Supply Chain Visibility and Social Responsibility: Investigating Consumers' Behaviors and Motives

Manufacturing & Service Operations Management, Forthcoming, DOI: 10.1287/msom.2017.0685

42 Pages Posted: 5 Nov 2014 Last revised: 22 Jul 2018

See all articles by Tim Kraft

Tim Kraft

Massachusetts Institute of Technology (MIT) - Sloan School of Management

León Valdés

University of Pittsburgh - Katz Graduate School of Business

Yanchong Zheng

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: October 9, 2017

Abstract

Consumers increasingly want to know more about where and how the products they purchase are being made. To create transparency requires a company to both gain visibility into its supply chain and disclose information to consumers. In this paper, we focus on the dimension of visibility and investigate when companies can benefit from greater supply chain visibility. To do so, we design an incentivized human-subject experiment to study two key questions: (i) How does supply chain visibility impact consumers' valuations of a company's social responsibility (SR) practices in its upstream supply chain? (ii) What roles do indirect reciprocity and consumers' prosociality play in affecting their valuations under different levels of visibility? In our design, greater visibility is represented by lower uncertainty in the outcomes of a company's SR efforts. Our results show that consumers value greater visibility regarding a company's SR practices in the upstream supply chain. This is especially true if consumers exhibit a self-serving bias and use uncertainty as an excuse not to pay for SR. We also observe that high prosocial consumers do not exhibit strong indirect reciprocity. Conversely, indirect reciprocity significantly increases low prosocial consumers' valuations under high visibility. Our work adds to the experimental literature focusing on transparency and SR (which has primarily studied disclosure) by examining the equally important but understudied dimension of visibility. Furthermore, our results on consumer heterogeneity offer insights into what SR information resonates with a company's target consumers.

Keywords: Supply chain visibility, indirect reciprocity, prosociality, social responsibility, behavioral economics, experimental economics

Suggested Citation

Kraft, Tim and Valdés, León and Zheng, Yanchong, Supply Chain Visibility and Social Responsibility: Investigating Consumers' Behaviors and Motives (October 9, 2017). Manufacturing & Service Operations Management, Forthcoming, DOI: 10.1287/msom.2017.0685. Available at SSRN: https://ssrn.com/abstract=2518627 or http://dx.doi.org/10.2139/ssrn.2518627

Tim Kraft

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

León Valdés

University of Pittsburgh - Katz Graduate School of Business ( email )

Pittsburgh, PA 15260
United States

Yanchong Zheng (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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