Coupling Labor Codes of Conduct and Supplier Labor Practices: The Role of Internal Structural Conditions

Yanhua  Bird; Jodi L. Short; Michael W. Toffel

Article | Organization Science | July–August 2019

Coupling Labor Codes of Conduct and Supplier Labor Practices: The Role of Internal Structural Conditions

by Yanhua Bird, Jodi L. Short and Michael W. Toffel

Abstract

Exploitive working conditions have spurred companies to pressure their suppliers to adopt labor codes of conduct and to conform their labor practices to the standards set forth in those codes. Yet little is known about whether organizational structures such as codes are associated with improvements in supplier labor practices, especially in organizations in which they compete with productivity-driving incentive structures. We investigate under what internal structural conditions suppliers’ labor practices are likely to become more tightly aligned—or coupled—with their formal commitments to labor codes of conduct. Using data on 3,276 suppliers in 55 countries, we find that in suppliers with high-powered efficiency structures (piece-rate pay), labor codes are internally buffered and thus less tightly coupled with labor practices, yet tighter coupling is more likely in suppliers with certain types of managerial structures (certified management system and unions). We also find important interactions between these organizational structures: managerial structures offset efficiency structures, and the presence of multiple managerial structures within a single supplier hastens improvement. Our focus on the internal structural dynamics of suppliers extends the existing decoupling literature and provides the first empirical investigation of internal buffering of multiple organizational structures. Furthermore, our findings suggest important strategic considerations for managers selecting supplier factories and provide key insights for the design of transnational sustainability governance regimes.

Keywords: organization theory; economic sociology; social responsibility; sustainability; auditing; process improvement; Organizational Structure; Corporate Social Responsibility and Impact; Supply Chain; Labor; Working Conditions;

Format: Print

Find at Harvard Read Now

Citation:

Bird, Yanhua, Jodi L. Short, and Michael W. Toffel. "Coupling Labor Codes of Conduct and Supplier Labor Practices: The Role of Internal Structural Conditions." Organization Science 30, no. 4 (July–August 2019): 847–867.

Supplemental Information

Supplement (Appendices)

We study how a regulator can best allocate its limited inspection resources. We direct our analysis to a U.S. Occupational Safety and Health Administration (OSHA) inspection program that targeted dangerous establishments and allocated some inspections via random assignment. We find that inspections reduced serious injuries by an average of 9% over the following five years. We use new machine learning methods to estimate the effects of counterfactual targeting rules OSHA could have deployed. OSHA could have averted over twice as many injuries if its inspections had targeted the establishments where we predict inspections would avert the most injuries. The agency could have averted nearly as many additional injuries by targeting the establishments predicted to have the most injuries. Both of these targeting regimes would have generated over $1 billion in social value over the decade we examine. Our results demonstrate the promise, and limitations, of using machine learning to improve resource allocation. JEL Classifications: I18; L51; J38; J8.

Faculty & Research

Coupling Labor Codes of Conduct and Supplier Labor Practices: The Role of Internal Structural Conditions

Abstract

Citation:

Supplemental Information

About the Authors

More from these Authors