Working Paper | HBS Working Paper Series | 2014

Codes in Context: How States, Markets, and Civil Society Shape Adherence to Global Labor Standards

by Michael W. Toffel, Jodi L. Short and Melissa Ouellet

Abstract

Transnational business regulation is increasingly implemented through private voluntary programs—such as certification regimes, codes of conduct, and social monitoring—that seek to enforce global standards governing business practices. But little is known about the conditions under which companies are more likely to comply with the standards these programs impose. Using data from tens of thousands of code-of-conduct audits, we conduct one of the first large-scale comparative studies to determine which international, domestic, civil society, and market institutions promote supply chain factories' compliance with the global labor standards embodied in codes of conduct imposed by multinational buyers. We find that supplier factories are more likely to comply when they are embedded in states that are active participants in the International Labour Organization treaty regime and that have highly protective domestic labor regulation and high levels of press freedom. We further demonstrate that supplier factory compliance is associated not only with institutions in the supplier's home country, but also with institutions in the global buyer's home country: Suppliers are more compliant with global labor standards when they serve buyers located in countries where consumers are wealthy and socially conscious. Taken together, these findings suggest the importance of overlapping state, civil society, and market governance regimes to meaningful transnational regulation.

Keywords: Transnational regulation; Labor standards; Consumer politics; Codes of conduct; Compliance; Accounting Audits; Corporate Accountability; Governance Compliance; Governance Controls; Working Conditions; Law Enforcement; Production; Corporate Social Responsibility and Impact; Performance Evaluation; Safety; Quality; Nonprofit Organizations; Non-Governmental Organizations; Supply Chain; Supply Chain Management; Apparel and Accessories Industry; Electronics Industry; Manufacturing Industry; Asia; Europe; China; United States;

Citation:

Toffel, Michael W., Jodi L. Short, and Melissa Ouellet. "Codes in Context: How States, Markets, and Civil Society Shape Adherence to Global Labor Standards." Harvard Business School Working Paper, No. 13-045, November 2012. (Revised May 2014. Revise and resubmit at Regulation & Governance.)