockchains in the food industry (e.g., Coyne, 2017; Yuva, 2017), the
shipping industry (e.g., Riley, 2017; Tirschwell, 2018), and the pharmaceutical/healthcare
industry (e.g., Bocek et al., 2017; Shanley, 2017) have attracted the most attention.
However, knowledge generation on BCT within SCM is still very early in its lifecycle.
Although some peer-reviewed publications on the relation between BCT and SCM have
emerged, these emphasise the broader role of the blockchain in achieving supply chain
competitive priorities at the organisational level (see Kshetri, 2018; Petersen et al., 2017).
Another challenge is that the literature on BCT within SCM needs theoretical substance and a
theoretical foundation, based on which it can begin a more structured process of knowledge
generation. The current knowledge is dominated by a multitude of imprecise literature
highlighting the many promises of the new technology. This is a problem, because the
theoretical and methodological approaches of these contributions are weak and the validity of
their claims low (Adams et al., 2017a). While some recent research on the theorisation of
blockchain for SCM has emerged (see Treiblmaier, 2018), it has yet to conceptualise both the
positive and negative managerial work-related effects of the technology and its specific
architectural properties. As a result, the technology, management and performance
relationship (Hald and Mouritsen, 2011) remains under-conceptualised.
This study explores the potentially enabling and constraining managerial implications of BCT
for SCM. It addresses the impact of the technology on dimensions of SCM and supply chain
performance. Because the technology affects not only supply chain processes but also
individual actors and their behaviours, its impact on the supply chain can be complex,
uncertain and potentially both enabling and constraining (Lyall et al., 2018). There is,
therefore, a need for research which may establish a grand overview of this complexity and
synthesise current insights into a set of propositions that highlight both the potentially
enabling and constraining effects of this new technology.
The research presented in this paper makes several contributions. The theoretical approach
and synthesis are new. Based on Adler and Borys (1996), the research takes into account the
blockchain as an organisational technology which is seen as powerful and actively affecting
the ability to manage the supply chain, its processes and its relationships. This adds to the
literature, which has not yet explored how the same potentially powerful architectural
properties of BCT might have both enabling and constraining effects for SCM and supply
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chain performance (see Treiblmaier, 2018). This adds a new and more holistic understanding
of the potential dual implications of BCT on SCM.
The paper is structured as follows. Section 2 presents BCT and its relationship to SCM and
performance. Section 3 describes the research methodology. Section 4 analyses the literature
with a view towards its position on how BCT may enable and/or constrain SCM. Finally, the
discussion and conclusion are presented in Section 5 and Section 6.
2. BLOCKCHAIN TECHNOLOGY, SCM AND PERFORMANCE
2.1 Blockchain technology
A blockchain can be defined as “a digital, decentralised and distributed ledger in which
transactions are logged and added in chronological order with the goal of creating permanent
and tamperproof records” (Treiblmaier, 2018, p.547). Thus BCT holds several important
architectural properties.
One important architectural propertyof BCT is its decentralised structure. In the blockchain
all the participants in the network have a copy of the same data, which is distributed across
the peer-to-peer network. This property of BCT may be designed to allow greater accessibility
to the dataset to everyone at any time and any place in the network (O’Dair and Beaven,
2017). However, there is a distinction between permissionless (public) and permissioned
(private) blockchains. In public blockchains, the digital ledger is completely decentralised,
and it can be accessed by any internet user. Hence, information about the transactions is
broadly available to the network participants in a public setting (O’Leary, 2017). However, in
a business setting, such information may provide competitors or other institution with the
potential for business intelligence. As a solution, private blockchains can be implemented. In
permissioned blockchains, only a preselected and limited number of participants are
authorised to use the ledger. The entries in a fully private blockchain are monitored by a
central authority (Siba and Prakash, 2016), which can decide to accept new members into the
network and determine the level of access provided to members (Kewell et al., 2017).
Another important architectural propertyof BCT is the cryptography system, which promises
immutability of data and further enables the tracking of chains of data and transactions over
time (Ølnes et al., 2017; Nowiński and Kozma, 2017). From a technical perspective, it
consists of two functions: keying and hashing. Keying works by using two different but
related keys, either of which can encrypt or decrypt a message or transaction. If one key
encrypts the message, only the other key can decrypt it (Brandon, 2016). Hashing allows
blocks to be chained together in an immutable sequence (Haber and Stornetta, 1990). The
header of each block contains a hash value reflecting the contents of the previous block,
which itself includes a hash value derived from its predecessor, and so forth, all the way back
to the first block in the chain (Yermack, 2017). Thus, new information cannot be forged
retroactively by changing a prior entry in the blockchain because it would cause changes in
the sequences of all subsequent entries (Biswas et al., 2017).
Yet another important architectural propertyof BCT is the consensus mechanism, through
which quality and integrity in the blockchain can be provided. The consensus mechanism
confirms that transactions are coded into blocks according to the cryptographic rules and
enforces the time sequence placing of blocks on the chain (Brandon, 2016). This typical peer-
to-peer architecture contributes to the security as well as the immutability of the transactions
which are recorded in the blockchain. Furthermore, the distributed consensus protocols can
have several forms, such as majority voting, priority voting or having a minimal number of
votes, to ensure the data integrity of the transactions (Ølnes et al., 2017).
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In some versions of BCT, the smart contract is added as an extra important architectural
property. The smart contract is a computer program that can autonomously verify and execute
the terms of contracts (Szabo, 1997). Thus, with this property, the blockchain has the ability
to allow self-enforcement of contracts. All the various promises in the contract can be
authenticated by the BCT, validating that each party has the ability to perform the tasks it is
responsible for.
2.2. Blockchain in SCM
For SCM, the blockchain is positioned as a digital innovation, an emergent enabling
technology (Buer et al., 2019). SCM is defined as the systemic, strategic coordination of
traditional business functions and the tactics across these functions within a particular
company and across businesses within the supply chain, for the purposes of improving the
long-term performance of the individual companies and the supply chain as a whole (Mentzer
et al., 2001). Through the above-mentioned architectural properties, the blockchain then
provides unique technological qualities, such as immutability, automaticity, pseudonymity
and non-repudiability (irreversibility), which in turn may result in unparalleled reliability,
transparency and efficiency in the supply chain (Treiblmaier, 2018).
Kshetri (2018) explores how the blockchain is likely to affect key SCM and performance
objectives, such as cost, quality, speed, dependability, risk reduction, sustainability and
flexibility. Based on analysis of secondary case data, it is concluded that the relation between
blockchains and increased transparency and accountability is likely to be strong. It is further
conjectured that the new technology may potentially affect all the explored objectives.
Petersen et al. (2017) perform one of the first mapping studies in the field and explore the
stance of industry professionals towards blockchains. They identify 49 different applications
of the blockchain, which may be grouped into three main clusters: product tracking, product
tracing and supply chain finance. It is found that although most managers realise the potential
impact of the new technology, the rather conservative logistics companies seem hesitant to
adopt and invest in blockchain applications due to unclear performance benefits and employee
effects.
Treiblmaier (2018) presents an agenda for the applicability and subsequent adoption of BCT
in SCM. Based on the theoretical premises for SCM (Halldórsson et al., 2015), Treiblmaier’s
framework provides a good theoretical starting point for understanding the implications of
blockchains in aiding SCM, though his propositions do not yet show the organisational work-
related managerial constraints and benefits of the BCT properties, which may affect its
applicability. As the study of Petersen et al. (2017) shows, there is a distinct difference in
terms of different managerial levels and professional backgrounds in how the benefits and
effects of BCT are perceived. It is important to account for these managerial effects in order
to have a better understanding of the technology-management-performance relationship (Hald
and Mouritsen, 2013).
2.3 Organisational technologies and supply chain performance
Organisational technologies can have potentially enabling or constraining effects on
organisation. This theory, presented by Adler and Borys (1996), proposes a conceptualisation
of workflow formalisation which helps reconcile the contrasting assessments of bureaucracy
as enabling employees to perform their tasks more effectively or as constraining and
alienating to their work and performance.
The theory further defines organisational technology as an instance of formalisation which
enables managerial intervention in organisational processes and workflow. Depending on its
design, organisational technology may lead to both enabling and constraining effects. Thus,
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Adler and Borys (1996) predict that any organisational technology creates the possibility for
both enabling and coercive bureaucracy.
From an SCM perspective, the blockchain may be understood as an organisational technology
which spans multiple organisations and work processes and which helps supply chain
managers intervene and manage the supply chain. However, its design affects supply chain
actors’ work and commitment and modifies the ability to manage the supply chain and reach
desired levels of supply chain performance. Thus, embedding BCT in the supply chain may
produce possibilities for both enabling and constraining formalisation.
Based on these considerations, a central question, then, is whether and how the blockchain
understood as an organisational technology will be supportive of the ability to manage the
supply chain and to enhance supply chain performance. The purpose of the present research
is, therefore, to understand the enabling and constraining roles of BCT in managerial work
practices, and to further conceptualise the technology-performance relationship for SCM.
With this ambition in mind, the following research question is formulated:
How does the blockchain enable and constrain SCM and supply chain performance?
2.4 The enabling and constraining effects of BCT on supply chain performance
Our research strategy follows Hald and Mouritsen (2013), which applies Adler and Borys
(1996) to explore the enabling and constraining effects of enterprise resource planning
systems in operations management. We look for evidence in the literature regarding how the
blockchain as an organisational technology is imbued with a set of powerful identities, each
with the potential to either enable or constrain different dimensions of SCM and supply chain
performance. The analysis, therefore, not only observes enabling effects, but also
simultaneously looks for the potential constraining/coercive effects which may potentially
emerge from the same architectural properties or BCT design. Thus, the analyses
acknowledge that enabling and constraining effects may go hand in hand, but also that they
may be difficult to capture, as they may be dislocated across complex organisational
structures such as a supply chain system (De Leeuw et al., 2013).
Specifically, Figure 1 shows the theoretical model. The theoretical model projects that when
the blockchain is understood as an organisational technology, it can lead to both enabling
formalisation and coercive formalisation in the supply chain. Whether it results in an enabling
or coercive formalisation is affected by its design. Thus, the theoretical model projects that
the same architectural property of the blockchain or combination of properties(e.g.,
decentralised structure, cryptographic mechanism, consensus mechanism, smart contract) can
result in either enabling formalisation or coercive formalisation, depending on how these
properties are taken into account in the supply chain.
When the blockchain is enabling, it is designed with usability and an upgrading rationale, it
supports and enhances supply chain capabilities and leverages supply chain skills and
intelligence (Adler and Borys, 1996). Thus, supply chain actors are seen as sources of skills
and intelligence to be supported. When the blockchain enables, it moves organisational
processes in new and desirable directions and it will immediately or over time increase supply
chain performance.
When the blockchain is constraining, it is designed with a fool-proofing and deskilling
rationale, it substitutes commitment with procedures, and it coerces effort and compliance
from supply chain actors (Adler and Borys, 1996). Thus, supply chain actors are seen as
sources of problems to be eliminated. When the blockchain constrains, it hinders the supply
chain, its processes and its actors in performing to their potential and it decreases supply chain
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performance. Supply chain performance is understood as the efficiency and effectiveness of
supply chain processes and relationships (Maestrini et al., 2017), and it may be
operationalised as a set of supply chain performance dimensions or objectives (Kshetri, 2018).
<<Insert Figure 1 approximately here>>
3. METHODOLOGY
The approach used in this research is based on a structured literature review which was
performed in September 2018. The review followed a three-step approach (Tranfield et al.,
2003). In the first step, an advanced search was designed and executed using Business Source
Complete as a search engine. In the search, we looked for different keywords in the abstract,
including ‘blockchain’, ‘block-chain’ and ‘distributed ledger’. Since the keywords were
considered to be synonyms, the terms were separated using the conjunction ‘or’. This enabled
the collection of a larger sample of relevant literature (Tranfield et al., 2003). This produced a
sample of 2868 papers. Consistent with the research strategy, the sample was then narrowed
to focus on scholarly peer-reviewed academic journals in English. This reduced the obtained
sample to 257 papers. In order to identify relevant papers which had not yet appeared as
academic publications on Business Source Complete, it was decided to supplement the
sample with two additional searches. The databases Google Scholar and ResearchGate were
used for these searches. As a result of these searches, ten additional papers of potential
relevance were added to the sample.
In the second step and in order to identify papers which could help us synthesise a theory-
driven understanding of how BCT may be taken into account to support or to constrain SCM
and its performance, the 267 abstracts were screened. In this process, relevance was defined
using two screening criteria: First, the study had to deal with blockchains as its main topic.
Second, the study had to discuss managerial- and performance-related implications of using
BCT in functions, organisations, supply chains or industries. To increase reliability, the
screening process was performed by all involved researchers individually and then
subsequently compared and discussed until agreement was reached on which papers to
include and which papers to exclude. Using these criteria, the sample was reduced to 48.
In relation to descriptive information regarding the sources included in the final sample, all
the included material was peer-reviewed academic material. Of the works included, 90% had
appeared in academic journals, 4% as conference papers, 4% as book chapters and 2% as
working papers. In addition, 49% of the academic journal papers were listed and ranked on
the ABS list. In relation to topics and research communities, 25% of the works had appeared
in management information systems and knowledge management outlets, 21% in general
management and strategy, 17% in finance and accounting, 15% in production and operations
management and 10% in outlets concerned with legal issues. The remaining 12% appeared in
outlets concerned with publishing sector management, sociology, economics and
entrepreneurship and sustainability. Finally, 66% of the papers included a specific focus on
the relation between blockchains and SCM.
In the final step, a coding process was performed to identify the enabling and constraining
effects of BCT on SCM. The coding process was developed based on Adler and Borys (1996)
and Miles and Huberman (1994). First, each of the identified publications was coded
individually. Specifically, words or phrases were sought indicating how the blockchain
could/would act and reach its projected effects, such as ‘the blockchain facilitates’, ‘the
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blockchain will revolution’, ‘transformative potential’ and ‘disruptive potential’. To increase
reliability, the identified effects were then listed in a comprehensive table and compared and
discussed among the involved researchers until a consensus emerged. As the final step, the
researchers looked for patterns across the sample that would help deduce different blockchain
identities. For that purpose and following Ashforth and Mael (1989), blockchain identity was
defined as the idiosyncratic characteristics related to the abilities and effects of the
blockchain.
4. THE DIFFERENT BLOCKCHAIN IDENTITIES
The outcome of our coding produced four enabling and three constraining blockchain
identities in relation to how the blockchain was understood to implicate SCM and supply
chain performance. Following Morgan (2006), the identities were formulated as metaphors,
enabling the researchers to better explore and highlight the complexities of the relationship
between BCT and SCM. Table A presents the outcome of the structured review. The different
identities and propositions that arose during the analysis will now be presented.
<<Insert Table A approximately here>>
4.1 The enabling blockchain
The analysis identified four aspects of the blockchain which potentially enable SCM, each of
which portrays the blockchain with a particular identity: information lighthouse, exploitation
technology, exploration technology and relationship-building technology. While the
information lighthouse identity focuses narrowly on the relation between BCT and data
quality, the remaining identities focus on the relation between BCT and the ability to manage
existing or new supply chain processes, or to forge stronger or new supply chain relationships.
4.1.1. The blockchain as an information lighthouse
Because the supply chain in its nature is a distributed network of actors and organisational
entities, it includes activities and transactions which are dislocated across time and space. The
ability to enhance supply chain transparency is therefore a fundamental ambition of SCM, and
one directly related to the ability to improve supply chain performance (e.g., Prajogo and
Olhager, 2012).
The ability to enable SCM rests on a set of data qualities enabled by BCT. First and following
from the decentralised structure of the blockchain, one central enabling aspect of BCT is its
potential to make data available across a distributed network of peer-to-peer nodes (e.g.,
Koonce, 2016; Nowiński and Kozma, 2017). Second, the cryptography system promises
immutability of data and enables the tracking of chains of data and transactions over time
(Biswas et al., 2017; Nowiński and Kozma, 2017). Third, the consensus mechanism enables
data consistency across the distributed peer-to-peer network of blockchain nodes (Siba and
Prakash, 2016):
Proposition 1a: Use of BCT in a supply chain enables data availability.
Proposition 1b: Use of BCT in a supply chain enables data immutability.
Proposition 1c: Use of BCT in a supply chain enables data consistency.
Based on these considerations and on the analysis of the literature on BCT, two aspects of
transparency which may potentially be affected by the blockchain are identified: supply chain
visibility and supply chain traceability. When understood as an enabler of supply chain
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visibility, the blockchain enhances the ability of the individual actor or node to see and know
more about all activities and processes which take place in the supply network, and which are
not immediately visible to the actors (e.g., Eljazzar, 2018; White, 2017). This is thus a
potential improvement of a managerial ability, which enables firms to better see across tiers in
the supply chain, both upstream and downstream (O’Leary, 2017). The blockchain may
therefore also be understood to play an important role in integrating decentralised resources in
industries which are characterised as scattered, small, disorderly and weak, thereby improving
system efficiency (Leng et al., 2018). In line with other definitions of supply chain visibility,
the blockchain can thus be considered to be an organisational technology which supports a
process that captures and transfers information ‘more’ accurately, timely and completely
among business partners in a supply chain (e.g., Arcos, 2018; Petersen et al., 2017).
When understood as a technology which enhances transparency, the blockchain is seen as
enabling its members to trace transaction histories (Adams et al., 2017b; Francisco and
Swanson; 2018). In relation to products, the blockchain will thus enable its users to attach an
indelible record of a product’s precise history (Koonce, 2016). This may be related to points
of origin of components and products consumed by the blockchain members or by its end
customers. Thus, BCT enables the disclosure of information and will increase knowledge
about the origin of products (Nowiński and Kozma, 2017), which in turn will enable better
decisions regarding issues such as sustainability (Ølnes et al., 2017; Nowiński and Kozma,
2017) and supply safety or forgery (Nowiński and Kozma, 2017; Subramanian, 2018).
Traceability, however, may also be understood to work on other dimensions, such as that of
ownership of assets (Yermack, 2017). Because an audit trail may be available on every
historical action and activity (Ølnes et al., 2017), the potential to make audits of all sorts may
be understood to be improved. This potential can be seen as a strengthening of the overall
ability to control the supply chain and its activities (Francisco and Swanson; 2018). It can also
be seen as an issue of fairness and, subsequently, trust. When everything is stored in supply
chain memory and can be retrieved by all actors at any time, knowledge of past events can no
longer be convincingly contested. Past transactions become irrefutable, and this enables
initiatives to reduce corruption and fraud (Kshetri, 2017) and increased trust in data (Kim and
Justl, 2018). The above arguments thus suggest the following propositions:
Proposition 2: Use of BCT in a supply chain enables increased supply chain visibility.
Proposition 3: Use of BCT in a supply chain enables increased supply chain traceability.
4.1.2. The blockchain as an exploitation technology
Following March´s (1991) seminal distinction between exploitation and exploration, the
blockchain can be understood as a technology leading to improved managerial ability to
exploit existing supply chain resources and competencies. Managerial focus is on alignment,
systematic improvement and refinement of existing capabilities (March, 1991). The literature
supports several ways in which the blockchain can be understood as a technology which
enables exploitation.
First, BCT is seen as a technology which reduces the potential for errors (Brandon, 2016;
Ølnes et al., 2017). Following Propositions 1b and 1c, the blockchain is understood to secure
data consistency and data immutability. That is, in a blockchain, errors in the form of
mistakenly recorded data and other types of inconsistencies can be assumed to be minimised
or even completely eliminated. When errors occur and are corrected, updates will take place
automatically in every place at once, rather than the current situation, which requires the
contacting of each individual note in the network (O´Dair and Beaven, 2017). When fewer
errors occur and/or when errors are easily detected and corrected throughout the supply chain,
there is a reduction in supply chain risk, understood as the potential malicious consequences
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of data inconsistencies and errors to the supply chain. The risk of attacks from hackers to a
single database is also avoided because of the decentralised structure of the blockchain (Ølnes
et al., 2017). The above arguments thus suggest the following propositions:
Proposition 4a: Use of BCT in a supply chain enables reduction of errors.
Proposition 4b: Use of BCT in a supply chain enables reduction of attacks.
Second, and following proposition 2, BCT can be understood to enable better coordination.
With improved visibility, each participant in the supply chain will be able to see the progress
of goods as they move through the supply chain. This will enable each participant to
understand where particular goods or containers are in transit. Participants can also determine
the status of customs documents, view bills of lading and view other types of data in real time
(O´Leary, 2017). The argument is that this will support coordination and planning in and
around the flow of goods and documents in the supply chain, which in turn may help increase
efficiency (Nowiński and Kozma, 2017; Voshmgir, 2017; Koonce, 2016). Because of the
potential that every node can see everything, another effect of complete supply chain visibility
may be the avoidance of duplication in similar or identical tasks performed in different
locations in the supply chain (O´Leary, 2017). However, because of the potential to limit data
availability in private blockchain designs, the suggested enabling effects related to supply
chain visibility will be moderated by blockchain membership and by data availability rules
controlled by a central authority. The above arguments thus suggest the following
proposition:
Proposition 5: Use of BCT in a supply chain enables enhanced supply chain
coordination.
Third, blockchains and the smart contract may be understood to reduce transaction costs of
reaching and enforcing supply chain agreements (Appelbaum and Smith, 2018). This enables
the formalisation and enforcement of agreements throughout the supply chain. That is, it
governs agreements in relationships between firms as well as between all other types of actors
in the supply chain and the assets they possess (Casado-Vara et al., 2018). This is achieved by
standardising transaction rules (Szabo, 1997). The agreement, understood as a transaction
ruleset, in the smart contract defines the conditions, rights and obligations to which supply
chain actors are contractually bound. The opportunity to improve supply chain efficiency can
be further supported by automation in the enforcement of the contract (Giancaspro, 2017;
Tapscott and Tapscott, 2017). As soon as the parties have come to an agreement and met the
conditions of the agreement, the rights and obligations established in the smart contract can be
automatically executed by the blockchain (Coyne and McMickle, 2017; Szabo, 1997). One
example is automated payment processing depending on the status of a shipment (Petersen et
al., 2017). This can be summarised in:
Proposition 6: Use of BCT in a supply chain enhances contract management and supply
chain governance.
Fourth, a central promise of BCT is its potential to eliminate intermediaries and thereby create
market efficiency (Koonce, 2016). One central type of intermediary which may potentially be
eliminated is the central authority whose main function is to validate transactions. With BCT,
parties to a transaction can store and exchange value without the need for a traditional
intermediary. Representations of value will no longer be confined to a local space but will
instead be part of the distributed ledger available to all relevant parties with access (Tapscott
and Tapscott, 2017). Thus, the blockchain will potentially eliminate the need for a central
authority to validate transactions, thus realising many supply chain efficiencies. Transaction
costs due to contract enforcement, such as following a sale, can be eliminated when the
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network validates the transaction (Subramanian, 2018). This allows for considerable savings
on costs associated with enforcement, such as labour expenses, legal fees, court costs and tax
advisors. Administrative functions acting at the boundary between firms in the supply chain
and with the purpose of calling off orders, checking delivery times, handling invoicing and
payments may also be severely reduced or entirely eliminated due to the increased visibility
of transactions and the potential to avoid non-value-adding double functions (Nowiński and
Kozma, 2017; Subramanian, 2018). This in turn will not only enhance supply chain efficiency
directly but will reduce system complexity in general (Underwood, 2016; Voshmgir, 2017;
Nowiński and Kozma, 2017; Seidel, 2018; Adams et al., 2017b; Bridgers, 2017), which may
also shorten administrative lead times and improve flexibility and responsiveness
(Underwood, 2016; Nowiński and Kozma, 2017; Brandon, 2016). This can be summarised in:
Proposition 7: Use of BCT in a supply chain enables reduction in structural complexity.
4.1.3. The blockchain as an exploration technology
Following March´s (1991) distinction, the blockchain can also be understood as a technology
leading to improved managerial ability to explore new supply chain routines and approaches.
Managerial focus is on radical process improvement, flexibility, search and experimentation
(March, 1991). The literature supports several ways in which the blockchain can be
understood as a technology which enables exploration.
BCT is in some part seen as a technology with the potential to create fresh opportunities for
value creation and capture (Maull et al., 2017), and as an opportunity for constructing entirely
new supply chain structures and forms of economic and social governance (Kewell et al.,
2017). One example is the creation of new electronic markets (e-markets) where buyers and
supplier can be matched very easily and with low cost (Subramanian, 2018). Specifically,
these new e-markets will enable both reach and immediacy (Subramanian and Overby, 2017),
and this will facilitate the sharing of resources and the combining of supply chain processes in
new and innovative ways. BCT may also enable innovation in manufacturing and help
transform traditional standalone manufacturing into decentralised or open manufacturing,
which may further enhance social and environmental sustainability (Li et al., 2018).
The blockchain can also be seen as an opportunity to rethink important decisions concerning,
for instance, sustainability and the sourcing of components (Kewell et al., 2017). Following
proposition 3, BCT can be understood to provide radical new knowledge to understand the
origin of products. This knowledge in turn may inspire firms and entire supply chains to shift
sourcing patterns away from unsuitable sources to new and much more sustainable ones. This
may generate opportunities for new value propositions to the market, which may be possible
because knowledge is made sticky and attaches to the individual components flowing through
the supply chain. BCT adoption may even be thought of as potentially enabling a circular
economy, closed-loop supply chains and reverse logistics (Saberi et al., 2018). The above
arguments thus suggest the following propositions:
Proposition 8: Use of BCT in a supply chain enables radical supply chain restructuring
and innovations.
Proposition 9: Use of BCT in a supply chain enables supply chain sustainability
innovations.
4.1.4. The blockchain as a relationship-building technology
In the literature, BCT is seen as an opportunity to cooperatively share value across boundaries
(Manski, 2017) and as a mechanism for improving trust in transactions (Kshetri, 2017).
Additionally, improved transparency will enable supply chain actors to know more about the
business partners who are integrated into the blockchain. This will enable them to collaborate
12
in real time across wide space, in different countries and even on different continents
(Anderson, 2018). However, the specific blockchain design or configuration of the blockchain
must be aligned with the relationships between the agents involved in the transactions
(O´Leary, 2017). These and other proposed effects and considerations highlight the
blockchain as a technology which has the potential to influence the ability to gain relational
rents (Dyer and Singh, 1998) from supply chain relationships.
Following Proposition 2, the blockchain increases supply chain visibility. Therefore, it can be
seen as a technology which enables firms in supply chain relationships to enhance
collaboration (Anderson, 2018). Involved firms can now better combine, exchange and invest
in idiosyncratic assets, knowledge and resources/capabilities because they are now better
known to the partners embedded in the blockchain (Kshetri, 2017). This will facilitate higher
levels of sharing of knowledge, resources and services in manufacturing ecosystems and
supply networks (Eljazzar et al., 2018; Li et al., 2018). Additionally, following the discussion
above as well as Proposition 6 on supply chain governance, the blockchain is also proposed as
a technology which enables effective governance mechanisms to increase trust and lower
transaction costs. In combination and building on the relational view by Dyer and Singh
(1998), the following proposition is suggested:
Proposition 10: Use of BCT in a supply chain enhances the potential to gain relational
rents from supply chain partnerships.
4.2 The constraining blockchain
When the blockchain constrains, it hinders the supply chain in reaching its full potential and
reduces supply chain performance. It hinders the supply chain in performing to its full
potential either by blocking it from more beneficial territories, by erasing parts of its
competitiveness or by introducing new uncertainties and risks. The analysis identified three
aspects of the blockchain which constrain SCM; each portrays the blockchain with a
particular identity.
4.2.1 The blockchain as a domination technology
Too much supply chain transparency may create challenges because it can compromise data
privacy issues (Bridgers, 2017; Underwood, 2016) and can be mobilised as a source of power
and surveillance. When every action, activity and transaction is immediately visible and
further stored permanently in technology memory, this might produce the possibility for a
powerful actor either inside (e.g., powerful buyer) or outside (e.g., government or other
authority) the supply chain to monitor and to dominate by surveillance or request supply chain
actors to deliver even more transparency (Adams et al., 2017b). In this view, the blockchain
understood as a Panopticon creates a consciousness of permanent visibility as a form of power
and a potential for domination (Foucault, 2012). Because of the decentralised structure,
cryptography system and consensus mechanism, removing data from the blockchain is
virtually impossible, since it will require that all or in some cases a majority of all users of the
blockchain simultaneously agree to remove the data (Bridgers, 2017). There is also an issue
with regard to who designs and owns the specific blockchain (O´Dair and Beaven, 2017).
Powerful corporations could set up private, permissioned blockchains and invite other firms
to participate in a space where tie-in situations and monopolies would emerge over time. In
this light, BCT will lead to the strengthening of hierarchies and the centralisation of power
(Manski, 2017).
Another potential adverse effect of the ability of blockchains to produce visibility and
traceability may be increased supply chain segregation. The blockchain might force firms to
think about which types of information and knowledge to protect from transparency (Kim and
13
Justl, 2018). It is most likely that firms will be interested in maintaining some sort of
information asymmetry to keep competitive advantages and to further reduce the risk of
information leakages (Coyne and McMickle 2017; Yermack, 2017).
Additionally, some customers and consumers may begin to shift to suppliers who provide
more complete information about the history of their products, and this can lead to radical
shifts in the marketplace (Koonce, 2016). Dominant firms may want to invite into their close
blockchain communities only other firms they already consider to be core supply chain
partners. Even when inside, dominant firms may act as central authorities restricting access to
information which might have been useful for less dominant members of the blockchain and
for the supply chain as a whole to coordinate activities. The above arguments thus suggest the
following propositions:
Proposition 11a: Use of BCT in a supply chain leads to increased surveillance and the
enforcement of power.
Proposition 11b: Use of BCT in a supply chain leads to supply chain segregation.
4.2.2 The blockchain as a straitjacket
There might be adverse effects from embedding the blockchain in supply chains to reflect
current activities and current supply chain relationships. In this light, the blockchain can be
seen as a transaction-specific investment and a straitjacket which may keep current operations
in place, although the market and competitive situation surrounding the supply chain is
dynamic. In this view, some research has discussed the inflexibility of smart contracts
(Kewell et al., 2017; Voshmgir, 2017). The danger is that the smart contract performs no
matter what, and this raises the question about who writes it (Kewell et al., 2017). Another
potentially cohesive effect of smart contracts is that they are impossible to modify in the event
of any changes in needs which were not considered when stipulating the contract (Sklaroff,
2017). Moreover, smart contracts may be difficult to adapt to current legal frameworks
regulating contracts across jurisdictions (Giancaspro, 2017). Other research points to the
scalability problem (Saberi et al., 2018). Computer power and the time and memory required
to confirm transactions in a blockchain is increasing (Manski, 2017), and current computer
infrastructures may not be able to keep pace with the growth of blockchain (Giancaspro,
2017). It is further argued that distributed solutions such as blockchains are much more
inefficient than traditional centralised database solutions because they are more difficult to
scale up to higher capacity and cannot easily be changed, resulting in less flexibility
(Underwood 2016; Ølnes, 2017). This leads to:
Proposition 12: Use of BCT in a supply chain reduces supply chain adaptability.
4.2.3 The blockchain as a deskiller
Because organisational technology can be designed with the intention of automating and
eliminating work, it will potentially also have deskilling implications for workers
(Orlikowski, 1992) and organisations. Based on the analysis of the literature, the blockchain
may be understood as a technology which has the power to erase parts of supply chain
competencies (Manski, 2017). Due to the potential for automation following the design of
BCT, many middle- and lower-income workers in the areas of accounting, verification,
banking and other disciplines may lose their livelihoods. Unique but intangible knowledge
embedded in the supply chain or in boundary-spanning functions may be lost or reduced
because of automation of work procedures and elimination of transaction intermediaries. In
addition, the increased potential for control enabled by the permanent and immutable storage
of data might cause workers’ autonomy to be restricted with single job tasks being exactly
prescribed, measured and evaluated, and existing qualifications and skills may lose value
14
(Treiblmaier and Umlauff, forthcoming). There may also be a challenge with organisational
or work commitment as functions are completely or partly automated and replaced with
procedures (Adler and Borys, 1996). This leads to the final proposition:
Proposition 13: Use of BCT in a supply chain reduces worker skills and supply chain
competencies.
5 DISCUSSION
The blockchain as an information lighthouse and specifically its ability to enable increased
supply chain traceability emerged in the analysis as the most dominant outcome of the
technology (see Appendix A). In addition, the blockchain understood as an exploitation
device figured strongly in the analysis, and here BCT-enabled enhanced contract management
and supply chain governance was found to be especially eminent. Less prominent were the
blockchain’s ability to work as an innovation engine and relationship-building technology.
This shows that there is a tendency in the literature to see the blockchain as an opportunity to
exploit existing supply chain resources and competencies, and, based on the analysis of the
literature sample, it seems that managerial focus is on alignment, systematic improvement and
refinement of existing capabilities. This finding relates well to the largely transformative
potential which is expected of the technology (Iansiti and Lakhani, 2017). In relation to the
eminent traceability focus, we propose that this stems from the key/core innovation of BCT as
providing data immutability, something not provided in other supply chain technologies
(Mougayar, 2016).
The analysis also shows how blockchain enables and constrains multiple dimensions of
supply chain performance. Specifically, it demonstrates how cost, resilience, responsiveness,
adaptability, sustainability and innovation are all supply chain performance objectives
potentially affected when the blockchain is embedded in the supply chan. These findings
complement Kshetri (2018) in identifying the same potential performance outcomes of
embedding BCT in a supply chain. However, the findings also extend previous research, as
they show how the same architectural properties of BCT can lead to both enhancements and
reductions in supply chain performance. In concert, the analysis shows that the blockchain is a
Janus-faced organisational technology which can take on a complex portfolio of different
powerful identities, depending on its specific design (Adler and Borys, 1996). This supports
Manski (2017) when arguing that BCT has potential in both leading towards and away from a
technological commonwealth.
Another central contribution of this study is to show how future research on the use of BCT in
supply chains can heighten its theoretical relevance and foundation. Specifically, the study
demonstrates how the organisational theory suggested by Adler and Borys (1996) holds
potential for future studies seeking to understand the managerial implications of adopting
BCT in a supply chain. In relation to previous academic research in the area, the present study
adds to Kshetri (2018) and Petersen et al. (2017) by addressing not only the final outcome of
the use of BCT on dimensions of supply chain performance, but also the complex path which
creates this outcome. The presented research further complements the theoretical agenda for
the applicability and subsequent adoption of BCT in SCM presented by Treiblmaier (2018).
This is done by furthering the blockchain as an organisational technology and exploring the
organisational work-related managerial benefits or constraints which may affect its
applicability.
Like most studies, this research contains some limitations. A limitation of the present study is
that findings are based on a literature synthesis and theoretical conceptualisation. The
15
deduced blockchain identities are the result of narrative coding. An alternative search strategy
and/or alternative coding would likely have resulted in a different set of enabling and
constraining effects. There is also some concern that some of the deduced effect categories or
‘representations’ can be understood as oversimplications. This is an inherent challenge when
using a conceptual approach to construct an overview and direction of a set of intervened and
complex phenomena (Miles and Huberman, 1994).
6 CONCLUSION
The purpose of this study was to explore how the blockchain enables and constrains SCM and
supply chain performance. The study highlights how BCT should be understood to have a
multifaceted and diverse impact on SCM and supply chain performance. Specifically, the
study develops a set of propositions, each of which highlights a different path of how these
impacts might manifest.
The analysis identified four different blockchain identities which enable SCM and improve
supply chain performance: information lighthouse, exploitation technology, exploration
technology and relationship-building technology. However, the analysis also identified three
different blockchain identities which constrain SCM and reduce supply chain performance:
domination technology, straitjacket and deskiller.
Practitioners can benet from the study results by noting the importance of the identied
enabling and constraining roles of the blockchain. This knowledge has the potential to serve
as a set of guidelines, through which supply chain managers should be aware of the potential
for simultaneous parallel enabling and constraining effects of embedding BCT in a supply
chain. Ideally, supply chain managers should seek to enhance the enabling powers and
minimise the constraining powers of the blockchain.
Future research should test the developed propositions to provide a deeper understanding of
each of the identied enabling and constraining roles and their implications for SCM. In
general, more research is suggested focussing on BCT as an opportunity to explore and
innovate and as a relationship-building technology. More studies adopting organisational
theory to explore the simultaneous and complex chain of both enabling and constraining
implications of BCT in supply chains are also strongly recommended.
ACKNOWLEDGEMENTS
We would like to thank student Lorenzo Russo for assisting us with the research. We would
also like to thank the two anonymous reviewers and the guest editors for providing invaluable
feedback and comments to this paper.
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Figure 1: Theoretical model developed on the basis of Adler and Borys (1996) and Hald and Mouritsen (2013)
22
BLOCKCHAIN IDENTITY
(REPRESENTATION) PROPOSITIONS BLOCKCHAIN PROPERTIES AUTHORS
Decentralised
structure
Cryptography
system Consensus
mechanism Smart
contracts
THE ENABLING
BLOCKCHAIN
THE
BLOCKCHAIN
AS AN
INFORMATION
LIGHTHOUSE
Proposition 1a: Use of BCT in a
supply chain enables data
availability.
X
Appelbaum and Smith (2018); Biswas et al.
(2017); Casado-Vara et al. (2018); Filipova
(2018); O’Dair and Beaven (2017); O’Leary
(2017); Siba and Prakash (2016); Yermack
(2017); Ølnes et al. (2017)
Proposition 1b: Use of BCT
enables data quality in the form
of data immutability.
X
Proposition 1c: Use of BCT
enables data quality in the form
of data consistency.
X
Proposition 2: Use of BCT in a
supply chain enables increased
supply chain visibility.
X X
Arcos (2018); Dai and Vasarhelyi (2017);
Eljazzar et al. (2018); Filipova (2018); Koonce
(2016); Kshetri (2018); Leng et al (2018);
O’Dair and Beaven (2017); O’Leary (2017);
Petersen et al (2017); Subramanian (2018);
Tapscott and Tapscott (2016b); Underwood
(2016); White (2017); Yermack (2017); Ølnes
et al.(2017)
Proposition 3: Use of BCT in a
supply chain enables increased
supply chain traceability.
X X
Adams et al. (2017b); Biswas et al. (2017);
Casado-Vara et al. (2018); Clauson et al.
(2018); Dai et al. (2017); Filipova (2018);
Francisco and Swanson (2018); Hawlitschek et
al. (2018); Kewell et al (2017); Kim and Justl
(2018); Kim and Laskowski (2018) ; Koonce
(2016); Kshetri (2017); Kshetri (2018); Lacity
(2018); Manski (2017); Nair and Sutter (2018);
Nowinski and Kozma (2017); Petersen et al
(2017); Saberi et al. (2018); Subramanian
(2018); Treiblmaier and Umlauff (forth.);
Underwood (2016); White (2017); Yermack
(2017); Ølnes et al. (2017)
Proposition 4a: Use of BCT in a
supply chain enables reduction
of errors.
X X X
Appelbaum and Smith (2018); Brandon (2016);
Clauson et al. (2018); Dai and Vasarhelyi
(2017); Filipova (2018); Manski (2017);
O´Dair and Beaven (2017); Preuveneers et al.
(2017); Ølnes et al. (2017)
23
THE
BLOCKCHAIN
AS AN
EXPLOITATION
TECHNOLOGY
Proposition 4b: Use of BCT in
a supply chain enables
reduction of attacks.
X X
Dai and Vasarhelyi (2017); Lacity (2018);
Manski (2017); O´Dair and Beaven (2017);
Preuveneers et al. (2017); Tapscott and
Tapscott (2016b); Underwood (2016); White
(2017)
Proposition 5: Use of BCT in a
supply chain enables enhanced
supply chain coordination.
X X
Anderson (2018); Clauson et al. (2018);
Eljazzar et al. (2018); Koonce (2016); Kshetri
(2018); Leng et al (2018); Manski (2017);
Nowinski and Kozma (2017); O´Leary (2017);
Petersen et al (2017); Voshmgir (2017);
Tapscott and Tapscott (2016b); White (2017)
Proposition 6: Use of BCT in a
supply chain enhances contract
management and supply chain
governance.
X X
Appelbaum and Smith (2018); Casado-Vara et
al. (2018); Coyne and McMickle (2017); Dai
et al. (2017); Dai and Vasarhelyi (2017);
Filipova (2018); Giancaspro (2017);
Hawlitschek et al. (2018); Kewell et al. (2017);
Kim and Justl (2018); Kshetri (2017); Kshetri
(2018); Lacity (2018); Leng et al., (2018); Nair
and Sutter (2018); Petersen et al. (2017);
Subramanian (2018); Tapscott and Tapscott
(2016b); Tapscott and Tapscott (2017);
Treiblmaier and Umlauff (forth.); Yermack
(2017); Ølnes et al. (2017)
Proposition 7: Use of BCT in a
supply chain enables reduction
in structural complexity.
X X X
Adams et al. (2017b); Brandon (2016);
Bridgers (2017); Coyne and McMickle (2017);
Hawlitschek et al. (2018); Kim and Justl
(2018); Koonce (2016); Manski (2017);
Nowiński and Kozma (2017); Seidel (2018);
Voshmgir (2017); Subramanian
(2018);Tapscott and Tapscott (2017);
Underwood (2016); Yermack (2017); Zamani
and Giaglis (2018)
THE
BLOCKCHAIN
AS AN
EXPLORATION
TECHNOLOGY
Proposition 8: Use of BCT in a
supply chain enables radical
supply chain restructuring and
innovations.
X X X
Anderson (2018); Kewell et al (2017); Kshetri
(2017); Li et al (2018); Maull et al (2017);
Nowiński and Kozma (2017); O’Dair and
Beaven (2017); Subramanian (2018); White
(2017); Zamani and Giaglis (2018): Ølnes et al.
(2017)
24
Proposition 9: Use of BCT in a
supply chain enables supply
chain sustainability innovations.
X X X
Kewell et al (2017); Saberi et al. (2018)
THE
BLOCKCHAIN
AS A
RELATIONSHIP
BUILDING
TECHNOLOGY
Proposition 10: Use of BCT in
a supply chain enhances the
potential to gain relational rents
from supply chain partnerships.
X X X
Anderson (2018); Eljazzar et al. (2018);
Kshetri (2017); Li et al (2018); Manski (2017);
O’Leary (2017); Subramanian (2018); Tapscott
and Tapscott (2016b)
THE
CONSTRAINING
BLOCKCHAIN
THE
BLOCKCHAIN
AS A
DOMINATION
TECHNOLOGY
Proposition 11a: Use of BCT in
a supply chain leads to
increased surveillance and the
enforcement of power.
X X X
Adams et al. (2017b); Manski (2017); O´Dair
and Beaven (2017); Voshmgir (2017);
Underwood (2016); Yermack (2017)
Proposition 11b: Use of BCT in
a supply chain leads to supply
chain segregation.
X X X
Bridgers (2017); Coyne and McMickle (2017);
Kim and Justl (2018); Koonce (2016); Manski
(2017); O´Dair and Beaven (2017); Voshmgir
(2017); Yermack (2017)
THE
BLOCKCHAIN
AS A
STRAITJACKET
Proposition 12: Use of BCT in
a supply chain reduces supply
chain adaptability.
X X X
Appelbaum and Smith (2018); Giancaspro
(2017); Kewell et al.(2017); Manski (2017);
Saberi et al. (2018); Voshmgir (2017); Sklaroff
(2017); Underwood (2016); Ølnes et al. (2017)
THE
BLOCKCHAIN
AS A
DESKILLER
Proposition 13: Use of BCT in
a supply chain reduces worker
skills and supply chain
competencies.
X X X X
Manski (2017); Treiblmaier and Umlauff
(forth.)
Table A: Outcome of the structured literature review
25
Appendix A
THE ENABLING BLOCKCHAIN THE CONSTRAINING BLOCKCHAIN
RANK ORDER LIST OF SUPPORTFOR
PROPOSITIONS IN SAMPLE
SUPPORT
IN
SAMPLE
(%)
INFORMATION
LIGHTHOUSE
EXPLOITATION
TECHNOLOGY
EXPLORATION
TECHNOLOGY
RELATIONSHIP
BUILDING
TECHNOLOGY
DOMINATION
TECHNOLOGY STRAITJACKET DESKILLER
NUMBER OF PAPERS IN SAMPLE SUPPORTING THE PROPOSITION
Proposition 3: Use of BCT in a supply chain
enables increased supply chain traceability. 54% 26
Proposition 6: Use of BCT in a supply chain
enhances contract management and supply
chain governance.
46% 22
Proposition 2: Use of BCT in a supply chain
enables increased supply chain visibility. 33% 16
Proposition 7: Use of BCT in a supply chain
enables reduction in structural complexity. 33% 16
Proposition 5: Use of BCT in a supply chain
enables enhanced supply chain coordination. 27% 13
Proposition 8: Use of BCT in a supply chain
enables radical supply chain restructuring and
innovations.
23% 11
Proposition 1a: Use of BCT in a supply chain
enables data availability. 19% 9
Proposition 1b: Use of BCT enables data
quality in the form of data immutability. 19% 9
Proposition 1c: Use of BCT enables data
quality in the form of data consistency 19% 9
Proposition 4a: Use of BCT in a supply chain
enables reduction of errors. 19% 9
Proposition 12: Use of BCT in a supply chain
reduces supply chain adaptability. 19% 9
Proposition 4b: Use of BCT in a supply chain
enables reduction of attacks. 17% 8
Proposition 10: Use of BCT in a supply chain
enhances the potential to gain relational rents
from supply chain partnerships.
17% 8
Proposition 11b: Use of BCT in a supply
chain leads to supply chain segregation. 17% 8
Proposition 11a: Use of BCT in a supply chain
leads to increased surveillance and the
enforcement of power.
13% 6
Proposition 9: Use of BCT in a supply chain
enables supply chain sustainability
innovations.
4% 2
Proposition 13: Use of BCT in a supply chain
reduces worker skills and supply chain
competencies.
4% 2
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