Reputational Risks and Responsible Supply Chain Management: Decision Making Under Bounded Rationality
Roehrich, J.K.; Grosvold, J. and Hoejmose, S.U. (2014). Reputational risks and responsible supply chain management: Decision making under bounded rationality. International Journal of Operations & Production Management, Vol. 34 No. 5, pp. 695-719.
46 Pages Posted: 20 Apr 2017
Date Written: 2014
Purpose – This paper applies the logic of bounded rationality to corporate reputation management and explores how constraints posed by bounded rationality impact on firms’ implementation of sustainable supply chain management (SSCM).
Design/methodology/approach – This study draws on primary and secondary data from twelve UK-based companies. We conducted 19 semi-structured interviews and analysed our data through an inductive methodology.
Findings – Reputational risk exposure is a central driver in a company’s decision to implement SSCM practices. However, managers face bounded rationality, in particular:
(i) conflicting priorities;
(ii) capabilities and resources;
(iii) commitment; and
iv) contextual setting,
which in turn, means that companies do what they can to safeguard their reputation, but balance the extent to which they implement SSCM and the cost of doing so against the likelihood of exposure.
Practical implications – By engaging in collaborative relationships with their supply chain partners, focal firms who wish to implement SSCM can spread the cost of SSCM across supply chain partners, which helps decrease the extent to which firms face the conflicting priorities of financial targets and SSCM. A long-term commitment to SSCM can also help build capabilities and resources necessary for SSCM implementation.
Originality/value – We make a significant contribution to the literature by conducting a cross-sectional study of the decision-making process involved in sustainable supply chain management. Our results suggest that managers are facing a number of constraints, which leads to sub-optimal choices regarding the level of SSCM implementation.
Keywords: reputational risk; decision making; bounded rationality; sustainable supply chain management; risk exposure; multiple case studies
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