Monitoring Global Supply Chains
Harvard Business School Technology & Operations Mgt. Unit Working Paper No. 14-032
48 Pages Posted: 22 Jul 2014 Last revised: 23 Mar 2019
Date Written: July 6, 2015
Firms reliant on supply chains to manufacture their goods risk reputational harm if the working conditions in those factories are revealed to be dangerous, illegal, or otherwise problematic. While firms are increasingly relying on private-sector ‘social auditors’ to assess factory conditions, little has been known about the accuracy of those assessments. We analyzed nearly 17,000 code-of-conduct audits conducted at nearly 6,000 suppliers around the world. We found that audits yield fewer violations when the audit team has been at that particular supplier before, when audit teams are less experienced or less trained, when audit teams are all-male, and when the audits were paid for by the supplier instead of by the buyer. We describe implications for firms relying on social auditors and for auditing firms.
Keywords: monitoring, transaction cost economics, auditing, supply chains, corporate social responsibility
JEL Classification: F23, K20, K31, K32, K42
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