The effects of interorganizational governance on supplier's compliance with SCC: An empirical examination of compliant and non-compliant suppliers

Abstract

Often, there is a huge gap between the requirements of the Supplier Codes of Conduct (SCC) imposed by buyers from advanced economies and actual compliance with SCC in developing countries. It is difficult for reseachers to reach suppliers who have violated SCC, especially within a large sample, because few disclose SCC violations to the public. In this paper, however, we identified 108 non-compliant Chinese apparel and textile suppliers. Through the investigation of these non-compliant suppliers and their compliant peers, this paper tests the impacts of antecedent factors (price pressure, production complexity, and contract duration) and buyer's governance mechanisms (peer-to-peer and buyer-to-supplier) on the likelihood of a supplier's compliance with SCC. While the buyer-to-supplier governance does not show significant effects, the peer-to-peer governance demonstrates the likelihood of supplier's commitment to SCC. This research reveals that if buyer's governance efforts move away from threat and toward cooperation, supplier's compliance with SCC could be more sustainable.