Cooperation and Punishment in Regulating Labor Standards: Evidence from the Gap Inc Supply Chain
52 Pages Posted: 18 Oct 2019 Last revised: 19 Aug 2020
Matthew Amengual
University of Oxford - Said Business School
Greg Distelhorst
University of Toronto, Centre for Industrial Relations and Human Resources; University of Toronto, Rotman School of Management
Date Written: August 18, 2020
Abstract
Multinational firms with global supply chains manage the labor compliance of their supplier firms. Does this private regulation cause compliance to improve? And what approaches to private regulation are effective? This study analyzes supply chain regulation under a largely cooperative approach and under an approach that incorporates the threat of penalties. Drawing on data from over one thousand factories supplying the multinational retailer Gap Inc over 2010-2019, it uses a regression discontinuity design to estimate the causal effects of assigning compliance ratings under these two approaches to supply chain regulation. Under the cooperative approach, we estimate precise, near-zero effects of compliance ratings on future social compliance. However, when the buyer incorporated penalties in the form of threats from the sourcing department to discontinue the business relationship with noncompliant suppliers, a failing grade caused factory compliance to improve by 0.8 standard deviations and reduced the probability of future failure by 22 percentage points. These effects are validated using independent labor compliance data from the ILO/IFC Better Work program. We also test hypotheses about the mediating effect of long-term supplier relationships and find that private regulation had a larger impact on longer-term suppliers, but again only in the presence of penalties. Notwithstanding an emerging consensus about the need for cooperation and committed commercial relationships in supply chain regulation, this study affirms the importance of incentives to enhance sustainability.
Keywords: private regulation, supply chain, social responsibility, social performance, labor standards, compliance
JEL Classification: J8, F16, F23, F66, D22
Suggested Citation: Suggested Citation
Greg Distelhorst (Contact Author)
University of Toronto, Centre for Industrial Relations and Human Resources ( email )
HOME PAGE: http://www.gregdistelhorst.com
Do you have negative results from your research you’d like to share?
Related eJournals
-
Law & Society: International & Comparative Law eJournal
Law & Society: International & Comparative Law eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS964PAPERS33,012This Journal is curated by:Christiana Ochoa at Indiana University Maurer School of Law -
International Employment & Labor Law eJournal
International Employment & Labor Law eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS900PAPERS2,059This Journal is curated by:J. H. Verkerke at University of Virginia School of Law -
Economic Perspectives on Employment & Labor Law eJournal
Economic Perspectives on Employment & Labor Law eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS893PAPERS3,766This Journal is curated by:J. H. Verkerke at University of Virginia School of Law -
Sustainability & Economics eJournal
Sustainability & Economics eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS875PAPERS27,565 -
Corporate Social Responsibility (CSR) eJournal
Corporate Social Responsibility (CSR) eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS824PAPERS13,231This Journal is curated by:Timothy M. Devinney at The University of Manchester - Alliance Manchester Business School -
Supply Chain Management eJournal
Supply Chain Management eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS789PAPERS1,670 -
International Trade eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS715PAPERS27,372 -
Labor: Public Policy & Regulation eJournal
Labor: Public Policy & Regulation eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS699PAPERS13,953 -
Development Economics: Women, Gender, & Human Development eJournal
Development Economics: Women, Gender, & Human Development eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS672PAPERS11,386 -
Environmental Economics eJournal
Environmental Economics eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS633PAPERS22,469 -
Human Rights & the Global Economy eJournal
Human Rights & the Global Economy eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS619PAPERS10,431This Journal is curated by:Wendy E. Parmet at Northeastern University - School of Law, Martha F. Davis at Northeastern University - School of Law -
Economic Anthropology eJournal
Economic Anthropology eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS610PAPERS8,966 -
Social Responsibility in Production & Supply Chain Management eJournal
Social Responsibility in Production & Supply Chain Management eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS580PAPERS1,891This Journal is curated by:Timothy M. Devinney at The University of Manchester - Alliance Manchester Business School -
Employee Social Responsibility & HR Practices eJournal
Employee Social Responsibility & HR Practices eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS570PAPERS3,847This Journal is curated by:Timothy M. Devinney at The University of Manchester - Alliance Manchester Business School -
Emerging Markets Economics: Environmental & Social Aspects eJournal
Emerging Markets Economics: Environmental & Social Aspects eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS386PAPERS2,398This Journal is curated by:Erik Berglöf at Institute of Global Affairs, London School of Economics and Political Science -
Migration, Urban & Transnational Anthropology eJournal
Migration, Urban & Transnational Anthropology eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS333PAPERS12,194 -
Strategy & Macroeconomic Policy eJournal
Strategy & Macroeconomic Policy eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS217PAPERS1,384 -
Legal Anthropology: Laws & Constitutions eJournal
Legal Anthropology: Laws & Constitutions eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS205PAPERS15,043 -
Management Practice eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS182PAPERS1,967 -
International Political Economy: Globalization eJournal
International Political Economy: Globalization eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS85PAPERS8,642 -
International Institutions: Transnational Networks eJournal
International Institutions: Transnational Networks eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS65PAPERS5,900 -
Comparative Political Economy: Regulation eJournal
Comparative Political Economy: Regulation eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS64PAPERS22,129 -
Human Rights eJournal
Subscribe to this free journal for more curated articles on this topic
FOLLOWERS5PAPERS29,659