Multi-principal collaboration and supplier’s compliance with codes-of-conduct

Pages1237-1254
DOIhttps://doi.org/10.1108/IJLM-09-2017-0222
Published date18 June 2018
Date18 June 2018
AuthorEmanuela Delbufalo,Marko Bastl
Subject MatterLogistics,Management science & operations
Multi-principal collaboration
and suppliers compliance
with codes-of-conduct
Emanuela Delbufalo
Faculty of Economics, European University of Rome, Rome, Italy, and
Marko Bastl
Department of Management, College of Business Administration,
Marquette University, Milwaukee, Wisconsin, USA
Abstract
Purpose The purpose of this paper is to articulate propositions on how collaborating multi-national
corporations (MNCs) can manage their supplier base in order to reduce the risk of suppliersnon-compliance
with shared codes-of-conduct.
Design/methodology/approach The study utilises a conceptual theory development approach. In doing
so, it utilises key tenets of agency theory that are applied in a multi-principalsupplier relationship context
and synthesised in a series of propositions.
Findings The study shows that MNCs have a variety of mechanisms for reducing the risk of suppliers
non-compliance by decreasing information asymmetry, increasing their bargaining power and
simultaneously use of both rewards/sanctions, and reputation-based safeguards.
Research limitations/implications This is a conceptual theory development study, offering testable
propositions, which have then to be empirically validated.
Practical implications The study showcases that managers of MNCs who find themselves in
relationships with non-compliant suppliers have at their disposal a variety of mechanisms to reduce the risk
of suppliersnon-compliance.
Originality/value This is one of the first studies that explore suppliersnon-compliance with codes-of-conduct
at the level of a relationship, rather than a single firm. In this way it proposes a theoretical framework grounded in
agency theory on managing relationships between multi-principal collaborators and their suppliers.
Keywords Sustainability, Corporate social responsibility, Agency theory, Europe, Asia,
Buyersupplier relationships, Conceptual research, Theory development, Supplier management,
Supplier compliance
Paper type Conceptual paper
Introduction
The widespreaduse of outsourcing, from low-costeconomies and growing concerns aboutthe
social and environmental impactsof production and consumption,is fuelling interest in issues
related to social responsibility, sustainable sourcing, environmental management and green
supply chains (Hofmann et al., 2015; Aguinis andGlavas, 2012; Hill and Rapp, 2014; Lee and
Kim, 2009). Corporatesocial responsibility (CSR)initiatives traditionallyhave been taken over
by multi-national corporations (MNCs), who hold most of the power in supply networks and
are responsiblefor division of tasks between them and their network partnersi.e. suppliers
( Jenkins, 2001; Maloni and Brown, 2006).
As part of addressing social and environmental issues, a growing number of MNCs
engage in collaborative initiatives with other firms operating in the same industry. One of
the main purposes of these collaborative efforts is to develop shared codes-of-conduct aimed
at managing and monitoring supplierscompliance with ethically and socially responsible
practices (Arya and Salk, 2006; Mele and Schepers, 2013). These codes stipulate, among
other operational issues, that working conditions are safe and hygienic, child labour is not
used, working hours are not excessive and wages/pay conditions are fair ( Jiang, 2009).
Moreover, the collaborative efforts between MNCs have also been seen as a way to establish
The International Journal of
Logistics Management
Vol. 29 No. 4, 2018
pp. 1237-1254
© Emerald PublishingLimited
0957-4093
DOI 10.1108/IJLM-09-2017-0222
Received 1 September 2017
Revised 7 December 2017
Accepted 30 January 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0957-4093.htm
1237
Codes-of-
conduct
common policies and action plans, design and encourage the development and adoption of
joint best practices, and generally avoid exposing suppliers to potentially conflicting
requirements (Aguinis and Glavas, 2012).
The evidence to date, however, shows that in spite of collaborative efforts between
MNCs to develop and implement codes-of-conduct, supplierslack of commitment and
non-compliance is still frequently present (Ciliberti et al., 2009). In fact, active
commitment is a precondition for the successful implementation of the [codes], but the
incentive to comply with [them] does not necessarily extend to all the actors in the chain
(Pedersen and Andersen, 2006, p. 228). For example, the Clean Clothes Campaign (2016)
report shows that, after a ten-year long period of commitment to worker safety, the
major apparel brands and retailers that are part of the Alliance for Bangladesh Worker
Safetyincluding Gap Inc., Target, VF Corporation, HudsonsBayCompanyand
Walmartare still struggling with massive suppliersnon-compliance, unsafe factories
and hundreds of thousands of workers at risk. Large global brands (such as Adidas and
Nike) experienced similar non-compliance problemswithSouthAsianmanufacturers
of footballs with regard to child labour practices expressed in multi-stakeholders
codes-of-conduct (Lund-Thomsen and Nadvi, 2010). Suppliersnon-compliance can lead to
serious consequences for MNCs resulting in consumer sanctions, negative press, capital
loss and damage to a companys brand (Aguinis and Glavas, 2012; Seuring and Müller,
2008). Besides, non-compliant behaviours can negatively impact on suppliers
competitiveness and on their possibility to engage in transactions with MNCs highly
committed to social and environmental issues (Mzembe et al., 2016).
The intent of this study is to use a conceptual theory development approach in order to
answer the following research question:
RQ1. How, and under what conditions, could collaborating MNCs effectively manage
relationships with their suppliers in order to decrease the risk of suppliers
non-compliance with codes-of-conduct?
In this way a well-established scholarly tradition of theory development is followed, which
has been previously applied in the areas of buyersupplier relationships and supply chain
management (e.g. Bastl et al., 2013; Choi and Wacker, 2011; Choi and Wu, 2009; Ketchen and
Hult, 2011). In doing so, we turn to agency theory, which specifically focusses on the
relationship between a principal and an agent that are engaged in cooperative behaviour,
but have differing goals and asymmetric information (Eisenhardt, 1989; Mitnick, 1973).
This study makes two key contributions: first, this is one of the first studies that focus on
the relationship between multi-principal collaborators and their suppliers in the
CSR contextmost studies to date examine this context from the single-firm position
(e.g. Egels-Zandèn, 2014; Lund-Thomsen, 2008); second, the utilisation of agency theory
enabled us to provide more nuanced insights into effective relationship management
between multi-principal collaborators and their suppliers along the key tenets of the theory,
namely, information monitoring, bargaining power and relationship safeguards, as opposed
to treating relationships as monolithsi.e. adversarial or collaborative (Prosman et al.,
2016). The study also considers the utility of combining formal and informal control
mechanisms to manage the tensions related to information sharing between collaborating
principals. In this way, a robust and theoretically grounded foundation is offered for
analysing this context, one currently missing from the extant literature. The study also has
important managerial implications: it shows that managers of MNCs who are collaborating
on joint codes-of-conduct to deal with non-compliant suppliers have at their disposal a
variety of mechanisms to reduce the threat of opportunism. It also provides suggestions for
addressing the potential tensions among collaborating competitors, a highly sensitive
problem for MNCs operating in dynamic and turbulent environments.
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