Reveal the Supplier List? A Trade-Off in Capacity vs. Responsibility

Basak Kalkanci and Erica Plambeck
Additional contact information
Basak Kalkanci: Georgia Institute of Technology
Erica Plambeck: Stanford University

Research Papers from Stanford University, Graduate School of Business

Abstract: This paper contributes to a recent thrust in the OM literature on how various sorts of transparency influence social and environmental responsibility in a supply chain. In practice, companies are under pressure to publish their supplier lists and suppliers' violations, and some are beginning to do so. This paper shows how a buying firm can use transparency to reward a supplier for responsibility effort to eliminate social or environmental violations. By publishing its supplier list, the buying firm can signal that a supplier is responsible and generate profitable new business for the supplier. However, the resulting competition for the supplier's scarce capacity could cause the buying firm to obtain fewer units or pay a higher price. We identify the conditions under which a buying firm should commit to publish its supplier list, and the conditions under which the buying firm should make complementary investments to help the supplier become more productive. In addition, the paper shows how a buying firm can use transparency to punish a supplier for a responsibility violation- by warning other buying firms not to source from the violating supplier. Commitment to do so increases the supplier's responsibility effort and can screen out a supplier with a known responsibility violation, thereby increasing a buying firm's expected profit. If the supplier is uncertain whether or not it has a violation (e.g., faulty electrical wiring likely to cause a fire) then the two forms of transparency are complementary. Buying firms should consider transparency as a potentially profitable approach to mitigating social and environmental violations in their supply chains.

Date: 2017-10
New Economics Papers: this item is included in nep-bec
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.gsb.stanford.edu/gsb-cmis/gsb-cmis-download-auth/458231
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:repec:ecl:stabus:3638

Access Statistics for this paper

More papers in Research Papers from Stanford University, Graduate School of Business Contact information at EDIRC.
Bibliographic data for series maintained by ().