Does Compliance Pay?  Social Standards and Firm-level Trade

Distelhorst, Greg; Locke, Richard M.

doi:10.31235/osf.io/tcrhq

Cited by 11 publications

(27 citation statements)

References 12 publications

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“…Oka (2010a, 2010b) finds that a reputation‐sensitive buyer is important for factory compliance, and there may also be additional effects here on the probability of survival. Reputation‐sensitive buyers may support their factories with higher prices in exchange for improvements in working conditions that might improve the reputation of the buyers, as found by Distelhorst and Locke (2018).…”

Section: Resultsmentioning

confidence: 91%

“…More recently, socially compliant Chinese firms have been found to have lower productivity and profits (Distelhorst, 2020). According to this strand of evidence, firm benefits from social compliance may be limited to access to export markets and increased orders from and higher prices paid by reputation‐sensitive and socially conscious international buyers (Distelhorst & Locke, 2018; Oka, 2010a, 2010b). The evidence that factories are more likely to improve compliance performance if they fear public disclosure of noncompliance (Ang et al, 2012; Robertson, 2020) further suggests that factories are motivated to comply for reasons related to reputation rather than for the impact that compliance might have on the internal operations of the firm.…”

Section: Discussionmentioning

confidence: 99%

“…The analysis of the official Chinese industrial survey microdata indicates that while compliance with international labor standards predicts lower profit margins and productivity, socially compliant factories have greater access to export markets (Distelhorst, 2020) (though why a firm would enter the export market if doing so lowers profits is unclear). Distelhorst and Locke (2018) estimate that a record of social compliance increases average sales by 4%. An important exception to the positive relationship between social compliance and orders concerns suppliers that have monopoly control of essential inputs to the production process (Amengual, Distelhorst, & Tobin, 2019).…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Working conditions and factory survival: Evidence from better factories Cambodia

Robertson

Brown

Dehejia

2020

Review Development Economics

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Working Conditions and Factory Survival: Evidence from Better Factories Cambodia * A large and growing literature has identified several conditions, including exporting, that contribute to plant survival. A prevailing sentiment suggests that anti-sweatshop activity against plants in developing countries adds the risk of making survival more difficult by imposing external constraints that may interfere with optimizing behavior. Using a relatively new plant-level panel dataset from Cambodia, this paper applies survival analysis to estimate the relationship between changes in working conditions and plant closure. The results find little, if any, evidence that improving working conditions increases the probability of closure. In fact, some evidence suggests that improvements in standards relating to compensation are positively correlated with the probability of plant survival.

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Section: Resultsmentioning

confidence: 91%

Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Working conditions and factory survival: Evidence from better factories Cambodia

Robertson

Brown

Dehejia

2020

Review Development Economics

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“…Malesky and Mosley (2018) offered survey evidence showing that Vietnamese exporters report higher willingness to invest in labor compliance in order to do business with importers that provide higher price markups. Distelhorst and Locke (2018) found that exporters across 36 countries were, on average, rewarded by increased purchasing when they improved compliance with labor and environmental standards. Oka (2012) showed that compliance with certain labor standards, such as health and safety, enabled factories in Cambodia to secure long-term sourcing relationships with reputation-conscious buyers.…”

Section: Compliance-promoting Incentives In Trading Relationshipsmentioning

confidence: 99%

Global Purchasing as Labor Regulation: The Missing Middle

Amengual¹,

Distelhorst²,

Tobin

2019

ILR Review

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Do purchasing practices support or undermine the regulation of labor standards in global supply chains? This study offers the first analysis of the full range of supply chain regulatory efforts, integrating records of factory labor audits with purchase order microdata. Studying an apparel and equipment retailer with a strong reputation for addressing labor conditions in its suppliers, the authors show that the retailer persuaded factories to improve and terminated factories with poor labor compliance. However, the authors also find that purchase orders did not increase when labor standards improved. If anything, factories whose standards worsened tended to see their orders increase. Contrary to the conventional wisdom, this “missing middle” in incentives for compliance appears unrelated to any cost advantage of noncompliant factories. Instead, lack of flexibility in supplier relationships created obstacles to reallocating orders in response to compliance findings.

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“…Using data from a large sourcing company, Distelhorst and Locke () find that suppliers that improve their performance on labor and environmental audits do subsequently receive larger orders. On the other hand, looking closely at one retailer with a reputation for social responsibility, Amengual et al (forthcoming) find that improvements were not generally rewarded with larger orders.…”

Section: Organizational Power At a Distancementioning

confidence: 99%

Power at a distance: Organizational power across boundaries

2019

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Organizational approaches can help to make sense of social phenomena, including inequality, politics, and culture. This is partly because large organizations exercise great power, both over employees and in their external environments. Revising Charles Perrow's classic account of the “society of organizations” in the 20th century, we argue that the organizational landscape has changed. There has been a dis‐embedding of individuals from organizations that contrasts with Perrow's idea of individuals being “absorbed” by organizations. Despite this hollowing out, there is a persistence of concentrated economic power or “concentration without centralization.” Organizational power in this landscape is increasingly exercised at a distance, not only geographically but also in the sense of moving across organizational boundaries and through technologies of valuation. Three bodies of research exemplify different types of power at a distance. (a) Research on global production networks shows how power travels across geographic and network distances. (b) Research on financialization and its consequences shows how power is mediated by frames and metrics. (c) Emerging research on big data and Artificial Intelligence shows how power is encoded into seemingly neutral technologies and made to seem inevitable. This work helps to update the sociology of organizations and opens up new research questions.

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Does Compliance Pay? Social Standards and Firm-level Trade

Abstract: for helpful feedback on this study. We wish to thank Sharlene Song for excellent research assistance and the MIT Sloan School of Management Dean's Innovation Fund for providing travel and research support.

Cited by 11 publications

References 12 publications

Working conditions and factory survival: Evidence from better factories Cambodia

Working conditions and factory survival: Evidence from better factories Cambodia

Global Purchasing as Labor Regulation: The Missing Middle

Power at a distance: Organizational power across boundaries

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