An increasing number of companies have begun to make efforts to treat their suppliers fairly as a part of wider corporate social responsibility (CSR) initiatives. Few studies, however, have investigated the performance implications of such efforts for buying firms. This paper uses both organisational climate theory and social exchange theory to investigate (1) if buying firms' efforts in the form of a code of conduct for its procurement practitioners pay off, and (2) its mechanisms from the perspectives of procurement practitioners. We use a multi-method approach, combining analysis of survey data complemented by results from a behavioural experiment. First, survey data were gathered from 327 Korean manufacturing companies and analysed using structural equation modelling. Second, the findings were complemented by a behavioural experiment involving 120 subjects. The results support the positive performance implications of fair supplier treatment in the form of codes of conduct for procurement practitioners. The paper also offers insights into how such efforts benefit buying firms, which is due to the trust in the buyer-supplier relationship fostered by the resulting ethical behaviours of procurement practitioners.
Purpose
– The purpose of this study is to empirically analyze managers’ ethical judgments in supply chain management. It investigated the influence of those judgments on trust and collaboration in relationships with suppliers.
Design/methodology/approach
– A scenario-based method was applied to measure managers’ ethical judgments using a sample of 341 data sets collected via survey. Structural equation modeling was utilized to test the proposed hypotheses associating ethical judgments with trust and collaboration in supply chains.
Findings
– This study illustrates that managers’ ethical judgments in bidding/contracting, information management and inventory management significantly increase trust, which in turn increases supply chain collaboration.
Originality/value
– The study extends our understanding of ethical judgments in the supply chain management context. Its findings on the causality among ethical judgment, trust and supply chain collaboration provide an effective approach to the management of supplier relationships.
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