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  • September 2016
  • Article
  • Strategic Management Journal

Monitoring Global Supply Chains

By: Jodi L. Short, Michael W. Toffel and Andrea R. Hugill
  • Format:Print
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Abstract

Firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories are increasingly relying on private social auditors to provide strategic information about suppliers' conduct. But little is known about what influences auditors' ability to identify and report problems. Our analysis of nearly 17,000 supplier audits reveals that auditors report fewer violations when individual auditors have audited the factory before, when audit teams are less experienced or less trained, when audit teams are all-male, and when audits are paid for by the audited supplier. This first comprehensive and systematic analysis of supply chain monitoring identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational risks by reducing information asymmetries in supply chains. Firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories are increasingly relying on private social auditors to provide strategic information about suppliers’ conduct. But little is known about what influences auditors’ ability to identify and report problems. Our analysis of nearly 17,000 supplier audits reveals that auditors report fewer violations when individual auditors have audited the factory before, when audit teams are less experienced or less trained, when audit teams are all-male, and when audits are paid for by the audited supplier. This first comprehensive and systematic analysis of supply chain monitoring identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational risks by reducing information asymmetries in supply chains.

Keywords

Monitoring; Transaction Cost Economics; Industry Self-regulation; Auditing; Codes Of Conduct; Supply Chains; Corporate Social Responsibility; Corporate Social Responsibility And Impact; Supply Chain; Globalization

Citation

Short, Jodi L., Michael W. Toffel, and Andrea R. Hugill. "Monitoring Global Supply Chains." Strategic Management Journal 37, no. 9 (September 2016): 1878–1897. (Video abstract (4 minutes). Working Knowledge article for practitioners.)
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About The Author

Michael W. Toffel

Technology and Operations Management
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    • March–April 2021
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    Manage the Suppliers That Could Harm Your Brand: Know When to Avoid, Engage, or Drop Them

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    • February 2021
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    Assessing Prediction Accuracy of Machine Learning Models

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    • February 2021
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    T-tests: Theory and Practice

    By: Michael Parzen, Natalie Epstein, Chiara Farronato and Michael Toffel
More from the Authors
  • Manage the Suppliers That Could Harm Your Brand: Know When to Avoid, Engage, or Drop Them By: Jodi L Short and Michael W. Toffel
  • Assessing Prediction Accuracy of Machine Learning Models By: Michael Toffel and Natalie Epstein
  • T-tests: Theory and Practice By: Michael Parzen, Natalie Epstein, Chiara Farronato and Michael Toffel
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