Financial Dependence, Lean Inventory Strategy, and Firm Performance†

We conduct an empirical investigation of the impact of focal firm and supplier financial dependence on focal firm financial performance using the lens of resource dependence theory. We further investigate the moderating impact of dependence asymmetry on the relationship between lean inventory strategy and focal firm financial performance. We use an innovative supply chain structure data set provided by Bloomberg, which allows implementation of unique measures for focal firm and supplier financial dependence within a supply chain. The results of an analysis of 3,638 buyer-supplier relationships provide support for the hypothesized direct effects of focal firm financial dependence and supplier financial dependence on firm financial performance. Our results also support our hypothesis regarding the moderating effect of dependence asymmetry on the relationship between lean inventory strategies on financial performance. These findings both improve our understanding of the impact of dependence on focal firm performance and shed light on the heretofore unstudied impact of dependence asymmetry's effect on the efficacy of lean inventory strategies.