Socially Responsible Firms Outsource Less

Abstract

Implementing corporate social responsibility (CSR) in supply chains is not a trivial task. In fact, many firms in recent years have publicly proclaimed that in order to keep their CSR commitments, they had to reduce reliance on external suppliers by vertically integrating their operations. Our aim in this article is to examine whether there is truly a relationship between a firm’s CSR performance and its level of vertical integration. Drawing on a multi-industry sample of 2,715 firm-year observations, and after addressing endogeneity concerns, we demonstrate that firms with higher CSR performance tend to vertically integrate more (or, outsource less). We also demonstrate that this tendency is weaker for firms that have higher degrees of asset specificity or international diversification. Our core conclusion is that CSR performance and outsourcing are at odds, but firms can reconcile this tension by deepening their collaborations with suppliers.

Corporate social responsibility decisions in apparel supply chains: The role of negative emotions in Bangladesh and Pakistan

“…This means, more specifically, innovating to the extent of achieving full vertical integration and expanding operations downstream to include direct sales to final consumers. Although attaining such upgrade is likely to require a major effort both in terms of economic investment and knowledge acquisition, Murcia et al (2020) informed that companies that vertically integrate do not only show more resilience, but are also able to invest more on CSR practices and ultimately increase their workers' benefits their workers. If the price dilemma in developing countries' supply chains continues to persist—including the tensions and subsequent negative emotions experienced by supplier senior managers—vertical integration might become an increasingly appealing option.…”

“…Given the importance of collaboration (Lozano & Barreiro-Gen, 2021;Murcia et al, 2020), a second cooperative model, dubbed the "cooperation paradigm" and rooted in the relational view (Dyer & Singh, 1998;Lee et al, 2019;Lund-Thomsen & Lindgreen, 2014) processes, and supplier capabilities (Huq et al, 2016;Klassen & Vereecke, 2012;Lund-Thomsen & Lindgreen, 2014). Nevertheless, GVC scholars have cautioned that the cooperative model is unlikely to lead to sustained improvements in labor conditions because of the permanently asymmetric power relationship between suppliers and buyers (Anner, 2018) and the challenge buyers face "[in engaging] in close cooperation," given the high number of suppliers (Lund-Thomsen & Lindgreen, 2014, p. 17).…”

“…It might also decrease their perceived power asymmetry with suppliers and lead to a shift from relational contracting to value creation.Crucially, the ongoing dilemma pertaining to prices and subsequent decisions on CSR practices for workers might lead suppliers to evaluate different market opportunities beyond their dyadic collaboration with buyers. Although much of the attention in the GVC literature has been paid to buyer-supplier relationship,Murcia et al (2020) suggested that suppliers might be more responsible by thinking beyond their relationship with buyers. This means, more specifically, innovating to the extent of achieving full vertical integration and expanding operations downstream to include direct sales to final consumers.…”

Progressive and Rational CSR as Catalysts of New Product Introductions

“…Vertical integration was measured using the value-addedto-sales ratio (VA/S). VA/S has been a common employed measure in the literature (Chen 2017;Murcia et al 2020). The ratio aims to reflect that, as firms increase the proportion of value-added (i.e., sales minus purchases) generated in-house, they increase their relative reliance on internal employees vis-à-vis external contractors.…”

Deforestation, global value chains, and corporate sustainability

“…This requires assessing whether, when, and how consumer support and willingness to change consumption patterns can aid in stopping deforestation. In addition, corporate strategy changes such as vertical integration of supplychains could be a possible venue for companies to make their supplychains free of deforestation (Murcia, Panwar, & Tarzijan, 2020). This theme will analyze topics such as the following:…”