Understanding the Relationship Between the Supply Chain and Finance Functions in Canadian Export Oriented Enterprises and Its Impact on Innovation Consideration By Peter Cowan BA (University of Alberta); MBA (University of Western Ontario) A thesis submitted to the Faculty of Graduate and Post Doctoral Affairs in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Management Carleton University Ottawa, Ontario May 2013 © Copyright 2013 Peter Cowan Library and Archives Bibliotheque et Canada Archives Canada Published Heritage Direction du 1+1 Branch Patrimoine de I'edition 395 Wellington Street 395, rue Wellington Ottawa ON K1A0N4 Ottawa ON K1A 0N4 Canada Canada Your file Votre reference ISBN: 978-0-494-94529-2 Our file Notre reference ISBN: 978-0-494-94529-2 NOTICE: AVIS: The author has granted a non­ L'auteur a accorde une licence non exclusive exclusive license allowing Library and permettant a la Bibliotheque et Archives Archives Canada to reproduce, Canada de reproduire, publier, archiver, publish, archive, preserve, conserve, sauvegarder, conserver, transmettre au public communicate to the public by par telecommunication ou par I'lnternet, preter, telecommunication or on the Internet, distribuer et vendre des theses partout dans le loan, distrbute and sell theses monde, a des fins commerciales ou autres, sur worldwide, for commercial or non­ support microforme, papier, electronique et/ou commercial purposes, in microform, autres formats. paper, electronic and/or any other formats. The author retains copyright L'auteur conserve la propriete du droit d'auteur ownership and moral rights in this et des droits moraux qui protege cette these. Ni thesis. Neither the thesis nor la these ni des extraits substantiels de celle-ci substantial extracts from it may be ne doivent etre imprimes ou autrement printed or otherwise reproduced reproduits sans son autorisation. without the author's permission. In compliance with the Canadian Conformement a la loi canadienne sur la Privacy Act some supporting forms protection de la vie privee, quelques may have been removed from this formulaires secondaires ont ete enleves de thesis. cette these. While these forms may be included Bien que ces formulaires aient inclus dans in the document page count, their la pagination, il n'y aura aucun contenu removal does not represent any loss manquant. of content from the thesis. Canada ABSTRACT This thesis is an exploratory research effort designed to initiate the development of an explanatory model specifically associated with one component of the financial value chain of global supply chains. Canadian enterprises have not adopted, let alone considered, a newly emerging financial innovation that is accepted as a best practice; that of supply chain finance (SCF). SCF is a technology based cross-enterprise administrative process that is a subcomponent of trade finance. The research explores this lack of consideration from the context of cross-enterprise, cross-functional and innovation consideration theories; grounded in a comparison of views from both the Supply Chain and the Finance functions towards upstream related supply chain and finance issues. Additionally, as SCF is not an established practice in Canada, a “proxy” line of inquiry, the “source to pay” process, is used to investigate the issue at hand. As neither the SCF issue nor the cross-functional relationship in question have been investigated academically before, this research is well suited to exploratory research practices, and a three stage mixed methods research design was chosen. The first two stages involved in depth interviews with seven Canadian exporters to explore and refine various lines of inquiry within the context of the “source to pay” process. Subsequent to the first two stages, suggested hypotheses were formulated and a survey tool was designed and executed to provide preliminary evaluation and refinement of a proposed model. ii The observations from all three stages have brought preliminary clarity to the practical nature of the relationship between the two functions related to upstream supply chain and finance issues. These observations have also provided suggestions related to cross­ functional interface activities that financial institutions may find useful in the pursuit of financial process innovation opportunities within a supply chain. From an academic perspective the research has provided guidance to the development of a proposed explanatory model related to the consideration of SCF. As well, a number of insights for future consideration, particularly related to the application of innovation theory to financial process consideration, have been identified. Suggestions for future research activity related to cross-functional relationships are also provided. ACKNOWLEDGEMENTS The pursuit and final achievement of the PhD has been an eventful chapter in my life and career. It is on that note that a very special thank you is extended to the PhD. program at Sprott for actively considering “mature” candidates for the program. I believe this approach shows wise and insightful leadership, and I can only encourage it to continue with this strategy so others like myself may benefit from the opportunity. A special thank you to Professor Linda Duxbury for being my initial champion and sponsor in the program and to Professor Vinod Kumar for being my supervisor during the latter part of my PhD. candidacy. The nature of my thesis did not have a natural home in any of the main streams of academic research, so Professor Kumar’s willingness to embrace the idea of the thesis, which was somewhat outside of his usual area of research, and guide me through the trials, tribulations and rewards of the effort, will always be greatly appreciated. The thesis was rather unique in that it also included the active participation of my employer, Export Development Canada (EDC). EDC is in my opinion a “national asset” due to its well-earned reputation of transactional excellence and long standing commitment to its client base. However I was (and still am) of the opinion that it is an underleveraged asset that should explore where it can apply its competencies and potentials in new ways, and that message was heard at EDC by various members of the senior management group who endorsed the core idea of this thesis. A heartfelt thanks to Sherry Noble, Gilles Morin and Fergus Groundwater of EDC for providing the endorsement and support for this effort, which truly went beyond the normal boundaries iv of EDC activities. Thank you for being so bold! To John McPherson, Theressa Cummings, Catherine Etherington, and Aline Cohen a special note of appreciation is warranted. These individuals were all my working colleagues at EDC on non-thesis related issues, but they were also witnesses to my efforts associated with the thesis and supportive over the years it took to complete; and everyone needs a support system! To Jackie McGinn, who was a late addition to the support system, but who was pivotal to the final effort related to the execution of the survey, a very special thank you! This leads to the ultimate support system of any PhD. candidate regardless of age, one’s family. To my two children, Krystyna and Jeffrey; the three of us have been on our respective graduate school journeys relatively simultaneously. As your journeys have unfolded, I have drawn strength and commitment in my own journey by watching the energy and passion you have both shown. The roles are reversing as the father learns from the children; thank you! And most importantly to my wife Irene. What patience and understanding!!!!! I would not dare to count the innumerable weekends that I “disappeared” to pursue my academic pursuits, nor challenge the innumerable comments of “where is your mind”, or to deny the observation that the temporary postponement of house hold maintenance projects was not measured in days, yet alone weeks, but years. I would not have started on this journey if you had not been by my side encouraging me, and I would never have finished it if you had not always supported me during the journey. v To all, thank you for being there for me and making this long journey a worthwhile and rewarding adventure. Table of Contents Table of Contents...................................................................................................................vii Table of Figures.......................................................................................................................x Table of Tables.........................................................................................................................x 1 Chapter 1 — Introduction.................................................................................................1 1.1 Background ____________________________________________________________ 2 1.2 Initial Questions ________________________________________________________ 4 1.3 Exploratory Research ____________________________________________________ 7 1.4 Original Contribution ____________________________________________________ 8 1.5 Research Plan _________________________________________________________ 11 1.6 Organization of Thesis __________________________________________________ 13 2 Chapter 2 — Research Relevancy..................................................................................18 2.1 Relevancy/Motivation ___________________________________________________ 18 2.2 What is Supply Chain Finance? ___________________________________________ 21