Consumer Trust in Social Responsibility Communications: The Role of Supply Chain Visibility
32 Pages Posted: 25 Jun 2019 Last revised: 2 Jun 2020
Date Written: May 31, 2020
Problem definition: Consumers are becoming more knowledgeable about companies' social responsibility (SR) practices. As a result, they are increasingly skeptical when companies do not provide clear information about these practices. In this paper, we examine when a company can strengthen consumer trust by investing to increase the visibility into its supply chain.
Academic/practical relevance: To create transparency requires a company to both gain visibility into its supply chain and disclose information to consumers. The current SR literature on trust and supply chain transparency has focused on the effect that disclosure has on consumer trust, while the effect of visibility on trust in communications is not well understood. Our work addresses this gap.
Methodology: We employ an incentivized, human-subject laboratory experiment to investigate the impact of visibility on consumer trust in a company's SR communication, and as a result, its impact on consumers' purchase decisions. To further enhance our understanding of consumer behavior, we examine how consumer heterogeneity and workers' conditions in the upstream supply chain influence our results. We apply causal mediation analysis to answer our research questions.
Results: We find that increasing supply chain visibility always strengthens consumer trust. Furthermore, opportunities exist for a trust-driven revenue benefit due to greater visibility. In particular, when consumers are highly prosocial or have low general trust beliefs, or when the impact of an SR initiative is small, then the increase in consumer trust due to greater visibility can in turn increase sales.
Managerial implications: Our results underscore the crucial role that supply chain visibility plays in engendering consumer trust and highlight when a company can leverage this effect to increase sales.
Keywords: Supply chain visibility, consumer trust, social responsibility, prosociality, mediation analysis, behavioral operations, experiment
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