Collaborative financing and supply chain coordination for corporate social responsibility

Abstract

Recent research in supply chain (SC) management shows that collaborative financing and coordination can separately improve the SC's corporate social responsibility (CSR). This article examines how reverse factoring (RF) and cost-sharing (CS) contracts initiated by sizable creditworthy retailers interact and can help SCs address various challenges posed by CSR, especially for small- and medium-sized suppliers with limited working capital. RF can simultaneously lead to greater CSR effort and higher profits for all SC members compared to traditional bank financing. We highlight, nevertheless, how some factors, such as market demand uncertainty, the interest rate premia charged by the respective banks, and the supplier's or retailer's bankruptcy risks, determine the adoption and the benefits of the financing devices. Our managerial implications indicate that combining collaborative financing and coordination can simultaneously be profitable for all members of the SC and incentivize the supplier to raise the CSR efforts. Specifically, a CS contract associated with an appropriate financing mechanism can help to improve CSR and the SC's profitability.