Working Paper | HBS Working Paper Series | 2015

Monitoring Global Supply Chains

by Jodi L Short, Michael W. Toffel and Andrea R. Hugill

Abstract

Outsourcing firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories increasingly rely on private social auditors to provide strategic information about the conduct of their suppliers. But little is known about what influences auditors' ability to identify and report poor supplier conduct. We find that individual supply chain auditors' monitoring practices are shaped by social factors including their experience, gender, and professional training; their ongoing relationships with suppliers; and the gender diversity of their audit teams. Providing the first comprehensive and systematic findings on supply chain monitoring, our study identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational spillover risks by reducing information asymmetries between themselves and their suppliers.

Keywords: Monitoring; transaction cost economics; industry self-regulation; auditing; Codes of conduct; supply chains; corporate social responsibility; globalization; Accounting Audits; Developing Countries and Economies; Supply Chain; Operations; Corporate Social Responsibility and Impact; Safety; Social Issues; Social Enterprise; Labor; Working Conditions; Law Enforcement; Globalization; Corporate Accountability; Fashion Industry; Forest Products Industry; Manufacturing Industry;

Citation:

Short, Jodi L., Michael W. Toffel, and Andrea R. Hugill. "Monitoring Global Supply Chains." Harvard Business School Working Paper, No. 14-032, October 2013. (Revised March 2015. Previously titled "Monitoring the Monitors: How Social Factors Influence Supply Chain Auditors.")