Research on corporate social responsibility and product quality in an outsourcing supply chain

Abstract

<p style='text-indent:20px;'>In a supply chain with product outsourcing, it is crucial to identify which firm implements corporate social responsibility (CSR) leads to a higher CSR effort level, a higher product quality level, a higher quantity of outsourced products, and higher profits for supply chain members. In response to this question, we consider a decentralized supply chain with an upstream contract manufacturer (CM) and a downstream original equipment manufacturer (OEM). In this relationship, the downstream OEM outsources the product to the upstream CM and determines the quantity, while the upstream CM produces for the downstream OEM and determines the product quality and the wholesale price. Based on the scenario that each supply chain member can respectively implement the CSR effort (i.e., the CM model and the OEM model), we first investigate the impacts of the CSR demand-sensitivity coefficient, the CSR cost-reducing efficiency, and the CSR effort investment efficiency on the operational decisions and on the profits for supply chain members. Second, we compare the equilibrium results between the CM model and the OEM model. Finally, we study supply chain coordination. We find that (1) an increase in the CSR demand-sensitivity coefficient (the CSR cost-reducing efficiency and the CSR effort investment efficiency) is beneficial to the CSR effort level, the product quality level, the quantity of outsourced products, and the profitability for each supply chain member; (2) the CSR effort level is higher in the CM model than that in the OEM model, which in turn leads to a higher product quality level, a higher quantity of outsourced products, and a higher profitability of supply chain members; and (3) the proposed schemes consisting of quantity discount contracts, CSR effort investment cost sharing contracts, and quality investment cost sharing contracts can effectively coordinate the supply chain.</p>