Buyer-supplier relationships and organizational values in supplier social compliance

Abstract

Buyers from developed countries require their suppliers in developing countries to demonstrate social compliance by the implementation of either generic social compliance standards, also called public standards, or buyer-developed social compliance codes, also called private standards. However, the research on the role of buyer-supplier relationship and adoption of social compliance standards is limited. Using data from apparel exporting factories, this paper investigates the role of transactional and relational buyer-supplier relationships in the adoption of public and private standards. Further, it examines the moderating role of supplier's organizational values in standards adoption process. The results indicate that transactional approach has a positive association with public standards and relational approach has a positive association with private standards. Also, the combined presence of transactional and relational approaches leads to implementation of both public and private standards. The empirical examination yielded partial support for moderation hypotheses as well. The findings imply that supplier governance decisions should be linked with the format of social compliance. A transactional approach will add more value when public standards are adopted and a relational approach will create more value if private standards are adopted. Further, managers need to evaluate a supplier's flexibility and external orientation to predict supplier willingness for social compliance and future social performance.