THE ROLE OF INSTITUTIONS FOR SOCIAL
SUSTAINABILITY IN GLOBAL SUPPLY CHAINS:
DEVELOPING AN INSTITUTIONAL PROFILE FOR SOCIAL
SUSTAINABILITY
by
ESTHER DE BRUIN
University of Groningen
Faculty of Economics and Business
MSc International Business and Management
Preface
After five months of hard work I proudly present to you my master thesis about the role of institutions for social sustainability in global supply chains. I have developed an institutional profile for the purpose of measuring social sustainability. This thesis is the final proof of competence for obtaining the Master of Science (MSc) degree in International Business and Management at the University of Groningen.
Several people have made valuable contributions to this thesis. I would therefore first like to thank my supervisor, Dr. Miriam Wilhelm for her time, excellent guidance and support during the process. Furthermore I would like to thank Sarah Castaldi for her valuable contribution and feedback in the development of the measurement instrument.
I also wish to thank all of the respondents, without whose cooperation I would not have been able to conduct this analysis. Finally I would like to thank my family, friends and boyfriend for being supportive. If I ever lost interest, you kept me motivated.
I hope you enjoy reading this thesis.
Content
Abstract ... 5
Introduction ... 6
Literature review ... 9
1.1 Social sustainability and its challenges ... 9
1.2 Extending social sustainability to the global supply chain ... 10
1.3 Difficulties of implementing social sustainability in global supply chains ... 12
1.3.1 Codes of conduct ... 12
1.3.2 Buyer-supplier relationships ... 15
2.1 The role of institutions ... 16
2.1.1 The role of institutions: Regulatory, cognitive and normative institutions ... 17
2.2 An institutional profile ... 18
Methodology ... 20
Measures ... 20
1. Regulatory rules about the social sustainability of products and services ... 20
2. Shared social knowledge about social sustainability ... 21
3. Sustainability-related social norms and values ... 22
Data and procedure ... 23
Results ... 25
Descriptive analysis ... 25
Intraclass correlation coefficient ... 26
Exploratory factor analysis ... 26
Regulatory pillar ... 26
Cognitive pillar ... 27
Normative pillar ... 27
Discussion ... 29
Findings ... 29
Theoretical and practical implications ... 32
Limitations and future research directions ... 33
Conclusion ... 36
Bibliography ... 37
Appendix A ... 42
B1: Respondent Demographics ... 48
B2: Factor Analysis Table for the Regulatory Pillar ... 48
B3: Factor Analysis Table for the Cognitive Pillar ... 49
Abstract
The role of institutions for social sustainability in global supply chains had not yet been investigated. This study aimed to bridge this gap by examining the international business and supply chain management literature on the subjects social sustainability, global supply chains and institutions. In order to grasp the role of institutions better and make it measureable an institutional profile for social sustainability was developed. This institutional profile was tested on 68 students with different study backgrounds. Through both a descriptive and exploratory factor analysis a few items were retained in the institutional profile. The institutional profile is of added value since it offers researchers and practitioners a tool to better understand the importance and role of institutions for social sustainability in global supply chains.
Introduction
Sustainability is defined as using resources to meet the needs of the present without compromising the ability of future generations to meet their own needs (World Commission on Environment and Development, 1987). It integrates three kinds of different responsibilities, namely economic, environmental and social responsibilities (Gimenez, Sierra & Rodon, 2012). This thesis focuses on the social responsibility of sustainability, and will thereby explore the role of institutions for social sustainability in global supply chains.
In order for organizations to become more socially sustainable, sustainability must be applied within the whole organization, and even better, within the whole supply chain. A supply chain is made up of a number of companies, and the sustainability of the chain is dependent on the sustainability of the individual member companies (Hutchins & Sutherland, 2008). So far, researchers have mainly focused on environmental sustainability (Darnall, Jolley & Handfield, 2008; Glover, Champion, Daniels & Dainty, 2014; Linton, Klassen & Jayaraman, 2007). However, globalization and the outsourcing of activities to developing countries increased interest for social sustainability in global supply chains (Andersen & Skjoett-Larsen, 2009; Hoejmose, Roehrich & Grosvold, 2014; Hutchins & Sutherland, 2008; Yawar & Seuring, 2015).
Institutional pressures are said to be the major driver of social sustainability (Brown, Dacin, Pratt & Whetten, 2006; Fowler & Hope, 2007). Firms are faced with the difficult task of conducting their social activities in different institutional settings, in which they have to cope with many institutional pressures like different social regulations and informal norms (Kolk & Van Tulder, 2010). Consequently, implementing improved social conditions in the global supply chain is seen as a key contemporary challenge (Matos & Hall, 2007).
Although institutions seem to be of high relevance to the implementation of social sustainability in the global supply chain, the current literature does not discuss this subject. In order to grasp the role of institutions better and make it measurable, the thesis is using the concept of institutional profiles. An institutional profile is the issue-specific set of regulatory, cognitive and normative institutions in a given country, also called ‘pillars’ or ‘dimensions’ (Kostova & Roth, 2002; Scott, 1995). This thesis is a step-by-step process aimed at developing an institutional profile for social sustainability that can ultimately be used by academics and professionals. To the best of the author’s knowledge, such a tool does not exist yet.
The measurement instrument has been tested, and the results assessed and discussed. This testing has helped gage the effectiveness of the instrument in measuring the role of institutions for social sustainability in global supply chains.
Literature review
In this review, both international business and supply chain management literature will be examined. Both areas of literature provide valuable insights. International business literature reveals more about the relationship between institutions and sustainability (Kolk & Van Tulder, 2010), whereas supply chain management literature provides insight into responsible behaviour at all stages of the supply chain (Ashby, Leat & Hudson-Smith, 2012). According to different authors the stream of research on social sustainability in the supply chain is still at a young stage (Ehrgott, Reimann, Kaufmann & Carter, 2011). To the best of the author’s knowledge, no literature exists yet on the role of institutions for social sustainability in global supply chains. In combining the international business and supply chain management literature, this research will be the first to address this research gap. This review will first explain social sustainability, its challenges, and the relationship between social sustainability and global supply chains. The review will also elaborate on the difficulties that arise with implementing social sustainability in global supply chains. The role of institutions will be discussed and finally, the concept of institutional profiles will be explored.
1.1 Social sustainability and its challenges
Furthermore, socially sustainable behaviour is challenging due to a lack of measureable objectives for social sustainability. Environmental sustainability, for example, has more concrete objectives than social sustainability and is therefore easier to measure (Bebbington & Dillard, 2009; Davidson, 2009). The difficulties of social sustainability are also due to the fact that there is no clear differentiation between the analytical, normative, and political aspects thereof and people therefore may prioritize one over the other (Littig & Grießler, 2005).
1.2 Extending social sustainability to the global supply chain
Over the last decade, social sustainability has received more attention in the global supply chain (Hutchins & Sutherland, 2008; Maloni & Brown, 2006). Maloni and Brown (2006: 36) define a corporation’s supply chain as “the series of companies that work together to deliver a value package of goods and services to the end customer.” A supply chain can be seen as a network, which includes suppliers, downstream distributors, manufacturing centers, retail outlets and inhouse operations. It begins with unprocessed raw materials, and ends with a finished product (Klassen & Vereecke, 2012; Simchi-Levi, Kaminsky & Simchi-Levi, 2003; Vitasek, 2006).
Klassen and Vereecke (2012) state that social issues in the supply chain refer to the product- or process- related aspects of operations that affect the safety of human beings, their welfare and the development of the community. Companies aiming to improve social sustainability in the supply chain are thus concerned with, among others: health, safety, child and bonded labour, gender discrimination, poverty, diversity, wages, education and inequality in their suppliers’ operations (Ashby et al, 2012; Mani et al., 2015).
of a final product, resulting in varying degrees of operational control over the actors in the supply chain (Bhandarkar & Alvarez-Rivero, 2007). Furthermore, business activities are often outsourced to developing countries where child labour, gender inequality, poverty and health problems still exist (Andersen & Skjoett-Larsen, 2009; Hutchins & Sutherland, 2008; Mani et al., 2015). This rising complexity of the supply chain is a major challenge for the implementation of sustainability, as activities become harder to control (Hasle & Jensen, 2012). Nevertheless, companies are expected to not only be socially responsible within their own firm boundaries, but also to control the social responsibility of their global trading partners, including their suppliers (Andersen & Skjoett-Larsen, 2009).
achieving sustainability in the supply chain by changing buyer’s purchasing practices and impacts on the natural environment (Roberts, 2003). Strong and flexible interactions between different parties are hereby needed to ensure social standards are maintained along the product chain (Gold, Seuring & Beske, 2010).
1.3 Difficulties of implementing social sustainability in global supply chains
As can be concluded, social sustainability plays a vital role in global supply chains. Organizations are pressured by all sorts of stakeholders to reframe their conceptions of responsibility away from a narrow mind-set, and beyond organizational and national borders (Boström, Jönsson, Lockie, Mol & Oosterveer, 2015). These pressures have helped organizations to find new, innovative ways to achieve sustainable supply chain management (Boström et al., 2015). However, the fact that organizations found new ways to manage their sustainable supply chains does not imply that the implementation of social sustainability in global supply chains is without barriers or difficulties. There are two examples used to illustrate this: codes of conduct and changing buyer-supplier relationships.
1.3.1 Codes of conduct
conduct are based on the values with which the individual firm wishes to be associated. They are often derived from local legislation and international conventions, standards and principles like the Social Accountability 8000 and the ILO Declaration on Fundamental Principles and Rights at Work (Andersen & Skjoett-Larsen, 2009). Implementation of codes of conduct, but also of other international certifiable standards, can range from symbolic, where firms fail to use the practices arranged by a certified standard in daily operations, to substantive, where firms constantly use the certified standard’s practices (Christmann & Taylor, 2006). Although research has shown that codes of conduct and other certifiable standards can be applied in the global supply chain, there is also empirical evidence that many companies have struggled with the issue of how to implement their codes of conduct and other certifiable standards in their global supply chains (Leigh & Waddock, 2006). Challenges arise, first and foremost, because supply chain relations are complex and transparency is lacking (Leigh & Waddock, 2006). This complexity is, as already discussed, a result of the international character of supply chains. Operations may be conducted in multiple countries with different institutional environments (Sundaram & Black, 1992). Fundamental political, social and legal ground rules can vary from one institutional environment to another (Davis & North, 1971). Firms in global supply chains are thus exposed to multiple sources of authority, this can increase the difficulty of substantial implementation of codes of conduct and other certifiable standards in the global supply chain (Sundaram & Black, 1992). Furthermore, if countries are characterized by a weak institutional structure, it is challenging to enforce codes of conduct (Pedersen & Andersen, 2006).
is another thing to ensure these standards are substantially implemented in the global supply chain (Boström et al., 2015). Companies are separated geographically, economically, legally, culturally and politically, which makes it difficult to enforce codes of conduct in global supply chains.
To inform customers if suppliers are operating according to social management systems, governance mechanisms like close monitoring can be used (Christmann & Taylor, 2006). These governance mechanisms are seen as reliable indicators of the substantial implementation of codes of conduct and other specified practices (e.g. Christmann & Taylor, 2006; Corbett & Kirsch, 2001; Delmas, 2002). Third parties like industry organizations, certification auditors or legal authorities should carry out this monitoring since they will improve the credibility of the codes (Pedersen & Andersen, 2006). Auditing can consist of inspection of the production facilities, interviews with both management staff and workers, as well as document inspection (Boström et al., 2015). Auditing helps to overcome some barriers of codes of conduct and improves the implementation of social sustainability in the global supply chain (Stuebs & Sun, 2015). However, research stated that firms pass periodic audits for certification without complying with the codes of conduct and other certifiable standards on an ongoing basis (e.g. Egels-Zandén & Lindholm, 2015; Yeung & Mok, 2005). This raises concerns about the effectiveness of auditing.
conduct at supplier factories, but that it is also challenging for suppliers to adhere to these codes constantly.
1.3.2 Buyer-supplier relationships
Changing buyer-supplier relationships is another challenge for the implementation of social sustainability in global supply chains. Koplin, Seuring and Mesterharm (2007) argue that due to the growing trend of internationalization, working with many different suppliers is more common than establishing long-term relationships. This phenomenon makes it harder for buyers to be fully concerned with the social sustainable practices of their suppliers since the purchasing activity is short term. Buyers can communicate to their suppliers what they expect from them when it comes to social responsible behaviour. However, buyers will most likely not prioritize monitoring social responsible behaviour above other issues like purchasing raw materials for the lowest price. Furthermore, the involvement with many different suppliers increases the length of the supply chain, making it difficult for buyers to handle the whole supplier network. The complexity of the supply chain also increases since various institutional environments are present. Therefore the effective implementation of social responsible behaviour is even more challenging (Awaysheh & Klassen, 2010; Koplin et al. 2007).
changing buyer-supplier relationships illustrated that due to the increasing complexity and length of supply chains, the chance that buyers meet suppliers operating in different institutional contexts increases. The role of institutions will be discussed in the next section.
2.1 The role of institutions
Institutions create expectations that define legitimate actions for organizations and also form the logic by which laws, rules, and taken-for-granted behavioural expectations appear (Meyer & Rowan, 1977; Zucker, 1977, 1987). According to North (1991) institutions are macro-level rules of the game. In other words, they help to define acceptable behaviour and explain which actions are unacceptable or even beyond consideration (DiMaggio and Powell, 1991; Scott, 2007). This will then affect how organizations make decisions. As practices become institutionalized, they are seen by society as legitimate (Meyer & Rowan, 1977; Zucker, 1987). The process of institutionalization is tied to history. Institutions are the result of historical struggles over prevailing understandings and rules of the game (Thelen, 1999). To understand a particular institution, it is rarely sufficient to look at its current economic function or even its meaning. Looking back to the historical origins, institutions are often shaped by contestation, conflict and compromises (Thelen, 1999).
exchanges, while firms in another institutional environment are more used to formal norms and obligations to govern exchanges. This may impede the use of formal contracts on social agreements, which could complicate the implementation of social sustainability (Xin & Pearce, 1996). Institutions can therefore be a barrier for implementing social sustainability globally. A further specification of institutions is needed to better understand the role of the institutional context for social sustainability in global supply chains.
2.1.1 The role of institutions: Regulatory, cognitive and normative institutions
Just like social sustainability, ‘institutions’ is a broad concept and is barely measurable without further specification. To make institutions measurable and develop an institutional profile, the pillars Scott (1995) used to measure institutional distance can be used. Institutional distance quantifies the level of similarity or dissimilarity between the regulatory, cognitive and normative institutions of two countries (Kostova, 1997).
The regulatory pillar concerns the setting, monitoring, and enforcement of rules. It focuses on formal institutions. Legitimacy is embedded in legal sanctioning (Xu & Shenkar, 2002). In other words, it describes the rules and regulations which stimulate certain types of behaviours (Kostova, 1997). In the global supply chain, actors often find it difficult to craft contracting and ownership elements that explicitly provide safeguards while motivating firms and binding them to assigned investments and activities. This is due to differences in legal traditions, such as in labour legislation (Bello, Lothia & Sangtani, 2004).
ability of firms in the global supply chain to develop, for example, social aspects of trading arrangements (Bello et al., 2004).
The normative pillar highlights internal representation of the environment by actors (Xu & Shenkar, 2002). According to Kostova (1997: 180), the normative dimension consists of “social norms, values, beliefs, and assumptions that are socially shared and carried out by individuals”. Institutions have an impact on the actions of organizations and individuals by normative processes (Trevino, Thomas & Cullen, 2008). Normative expectations regarding business and social behaviours differ greatly around the world, therefore numerous normative problems exist in the global supply chain (Bello et al., 2004).
2.2 An institutional profile
So far, there has been attention given to implementing social sustainability in global supply chains and to the role of institutions. It was argued that institutions increase the difficulty of implementing social sustainability in global supply chains. An institutional profile can be developed to quantify the influence of the institutional environment. According to Kostova and Roth (2002), an institutional profile can be defined as “the issue-specific set of regulatory, cognitive and normative institutions in a given country” (Kostova & Roth, 2002: 217). Kostova (1997) stated that institutional profiles are introduced as a means to conceptualize and measure country-level characteristics that affect organizations.
and Roth (2002) used an institutional profile to focus on the issue of quality management. In this thesis, an institutional profile will be used in the context of social sustainability.
Methodology
Measures
As discussed earlier, the institutional profile was operationalized as a set of (1) regulatory rules about the social sustainability of products and services, (2) shared social knowledge about social sustainability and (3) sustainability-related social norms and values (Kostova, 1997). The items presenting the three sets are mainly based on the research of Kostova and Roth (2002). Although their research focused on quality management instead of social sustainability, the items they developed were still useful. In consultation with other researchers the items have been adjusted to the social sustainability context. The items are introduced and discussed below.
1. Regulatory rules about the social sustainability of products and services
regulation and the industry-self regulation can conflict. It may be that suppliers do not adopt best practices of the buyer because of contradicting traditional regulation. Regulatory rules about the social sustainability are mostly rooted in the development of products and services, impacting working conditions and other areas.
For regulatory rules about the social sustainability in the development of products and services the following items were formulated:
1. Strict social standards in this country are mandated by law. (Reg1) 2. In this country, laws and rules in business are strictly enforced. (Reg2)
3. The rights of people in the working environment are protected by law. (Reg3)
4. There are laws in this country to protect employees’ health and safety, as well as their well-being. (Reg4)
5. There is a large number of regulatory bodies in this country which promote and enforce social sustainability. (Reg5)
6. There exists a social safety net which prevents individuals from falling into poverty. (Reg6)
7. In this country, the government promotes the establishment of non-government organizations (NGOs) and independent trade unions. (Reg7)
2. Shared social knowledge about social sustainability
act as they do because they want to (Palthe, 2014). Social actions are not context free, but are constrained and shaped by the cultural setting in which they occur (Scott, 1995).
Items that were used for the shared social knowledge about social sustainability are:
1. People in this country know a great deal about social sustainability. (Cog1)
2. Social standards (e.g. SA8000, BSCI, WRAP) are widely used amongst manufacturing companies in this country. (Cog2)
3. Most of the successful manufacturing companies in this part of the world are implementing social compliance programs. (Cog3)
4. Child labour and appalling working conditions are perceived as immoral. (Cog4) 5. There is a lot of talk about social sustainability going on in the media of this country.
(Cog5)
6. It is unusual that firms are involved in bribery and corruption in this country. (Cog6) 7. There is a very strong message in manufacturing companies in this country that you
can’t stay in business nowadays if you do not adopt social policy. (Cog7)
3. Sustainability-related social norms and values
Items used for sustainability-related social norms and values are:
1. Manufacturing companies would be socially sustainable even if not required by customers. (Nor1)
2. All companies treat their employees with respect. (Nor2)
3. In this environment, being socially responsible is a moral obligation. (Nor3)
4. People in this country care a great deal about social sustainability at their workplace. (Nor4)
5. Always treat people fair. (Nor5)
6. Being socially responsible is at the heart of who we are as people. (Nor6) 7. The minimum wage in this country is below the subsistence rate. (Nor7)
8. It is expected in this country that manufacturing companies would have a high social performance. (Nor8)
Data and procedure
To test the above developed items, a survey was conducted among 68 students with different study backgrounds. Students with different backgrounds were chosen since this method more or less secured that the items would be understandable for everyone. Facebook and other social media sources were used to get in contact with students. The researcher also asked students in person to fill in the survey at the University of Groningen. Once students responded positively to the message the survey was sent or given to them. Apart from brief contact between the researcher and the participant when handing over the survey, there was no contact. Participants were not allowed to ask questions.
three categories. To make participants familiar with the terminology, the three pillars and other relevant concepts were explained. This was done to ensure that the participants all had the same understanding of the concepts. There were no practical examples added to the explanation of the pillars since it was believed that this would limit the scope of the pillars and might have led to more confusion. The questionnaire handed out to participants can be found in Appendix A.
The questionnaire started with an introduction text that described the aim of the survey and explicitly guaranteed the confidentiality of the participants’ responses. Furthermore, it explained that their answers would only be used for this particular research for the University of Groningen. The questionnaire then continued with an explanation of the most relevant concepts. Then 22 statements followed and the participants had to indicate for each statement whether it was a regulatory, cognitive or normative statement. The questionnaire ended with some demographic questions and the option to add comments on the survey.
Of the respondents, 45,6% were male, 54,4% were female and the average age was M
= 22,15 SD = 1,61. 88,2% of the students were Dutch, 2,9% were German, 1,5% were
Belgian, 1,5% were Chinese, 1,5% were Danish, 1,5% were Norwegian, 1,5% were Portuguese and 1,5% were Lithuanian. Furthermore, 79,4% of the respondents were university students. Of those university students, 59,3% were currently doing their master(s). The other 40,7% of the university students were bachelor students. The remaining respondents (20,6%), were studying at universities of applied sciences, in Dutch called HBO. They were all bachelor students.
Results
Descriptive analysis
A table with respondent demographics can be found in Appendix B1. The table below gives an indication of how well the items represented the pillar they were supposed to represent, according to the respondents. The first column covers the items. Reg1 to Reg7 corresponds with the regulative pillar, Cog1 tot Cog7 with the cognitive pillar and Nor1 to Nor8 with the normative pillar. The second column gives the percentage of respondents that allocated the item to the correct pillar and the third column gives the percentage of respondents that assigned the item to another pillar.
Item Percentage of respondents that indicated the item correct
Percentage of respondents that assigned the item to a different pillar Reg1 85,3 14,7 Reg2 91,2 8,8 Reg3 95,6 4,4 Reg4 89,7 10,3 Reg5 58,8 41,2 Reg6 69,1 30,9 Reg7 44,1 55,9 Cog1 70,6 29,4 Cog2 27,9 72,1 Cog3 45,6 54,4 Cog4 22,1 77,9 Cog5 50,0 50,0 Cog6 50,0 50,0 Cog7 55,9 44,1 Nor1 55,9 44,1 Nor2 58,8 41,2 Nor3 72,1 27,9 Nor4 58,8 41,2 Nor5 72,1 27,9 Nor6 61,8 38,2 Nor7 13,2 86,8 Nor8 39,7 60,3
This descriptive analysis showed that the items of regulatory nature were most often assigned to the correct pillar and that the respondents had most difficulties indicating the cognitive items as such. There are a few items that were rarely assigned to the pillar they belonged to. These items include Cog2, Cog4 and Nor7.
Intraclass correlation coefficient
To determine the agreement among the 68 respondents, also called the inter-rater reliability, the intraclass correlation coefficient was calculated. Adapted from Landis and Koch (1977), Fleiss (1981) and Altman (1991) an excellent degree of reliability was found between the participants, ric = .982 (95% CI, .970 to .991).
Exploratory factor analysis
Conclusions cannot be drawn solely on this simple statistical analysis since it has the potential to be misleading (Perreault Jr. & Leigh, 1989). To get more insight in the data and to understand the underlying structure of the variables an exploratory factor analysis was conducted.
Regulatory pillar
and laws aimed at protecting employees, factor 2 involves promoting social sustainability and factor 3 is concerned with the requirement to use laws and rules. The communalities of the variables were almost all above the desired value of .5 (Hair, Black, Babin & Anderson, 2010). The only exception is item Reg6, which refers to the question ‘there exists a social
safety net which prevents individuals from falling into poverty’. However, in this study this
item will be retained since 69,1% of the participants indicated this item as regulatory. A table with results can be found in Appendix B2.
Cognitive pillar
A principal component analysis was also conducted for the cognitive pillar of institutions. It was conducted with 7 items. Bartlett’s test of sphericity was not significant (χ2 (21) = 29.46, p = .10). However, the Kaiser-Meyer-Olkin measure indicated that the strength of the relationships among variables was acceptable (KMO = .51), thus it was appropriate to proceed with the analysis. The results showed that there were four factors with eigenvalues over 1. In combination, they explained 72,6% of the variance. The rotated component results also showed four factors. The first factor is concerned with the implementation and use of social standards in manufacturing companies. The second factor is concerned with the absence of unethical practices, like child labour and bribery. The third factor covers the communication about social sustainability, the fourth and last factor covers the knowledge about social sustainability. The communalities of the variables were all above the desired value of .5. A table with results can be found in Appendix B3.
Normative pillar
At last, a principal component analysis was completed with 8 items that were supposed to measure the normative pillar of institutions. Bartlett’s test of sphericity, was significant (χ2
with eigenvalues over 1, explaining 68,9% of the total variance. Factor 1 covers the believes that are deep within us, related to social sustainability. Factor 2 is concerned with the voluntary social responsible behaviour of companies, which arises because companies believe it is the appropriate thing to do. Factor 3 covers moral obligations and factor 4 involves the expectation to have a high social performance. The only communality that was not above the value of .5 was the communality of variable Nor2, which refers to the item ‘all companies
treat their employees with respect’. However, this item was retained because 58,8% of the
Discussion
Findings
The descriptive analysis showed that a few items, namely the items ‘strict social standards in
this country are mandated by law’, ‘in this country, laws and rules in business are strictly enforced’, ‘the rights of people in the working environment are protected by law’ and ‘there are laws in this country to protect employees’ health and safety, as well as their well-being’
were indicated as being regulatory in over 80% of the cases. These items thus seem to measure the regulatory pillar of institutions. Two items ought to measure the cognitive pillar of institutions: ‘social standards (e.g. SA8000, BSCI, WRAP) are widely used amongst
manufacturing companies in this country’ and ‘child labour and appalling working conditions are perceived as immoral’ were only indicated as being cognitive in less than 30% of the
cases. For the item ‘the minimum wage in this country is below the subsistence rate’ meant to measure the normative pillar, this percentage was less than 15%. For both situations, the percentage of correct answers was so low that it is questionable if these items can be used in an institutional profile to explain the cognitive and normative pillars of institutions related to social sustainability. It is therefore recommended to delete these items when one is interested to better understand the role of institutions for social sustainability in global supply chains.
The exploratory factor analysis gave more insights in the underlying structure of the variables and showed logical combinations of variables. This analysis furthermore allowed to determine which items could be deleted from the set of variables by selecting the variable with the highest factor loading as a surrogate representative for a particular factor dimension. For the regulatory pillar of institutions, three factors were extracted. In table B2 the items that correlated best with the extracted factors are highlighted in bold. For the first factor, the item
‘in this country, laws and rules in business are strictly enforced’, had the highest factor
regulatory pillar, it should therefore be retained as a measure of regulatory institutions in the institutional profile. For the second factor the item ‘in this country, the government promotes
the establishment of non-government organizations (NGOs) and independent trade unions’,
had the highest factor loading (.799). However, from all the regulatory items, this item was least demonstrative to measure the regulatory pillar of institutions according to the respondents (see table 1). Thus, it is questionable whether this item should be retained in the institutional profile or not. For the third factor, the item ‘the rights of people in the working
environment are protected by law’, had the highest factor loading (.841). This item was
recognized as being regulatory in 95,6% of the cases, it should therefore be retained in the institutional profile.
For the cognitive pillar of institutions, four factors were extracted. For the first factor, the item ‘most of the successful manufacturing companies in this part of the world are
implementing social compliance programs’ had the highest factor loading (.792). This item
belongs, according to table 1, to the bottom three of items that ought to measure the cognitive pillar of institutions. The item ‘there is a very strong message in manufacturing companies in
this country that you can’t stay in business nowadays if you do not adopt social policy’, that
are involved in bribery and corruption in this country’, with a slightly lower factor loading of
.764 to be the surrogate representative of the second factor. The third factor consists of one item only with a factor loading of .900. The item ‘there is a lot of talk about social
sustainability going on in the media of this country’ was allocated to the cognitive pillar in
50% of the cases. Therefore, it is doubtful whether this item is a representative example of a cognitive item. More research is needed before a decision can be made on whether to retain this item in the institutional profile or not. The fourth factor consists of one item with a factor loading of .946. This item: ‘people in this country know a great deal about social
sustainability’, was assigned to the cognitive pillar by 70,6% of the respondents and should
therefore be retained as a measure of cognitive institutions in the institutional profile.
For the normative pillar, four factors were extracted. For the first factor, the item
‘being socially responsible is at the heart of who we are as people’, had the highest factor
loading (.857). The descriptive analysis showed a fairly high amount of respondents that assigned this item to the normative pillar (61,8%) and therefore this item can be used as a surrogate representative for this first factor dimension. For the second factor dimension, the item ‘the minimum wage in this country is below the subsistence rate’, had the highest factor loading (.758). However, in the descriptive analysis this item was only recognized as being normative by 13,2% of the respondents. This is such a poor percentage that it might be a better choice to choose the item ‘manufacturing companies would be socially sustainable
even if not required by customers’, that had the second highest factor loading (.757) as the
item should be indeed the surrogate representative for the second factor. Further research is needed. For the third factor, the item ‘in this environment, being socially responsible is a
moral obligation’, had the highest factor loading (.873). 72,1% of the respondents allocated
this item to the normative pillar. The item thus seems to be relevant and can therefore be selected as the surrogate representative for the third factor dimension. The fourth and last factor consisted of a single item. Namely: ‘it is expected in this country that manufacturing
companies would have a high social performance’. The descriptive analysis showed that
39,7% of the respondents assigned this item to the normative pillar. This is not that high. Therefore, it is up for debate whether to keep this item to measure the normative pillar of institutions in the institutional profile or to delete it.
Theoretical and practical implications
The role of institutions for social sustainability in global supply chains had not yet been investigated. This study bridged this gap by providing an extensive literature review on both the international business as well as the global supply chain management literature and combined these two streams of literature. It was noticed that an institutional profile for social sustainability did not exist. However, such an instrument was necessary to better understand the role of institutions for social sustainability in global supply chains. The designed measurement instrument can, first of all, be interesting and useful for other researchers as they can use the measurement instrument for research in the same field. It is also interesting as it may help researchers understand why social sustainability in the global supply chain is easier adopted and maintained in one institutional context in comparison to another institutional context.
managers and other leaders decide which pillar of the institutional context is most challenging in adopting social sustainability in their global supply chain. By understanding the distinctions among the dimensions of a country’s institutional profile, emphasis can be placed on more specific solutions for challenges related to the institutional context. Policy makers could, for example, devise strategies for improving their domestic institutional environments for social sustainability (Busenitz et al., 2000).
Limitations and future research directions
The survey was conducted both online and with paper and pencil, chosen as it is very convenient. However, it also has its downsides and can therefore be seen as a limitation for this research. In an online survey, participants do not have direct contact with the researcher. In case of unclear descriptions or other questions, participants are thus not able to ask for clarification. To keep conditions for both data collection methods the same, participants who filled in the paper and pencil version were not allowed to ask questions in person. A few participants added comments at the end of the survey that they had difficulties with the distinction between the cognitive and normative dimension of institutions. This could have led to filling in the questionnaire without being fully aware of the exact meaning of the pillars and therefore could have caused mistakes. Participants might have needed a more thorough explanation of the distinction between the two pillars. A face-to-face interview can be a solution for this limitation since it offers participants the possibility to ask questions and provide better answers. Nevertheless, having face-to-face contact with participants also has its downsides since the researcher can influence the initial thoughts of the participants by giving too much information (Duffy, Smith, Terhanian & Bremer, 2005).
measurement instrument in a company-specific matter would therefore be more appropriate (Kostova & Roth, 2002). Furthermore, a few participants indicated that they found the level of English difficult, casting doubt on whether the questionnaire was completed correctly. In future research it might be better to translate the questionnaire into the mother tongue of the participants.
future research it is advised to conduct this confirmatory factor analysis so that the measurement theory can be confirmed.
Conclusion
This study examined the role of institutions for social sustainability in global supply chains and thereby focused on the development of an institutional profile. To develop this institutional profile items meant to measure regulatory, cognitive and normative institutional pillars were designed.
Results showed that especially the items meant to measure the regulatory pillar appeared to do so. A few of these items were also selected as the surrogate representatives for various factor dimensions. Therefore, these items can be retained in the institutional profile. For both the items that intended to measure the cognitive pillar as well as the items that intended to measure the normative pillar it was harder to draw general conclusions as results of both analyses were contradicting most of the time. Only a couple of items for these pillars both seemed to measure what they ought to measure and were selected as surrogate representatives for various factor dimensions. For all factors combined, the items ‘in this
country, laws and rules in business are strictly enforced’, ‘the rights of people in the working environment are protected by law’, ‘people in this country know a great deal about social sustainability’, ‘being socially responsible is at the heart of who we are as people’ and ‘in this environment, being socially responsible is a moral obligation’ can be retained in the
institutional profile for social sustainability. This study served as an exploratory study. To conclude if the remaining 17 items can be retained in the institutional profile and to confirm the measurement theory, further research is needed.
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Appendix A
Dear participant,You are participating in a study that develops a measurement instrument aimed at
understanding the role of the institutional context for social sustainability in global supply chains. The aim of this survey is to identify if the items developed to categorize institutional profiles in a regulative, cognitive and normative dimension are correct.
The survey will approximately take 5 minutes to complete. The results of the study will be used exclusively for scientific purposes and the data gathered through this survey will be used strictly confidential.
1. Survey
In order to make you a bit more familiar with the topic, the role of institutions for social sustainability is shortly introduced. The most relevant concepts will hereby be explained to ensure that everyone follows the same understanding of the concepts. Please read this information carefully. At the end of the survey, there is an option to add comments if definitions or statements are unclear.
An institution consists of rules, norms and rituals that define legitimate behaviour. Institutions vary across countries and can be operationalized by using three “pillars” or “dimensions”, namely: regulative, cognitive, and normative.
The regulative dimension is characterized by rules and laws that exist to ensure the
stability and order of a society. This dimension is thus concerned with formal institutions and describes the rules and regulations which stimulate certain types of behaviours.
The cognitive dimension defines what is typical or taken for granted. It is concerned
with cognitive structures and widely shared knowledge derived from national culture. This dimension is also called the cultural-cognitive dimension. Cognitive structures affect individual behaviour as they shape to a great extent the cognitive programs which people use when selecting and interpreting information.
The normative dimension consists of social norms, values, beliefs, and assumptions
that are socially shared and carried out by individuals. Normative components of institutions define what is appropriate or “right” behaviour for a society’s member. People behave as they do because they ought to.
Institutions play a role for social sustainability. Social sustainability focuses on social interactions and includes different aspects such as social welfare, cultural diversity, human safety, workers’ rights and gender issues. Firms operate in unique institutional contexts, which makes it difficult to implement social sustainability globally.
22 statements will be given. It is your task to assign these statements to either the regulative, cognitive or normative dimension of institutions. Please tick the box which you think
correlates best with the given statement. Don’t think about it for too long, trust your first instinct. There is no right or wrong.
1. Strict social standards in this country are mandated by law. Regulative ☐
2. People in this country know a great deal about social sustainability. Regulative ☐
Cognitive ☐ Normative ☐
3. Manufacturing companies would be socially sustainable even if not required by customers.
Regulative ☐ Cognitive ☐ Normative ☐
4. In this country, laws and rules in business are strictly enforced. Regulative ☐
Cognitive ☐ Normative ☐
5. The rights of people in the working environment are protected by law. Regulative ☐
Cognitive ☐ Normative ☐
6. Social standards (e.g. SA8000, BSCI, WRAP) are widely used amongst manufacturing companies in this country.
Regulative ☐ Cognitive ☐ Normative ☐
7. Most of the successful manufacturing companies in this part of the world are implementing social compliance programs.
Regulative ☐ Cognitive ☐ Normative ☐
8. Child labour and appalling working conditions are perceived as immoral. Regulative ☐
9. There is a lot of talk about social sustainability going on in the media of this country. Regulative ☐
Cognitive ☐ Normative ☐
10. There are laws in this country to protect employees’ health and safety, as well as their well-being.
Regulative ☐ Cognitive ☐ Normative ☐
11. All companies treat their employees with respect. Regulative ☐
Cognitive ☐ Normative ☐
12. In this environment, being socially responsible is a moral obligation. Regulative ☐
Cognitive ☐ Normative ☐
13. People in this country care a great deal about social sustainability at their workplace. Regulative ☐
Cognitive ☐ Normative ☐
14. Always treat people fair. Regulative ☐ Cognitive ☐ Normative ☐
15. There is a large number of regulatory bodies in this country which promote and enforce social sustainability.
16. It is unusual that firms are involved in bribery and corruption in this country. Regulative ☐
Cognitive ☐ Normative ☐
17. There is a very strong message in manufacturing companies in this country that you can’t stay in business nowadays if you do not adopt social policy.
Regulative ☐ Cognitive ☐ Normative ☐
18. Being socially responsible is at the heart of who we are as people. Regulative ☐
Cognitive ☐ Normative ☐
19. The minimum wage in this country is below the subsistence rate. Regulative ☐
Cognitive ☐ Normative ☐
20. There exists a social safety net which prevents individuals from falling into poverty. Regulative ☐
Cognitive ☐ Normative ☐
21. In It is expected in this country that manufacturing companies would have a high social performance.
Regulative ☐ Cognitive ☐ Normative ☐
22. In this country, the government promotes the establishment of non-government organizations (NGOs) and independent trade unions.
Regulative ☐ Cognitive ☐ Normative ☐
2. Background information about you 3. Comments [optional] Nationality: ……….. Age: ………. Gender: Male ☐ Female ☐
What are you studying?
... In which year are you studying?
……… Level of education:
HBO ☐
University ☐
Are you a Bachelor or Master student? Bachelor ☐
Master ☐
If there was anything unclear, or if you have any other questions or comments, please write them down here.
……… ……… ……… ……… ……… ………... ... ...
Appendix B
B1: Respondent Demographics
B3: Factor Analysis Table for the Cognitive Pillar
