The Impact of Control and Complexity on Supply Network Performance: An Empirically Informed Investigation Using NK Simulation Analysis

Control over suppliers is a core issue for a buying firm. Despite the amount of research on the topic, how much of its supply network (i.e., scope of control) a buying firm should control, so as to increase supply network performance, is a question that has not received adequate research attention. The study addresses this research question by considering the supply network as a complex adaptive system and developing an empirically informed agent-based simulation model using the NK fitness landscape framework, to examine how varying levels of scope of control influence supply network performance. We also investigate the direct effect of two supply network complexity dimensions (i.e., number of firms and level of supply interactions) on supply network performance and the moderating effect played by the scope of control. Results show that the relationship between scope of control and supply network performance follows an inverted-U shape. Furthermore, we find that the complexity dimensions negatively affect supply network performance with the performance decrease depending on the scope of control. Based on these findings, we formulate different control strategies to mitigate the negative influence of complexity.