Moderating Role of Uncertainty and Asset Specificity in the Structure-Conduct-Performance Paradigm: Evidence from Rice Millers in Sri Lanka

Most small and medium-sized enterprise (SME) rice millers have experienced performance issues related to their conduct, threatening the sustainability of the industry. These issues appear to stem from uncertainty, even though their investments are asset specific. This study, therefore, assessed the moderating effects of asset specificity and uncertainty on the relationships among Structure, Conduct, and Performance (SCP) in SME rice mills. A questionnaire survey was conducted among 125 SME rice mills in the main paddy-producing districts of Sri Lanka. The analysis was carried out using SmartPLS 4 software. The results confirmed a significant negative moderating effect of uncertainty on the relationship between conduct and performance (β = -0.387, t = 3.010, p < 0.003). This indicates that the presence of uncertainty significantly weakens the impact of conduct on performance. In contrast, the results did not show such an effect on the relationship between structure and conduct. Furthermore, asset specificity did not moderate the relationships between either structure and conduct or conduct and performance. In addition, the study found that conduct did not mediate the relationship between structure and performance. The findings suggest policies and strategies to minimise the impact of uncertainty in achieving sustainable positive performance outcomes. Future research is recommended to explore strategies to mitigate these moderating factors and enhance performance. The incorporation of asset specificity and uncertainty into the SCP framework represents the novelty of this study.