Sustainable Supply Chain Management: Horizontal Collaboration by Low-power Buying Firms to Overcome Supplier Power Asymmetry

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Sustainable Supply Chain Management: Horizontal

Collaboration by Low-power Buying Firms to

Overcome Supplier Power Asymmetry

Master thesis, MSc Supply Chain Management

University of Groningen, Faculty of Economics and Business

ARON BOUWE HENDRIKSEN S2476681

Supervisor: C. Xiao

Co-assessor: prof. dr. D.P. van Donk

Second examiner: prof. dr. J.T. van der Vaart

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We find that formal horizontal collaborations between low-power buying firms and the governments provides the best opportunity to indirectly and directly increase leverage over suppliers. The government plays a large role in managing the paradoxical nature for buying firms in competing and collaborating simultaneously.

Design & Methodology

This paper makes use of an inductive case-study approach. Data collection originate from semi-structured interviews with key representatives of firms active in the apparel and electronic manufacturing industry. Secondary sources of data are derived from governmental reports, company reports, codes of conducts, and audits.

Practical Implications

This research positively contributes to low-power buying firms that are dedicated towards more sustainable practices, but are faced with resistance by suppliers that hold leverage over them.

Value

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1. Introduction

Power asymmetry between buyers and suppliers is a common phenomenon. The powerful firm leverages its power advantage at the expense of the weaker party, and at the same time the more powerful party may utilize opportunistic behaviour ( Nyaga, 2013) . In the specific context of sustainable supply chain management (SSCM), power distribution can play an important role in shaping the extension of sustainability standards in supply chains. The prevalent compliance-based model relies upon the power surplus of downstream buying firms: the ability to make use of economic leverage by buyers gives them the ability to enforce suppliers to comply with sustainability-related codes of conduct (Locke, 2009) . However, buying firms are not always the power holders in global supply chains (Touboulic, 2014) , with suppliers being able to have the upper-hand. How can low-power buying firms stimulate supplier sustainability? Especially in a highly competitive market, a supplier will be less likely to adhere to sustainability standards, due to concerns about cost implications (Chang et al, 2017) .

As a possible solution, low-power buying firms may seek to increase their bargaining power through partnerships with other supply chain stakeholders. Firms may therefore favour horizontal collaboration in order to improve their leverage over powerful suppliers. Horizontal collaboration signifies a type of formal or informal agreement in which two or more supply chain actors, who are operating at the same level of supply chain, work together to achieve common objectives ( Keskinocak, 2008, Cao and Zhang, 20011, Moutaoukil et al, 2012) . They can include

partnerships between competing firms, NGOs and governments (Bahinipati, 2009) .

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the context of SSCM (Chen et al, 2017) , while this may prove to be very beneficial to small buying firms who are faced with suppliers who are unwilling to adhere to sustainability standards. Collaboration for sustainability can help firms to develop resources and competences

(León-Bravo et al, 2017) , which could allow low-power buying firms to increase their leverage over suppliers. Furthermore, existing research on horizontal collaboration in SSCM has often relied on mathematical models within its methodology (Chen et al, 2017) , neglecting the

complicated dynamics and complexities in inter-organisational interactions in sustainable supply chain management. A case study would provide the necessary addition to literature on horizontal collaboration in SSCM, allowing “new and creative insights and development of new theory” (Karlsson, 2016) .

It is therefore highly interesting to take a closer look at how low-power buying firms may choose to collaborate with other competing firms and institutions, in a bid to overcome buyer-supplier power asymmetry and simultaneously achieve sustainability. In this study, we will primarily explore the following research question:

1. “How can horizontal collaboration be used by low-power buying firms to overcome buyer-supplier power asymmetry, with sustainability as end-goal?”

Ang (2008) suggests that firms that are faced with great competitive intensity within the manufacturing industry are more likely to turn to collaboration in order to reduce resource commitments and uncertainty. This type of interpersonal relationship, in which firms simultaneously compete and collaborate, is fundamentally paradoxical (Gnyawali et al, 2015) .

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competitive intensity. We therefore propose the following sub-question in addition to our main research question:

2.1 “How does competitive intensity influence the willingness and ability of low-power buying firms to engage in horizontal collaboration in sustainable supply chain management?”

Although there has been an increase in the valuation of sustainability by firms, recent research has found that SSCM is being practiced very little, due to concerns about profits (Caprar and

Neville, 2012) . Pressure by institutional organisations, such as governments and NGOs, increase the willingness of firms to implement sustainable practices and collaborate with competing supply chain members (Caprar and Neville, 2012) . However, little research has paid attention as to how institutions can increase the willingness and ability of firms to engage in horizontal collaboration in SSCM, making it interesting to investigate. We will therefore explore a second sub-question in our research:

2.2 “How does institutional pressure influence the level and type of horizontal

collaboration carried out by low-power buying firms in sustainable supply chain management?”

Our paper makes use of an inductive case study research to explore the phenomenon of horizontal collaboration in SSCM in further detail. We investigate low-power buying firms active in the apparel and electronics industry. Both the apparel- and electronics manufacturing industries are characterized by intense competition and the presence of many low-power buying firms (Bhardwaj and Fairhurst, 2010; Ang, 2008) . Furthermore, Ang (2008) and Dodgson

(1993) find that industries that are faced with high uncertainty and intense competition, are more

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2. Theoretical background

2.1 Introduction to horizontal collaboration

In its simplest form, horizontal collaboration is a type of partnership in which at least two supply chain actors of the same level, work together in order to accomplish common goals and benefits ( Keskinocak, 2008, Cao and Zhang, 20011, Moutaoukil et al, 2012) . Horizontal collaboration

further requires participating firms to set up clear objectives and devise plans to achieve these objectives (Bahinipati, 2009) . Additionally, Androiolo et al (2015) find that horizontal collaboration requires a neutral coordinator in order to lead the collaboration process.

Although Keskinocak ( 2008) only considers horizontal collaboration as being between competing companies, horizontal collaboration can have a more extensive definition. Other research has highlighted the involvement of other organisations, such as institutions and NGOs, as a form of horizontal collaboration. ( Bahinipati, 2009; Barratt, 2004 ). These other types of organisations play an important role in motivating and assisting firms to collaborate with each other ( Chen et al, 2017) . Therefore, we extend our definition of horizontal collaboration to include not only competing firms, but also institutions and NGOs, such as governments.

Horizontal collaboration has mainly taken the form of resource and capability sharing, and knowledge transfers, allowing internal limitations (Bahinipati, 2009; Birru, 2011: 808) . Often, the goal of horizontal collaboration has been on cost reductions. Essig (2000) confirms this by finding in its paper on horizontal collaboration that buying firms are mainly motivated by quantity discounts from suppliers when collaborating with competing firms. By pooling resources and capabilities together, firms can collectively achieve economies of scale, and share the costs and risks of new product development and the changing business environment ( Birru,

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2.3 Sustainable supply chain management

SSCM is considered to be the voluntary decision by firms to integrate social, economic and environmental aspects into their supply chain for sustainable, long-term growth (Dubey et al, 2016) . All decision-making activities in a supply chain, between design and purchasing, are involved within SSCM (Al-Odeh and Smallwood, 2012) . For example, within the design phase of SSCM, firms can choose to develop their products and packaging in a manner that allows recycling or remanufacturing. Within the purchasing phase, firms can take the decision of purchasing environmental raw materials, reducing the amount of pollution and waste (Al-Odeh

and Smallwood, 2012) . SSCM activities can lead to many advantages, such as improving environmental performance, improving corporate image, reducing costs and improving product quality (Al-Odeh and Smallwood, 2012) . However, in some cases the development of SSCM is negatively affected by the high costs of environmental programs, uneconomical recycling, high competition and the inability to reduce suppliers’ prices (Al-Odeh and Smallwood, 2012) . It would therefore make sense that firms that are interested in utilizing horizontal collaboration in SSCM in order to reap the possible benefits of SSCM and improve their marketing position, while at the same time avoid possible negative effects of SSCM.

2.4 Horizontal collaboration in SSCM

2.4.1 Steps and decision-making

Researchers have often taken different approaches to horizontal collaboration in order to accomplish sustainability measures (Un and Asakawa, 2015; Varsei et al, 2014) . Horizontal

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given the fact that supply chains are highly complex and firms are often present in multiple supply chains (Varsei et al, 2014) . Research also states that it’s only possible “to partner with only a few” (Harrison et al, 2014) , showing that firms should be very careful in deciding whom to collaborate with.

2.4.2 Approaches

One way for firms to collaborate with each other is by taking an output perspective, in which they directly work together through product innovation to achieve sustainable outputs, such as eco-innovation, more sustainable business models and more environmentally friendly services

(Un and Asakawa, 2015) . Un and Asakawa (2015) find in their research that collaboration with a focus on product innovations, rather than processes, are more easily protected due to the possibility of patents. In this sense, inter-organisational trust plays a large role in facilitating horizontal collaboration, even in SSCM.

An organisational perspective can also be taken, where the sharing of resources will lead to a competitive advantage to firms, providing motivation to retain sustainable practices. An example of this is from Lu et al (2014) paper on recycling operations in China. In their paper, they describe how firms shared recycling facilities and then would sell the recycled products in their own market. The firms made decisions together regarding the quantity and the price of the common waste product recycled. By sharing resources and taking decisions together, firms will be able to improve their sustainability, whilst at the same time, become more profitable.

Varsei et al (2014) regard social network theory as an important approach to horizontal collaboration. The social network theory describes a set of organisations which are characterized by a series of relationships. The success of this social network is dependent on the “systematic

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interpersonal relationships, there is less motivation for opportunism (Birru, 2011; Rutshobya et al, 2001) .

Varsei et al (2014) state that firms that are willing to work together and implement sustainable practices, should organise themselves in such a manner that allows efficient and effective flow of information. Firms can choose to adopt advanced information sharing mechanisms in the form of standardized supplier compliance data and sustainability ratings in an industry (Chouinard et al, 2011) . By adopting a social network approach, in which firms benefit from the effective exchange of information between supply chain participants, firms will be more successful in implementing sustainability practices in their supply chain.

2.5 Drivers of horizontal collaboration in SSCM

2.5.1 Institutional pressure (governments and NGOs)

Research on horizontal collaboration with sustainability as end-goal has highlighted the importance of collaborating with institutional organisations, such as governments, NGOs and local communities ( Chen et al, 2017; Bahinipati, 2009 ), rather than exclusively with competing

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between governments, businesses and trade unions. Firms with different cultural backgrounds may be more or less sensitive to the different types of institutional pressures in collaborating and pursuing sustainability.

2.5.2 Competitive intensity

Competitive intensity signifies the amount of competition that is reflected in a buyer’s product market, both domestic and international (Mahapatra et al, 2012) . Additionally, the presence of stronger competitors will most likely lead to higher competitive intensity and the amount of action a firm will take in response to the competition. Collaboration with other small buying-firms can lead to acquiring external knowledge and innovation (Ang, 2008) , may minimize coordination costs, and may lead to more intense mutual pursuits of collaboration ( Gnyawali et al, 2015) .

However, collaborating whilst at the same time competing is considered to paradoxical in nature ( Gnyawali et al, 2015) . Firms that hold unique identities, motives and goals, work together to achieve shared goals in order to create value, but at the same time also try to achieve greater private benefits from that value. In other words, firms attempt to create a bigger pie whilst also trying to take the bigger piece of the pie. Gnyawali et al (2015) argue that this may limit the initial value creation, making it more challenging for firms to engage in collaboration. Furthermore, although collaboration may reduce competitive effects and intensity, it may actually create an increase in administration, coordination and information costs (Sing and

Mitchell, 2005) . A reason for this may due to the inability of firms to manage the paradox. Gnyawali et al (2015) argue that managers lack guidance in order to understand and manage the relationship.

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research has not found any clear relationship about whether sustainability can add value to competitiveness or that it can actually be detrimental to competitiveness (Horváthová, 2010) . Especially in tough economic times, firms that are restricted by its available resources, are not motivated to pursue sustainability (Sekerka and Stimel, 2011) . This may indicate that competitive intensity negatively influences the ability and the willingness of low-power buying firms to pursue horizontal collaboration in SSCM.

However, as a solution to the competitive intensity, Sekerka and Stimel (2011) indicate that firms should combine the interests of both shareholder and stakeholder interests to create sustainable practices. Furthermore, Peng and Kerry (2013) argue that sustainability may actually aid companies in achieving long-term competitiveness. They state that if firms do not respond to the increased pressure of new industry standards and policies in sustainability, they will be negatively impacted. Peng and Kerry (2013) therefore indicate that a proactive approach will be beneficial in the long-term, although it may lead to high costs in the short-term. It can therefore be argued that introducing horizontal collaboration by firms in SSCM, they will combat the competitive intensity.

2.6 Buyer-supplier power asymmetry

Dependence between buyer and supplier is apparent when one party does not have the ability to influence the other party to act in a way that the former party wishes (Brito et al, 2017) . The

inability is a direct consequence of a dependence on scarce resources from the other party, limiting the ability of the first party to achieve its own goals (Brito et al, 2017) . Inter-organisational power can be split into two different types; mediated and non-mediated power (Brito et al, 2017) . Mediated power (reward, coercion, legal legitimate) mainly concerns

whether one firm has the ability to reward or punish the weaker party, whereas non-mediated power (expert, referent, legitimate) concerns the stronger party has a higher level of knowledge and reputation, or has the natural or legal right (Brito et al, 2017) . Both buyers and suppliers can

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supplier has the lever of power (Cox, 2001) . This type of dependency is highly relevant for SSCM, since low-power buying firms are highly dependent on suppliers to enhance their sustainability performance and activities, with the suppliers contributing to the value for the buyer’s customers (Vachon and Klassen, 2006) . The dependency on suppliers can be caused by many different reasons. It mainly originates from the fact that there are many buyers, but few capable suppliers to create the buyer’s products (Cox, 2001) . For buyers, trying to find different suppliers will result in high searching and switching costs. Low-power buying firms may not be attractive to suppliers due to the buyer’s low volume of orders and the low percentage of total market share (Cox, 2001) . In some cases, suppliers may have more knowledge of the market and/or products, creating high information asymmetry (Cox, 2001) .

2.7 Established conceptual model

After considering the formulated research questions and the theoretical background, a conceptual model was developed, which can be seen in figure 2.1 .

Figure 2.1: Conceptual model of horizontal collaboration in SSCM context

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3. Methodology

3.1 Research method and setting

The aim of this study is theory exploration, analysing how horizontal collaboration between small buying firms and/or institutions can play a role in overcoming power asymmetry and implementing sustainable practices. An inductive, multi-case study research was chosen, as it may be able to provide more insights into a complicated and detailed relationship or give new perspectives ( Karlsson, 2016 ) , and increases generalizability. These factors are especially relevant due to the limited available previous research on the topic of horizontal collaboration in the context of sustainability ( Chen et al, 2017) . Moreover, previous research on horizontal

collaboration have mainly consisted of mathematical models for its methodologies. Chen et al

(2017) recognize the need for more research through case studies and experimental methods in order to increase the depth and wideness of knowledge on the topic of horizontal collaboration in a sustainability context.

This multi-case investigates the manufacturing industry, and more specifically the Dutch apparel industry and the Chinese electronics industry. The industries of these countries were chosen due to their high ranking in the Global Manufacturing Competitiveness Index ( Deloitte, 2016) , placing China as number 1 and the Netherlands at number 20. According to literature, firms that are faced with high uncertainty and competition, are more likely get involved in strategies such as collaboration in order to strengthen their market position (Ang, 2008) . Furthermore, the apparel industry and the electronics industry have seen a rise in concerns and actions in SSCM

(Shen et al, 2017; Wittstruck and Teuteberg, 2011) .

3.2 Unit of analysis

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3.3 Case selection

After having established our research setting, we started setting the criteria for our cases. We decided to investigate four low-power buying firms that pursue sustainability and are engaged in horizontal collaboration. In order to meet this criteria, we searched for small and medium-sized enterprises active in the Dutch apparel industry and the Chinese electronics industry. Following the European Commission’s definitions of SMEs, we searched for firms that employed between 50 and 250 individuals, with a turnover not exceeding €50 million (European Union, 2015) . This gave us a better opportunity to find firms that deal with asymmetrical buyer-supplier power, where the supplier holds more power.

We then investigated, with the use of company and news reports, whether these companies were pursuing sustainability and were engaged in horizontal collaboration. The chosen companies were then contacted to inquire into their interest and availability for interviews. Those that showed interest, were sent a pre-survey in order to establish whether these companies fit our research. Of the four cases chosen, three buying firms are active within the Dutch apparel industry, and one firm is active in the Chinese electronics industry. The case selection should ensure that either literal or theoretical replication logic is followed, to allow for a thorough analysis of the horizontal collaboration phenomenon in an SSCM context (Karlsson, 2016) . Literal replication was followed by utilizing three cases in the Dutch apparel industry, who all deal with the same competition and institutions. Theoretical replication was also followed, as the fourth case concerns a Chinese electronics buying firm, who deals with different competition and institutions than the first three cases. Table 3.1 shows a short description of the selected cases.

Case Country Industry Category description Firm size No. employees

Buyer A Netherlands Apparel Maternity- and baby clothing

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Buyer C Netherlands Apparel Corporate clothing Small-sized 0-50 Buyer D China Electronics Consumer electronics Small-sized 0-50 Table 3.1: Cases descriptions

3.4 Data collection

Data was collected through semi-structured interviews with key informants of the different companies in the Dutch apparel industry and Chinese electronics industry. Due to the limited number of employees at the selected firms, interviews were held with informants who hold high positions within their organisations. These key informants are responsible for their firm’s sustainability efforts and have a thorough understanding of the buying firm’s relationships with external parties and its suppliers. Interview questions were acquired with the use of previous research on horizontal collaboration in both a general business context and in SSCM. The interview outline and example questions for each issue can be found in table 3.2 .

Issue Example questions

General information What does your firm do and what is the main strategy of your firm?

Power asymmetry Do you ever feel resistance from suppliers in implementing more sustainable measures? Horizontal

collaboration

Do you work together with other buying firms in your industry within a sustainability context?

Competitive intensity How would you describe your industry in terms of competition?

Institutional pressure Do you feel any type of pressure from governments and NGOs in implementing more sustainability measures and working together with other buying firms? Table 3.2: Interview outline and example questions

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conducted by one researcher, who took both notes and audiotaped the interviews, which were transcribed subsequently by the same researcher.

To ensure data triangulation and increase internal validity, personal observations, company reports, the firm’s codes of conduct, audit reports (SEDEX, SA8000 and BSCI), as well as official reports by governments and NGOs were used. For example, the official covenant report published by the Dutch government (Social Economic Council (SER)) was utilized for the firms active in the Dutch apparel industry. This document is important as it shows the government’s perspective on horizontal collaboration in the Dutch apparel industry, containing a timeline and guidelines for participating firms. An interview protocol was also established, which can be found in appendix A, containing general procedures before the interviews, a pre-interview survey, and the interview questions. The interview protocol was followed for each of the interviews, with the interviewees being told that the results would stay anonymous and would strictly be utilized for this research. The purpose of the research was then thoroughly explained to the representative. A short description of the interviewees and the conducted interviews can be found in table 3.4 . Case Reference number Informant Informant’s experience at firm Type interview Time Words

A A1 Director of Design, Sourcing and Buying

2 years Face-to-face 40:00 1817

B B1 Co-founder & Chief Executive Officer

12 years Telephonic 33:50 2439

C C1 Chief Executive Officer 7 years Telephonic 23:13 1952

D D1 Sourcing Director 6 years Face-to-face 27:37 2101

D D2 Product Management Director 20 years Telephonic 19:44 1189

D D3 Product Management Director 8 years Telephonic 23:03 1121

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3.5 Data analysis

After the interviews were conducted and transcribed, the interviews were read through several times. Answers that were viewed as unclear were corresponded with the interviewee and revised. Parts of the interviews that were seen as valuable for this research were highlighted. A short summary of each case was then made to create a clear overview for the researcher. We then identified the most important quotes relevant to our research questions. Since we are interested in developing new theories based on our findings, we followed inductive reasoning for our coding. First-order coding was carried out utilizing concepts identified in the initial analysis phase. These constructs include: horizontal collaboration in SSCM, competitive intensity, institutional pressures, and power asymmetry. The operationalization of these concepts can be found in table

3.4 . We then added the relevant quotes to the correct constructs.

Concept Definition Operationalization Source

Horizontal collaboration in

SSCM

An informal or formal agreement by a firm with a competing firm or

institution, to achieve more sustainable practices and standards

High: When buyer is fully committed to multiple and extensive informal and formal agreements with competing buyers

or institutions in SSCM Low: When buyer is sporadically

engaged in informal or formal agreements with competing buyers

or institutions in SSCM

Researchers’ assessment

Competitive intensity

The level of competition felt by firms in terms of amount of competitors and technology

changes

Difference between buyers’ industry and country in the Global

Manufacturing Competitiveness Index, in combination with interviewee’s own experiences and

thoughts Deloitte, 2016; researchers’ assessment Institutional pressures

The level of pressure felt by firms, either through force or incentives,

from institutions

Based on assessment of interviewee’s experiences and

thoughts

Researchers’ assessment Supplier-buyer

power asymmetry

The difference in power between buyer and supplier described by

the buyer, in terms of mediated and non-mediated power

Based on assessment of interviewee’s experiences and

thoughts

Researchers’ assessment

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An example of the first-order coding can be found in table 3.6 . The first-order coding of all cases can be found in appendix B.

Case C Construct Ref.

No.

Quote First-order code

Driving forces & deterrents

C1.12 “It is still difficult, because of the competition sensitivity. Socially it is not all that bad, but we

are very far with recycling. We do not want to give away all our secrets in it.“

High competition, confidentiality

C1.13 “You want the industry to be sustainable, but on the other hand you also have to take into account the commercial importance of your

company”

Sustainability concern, commercial importance

Table 3.5: Example first-order coding

The next step included transforming the first-order codes of the cases into second-order categories and establishing a final coding tree. An example of this can be found in table 3.6 . Here you can see how first-order codes identified from the quotes, can be placed into second-order categories. For example, responsibility, contribution and sustainability concern, can all be labelled under intrinsic motivation, which is found to be a driving force of case C’s pursuit of horizontal collaboration and sustainability. The coding trees for all cases can be found in appendix C.

Case C

First-order code Second-order category Category

Responsibility Intrinsic motivation Driving forces & deterrents Contribution

Sustainability concern

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Confidentiality Consumer awareness

Legislation Institutional pressure and influence NGO pressure

NGO influence Governmental influence

Table 3.6: Example second-order coding

The cases were first analysed individually and then afterwards compared for a cross-analysis. An extended within-case analysis was conducted to increase our understanding of the answers given during the interviews. Afterwards, the cases were summarized and important information regarding the cases were added with the use of documentation such as company reports, governmental reports and audits. Then, cross-case analysis was performed in order to compare the cases and draw conclusions on how horizontal collaboration may be utilized to overcome power asymmetry, and the effects of its relevant drivers.

3.6 Validity & Reliability

The following table (3.7) visualizes a summary of the steps taken within our research method for each reliability and validity criterion. All measures taken are integrated within the descriptions of our research methodology. We ensured that the proper steps for validity and reliability were taken in all phases of our research, namely; research design, data collection, and data analysis.

Reliability/Validity criterion Steps taken Research phase

Reliability Case study protocol and database (Appendix A) Research design Interview protocol (Appendix A) Data collection Audiotaping, transcribing and coding interviews

(Appendix B)

Data analysis Internal validity Interviews with key informants (CEOs and Directors)

of firms providing multiple perspectives

Data collection Construct validity Interview questions based on established theory on

horizontal collaboration in SSCM (Theoretical

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background, Appendix A)

Thorough explanation of how data was collected and analysed

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4. Findings

This section serves the purpose of introducing the four different buying firms, and describing their sustainability pursuit, dependency on their suppliers and horizontal collaboration in SSCM. Lastly, we present our overall findings on horizontal collaboration in SSCM, competitive intensity and institutional pressure.

4.1 Buyer A

Buyer A is a medium-sized enterprise that is active within the Dutch apparel industry, producing and selling a wide assortment of maternity, children’s and baby clothing. It produces its clothing in three different countries, namely India, Turkey and China. Buyer A requires all of its new suppliers to adhere to their personal code of conduct, which is based on the conventions by the International Labour Organisation, and signing it, before production begins. The ILO conventions include fundamental themes, such as freedom of association, right of collective bargaining, elimination of forced or compulsory labour, child labour and discrimination.

In order to ensure that suppliers follow its code of conduct, buyer A requires its suppliers to send audit reports adhering to the Business Social Compliance Initiative or SEDEX standards, or by sending their SA8000 certificate. Originally, however, buyer A was dependent on suppliers’ own responsibility of ensuring that audit reports and certificates were sufficient and valid since there

“was never a plan of action, or at that time we never discussed it with suppliers” (A1.2) . In many cases, suppliers did not fulfil this responsibility. Buyer A states that this was due to suppliers’ resistance to auditing authorities, who at times are “far removed from reality” (A1.3) . For example, buyer A states: “I had a Turkish supplier who told me that if you have a Turkish supplier who scores green on paying wages, he has bribed everyone” (A1.4) . We further find that

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4.1.1 Buyer A’s horizontal collaboration in SSCM

Buyer A is faced with heavy competition from mostly large multinationals such as H&M and Zara, “being attacked in all countries” (A1.9) , who have begun specializing in maternity and children’s clothing, operating in the same niche market as buyer A. This has driven buyer A towards more sustainable practices and utilizing it as competitive advantage, stating: “ I want to take the lead. I do not want to catch up later. I’d rather be distinctive now, by having everything organised and paying a lot of attention to sustainability” (A1.14) . Buyer A has found that sustainable technology has increased the pressure on buyer A, stating that “you have to consider recycling of strange materials, new materials we hadn’t heard before, and upcycling. You will also get wearables, such as putting your phone in your jacket to charge” (A1.10) . This has lead

buyer A to adopt collaborative practices within SSCM with competing buyers in the Dutch apparel industry, joining the Dutch Agreement on Sustainable Garment and Textile.

Before joining the Agreement on Sustainable Garment and Textile in 2016, buyer A initiated the due diligence of its suppliers, evaluating their social compliances, in order to prepare for signing the agreement. We find here that the government played an important role in enabling buyer A in improving its suppliers’ sustainability, which in turn lead to buyer A pursuing horizontal collaboration to join forces with other buying firms.

The Agreement on Sustainable Garment and Textile was introduced in 2016 by the Dutch government, driving Dutch buying firms in the apparel industry to work together with the Dutch government and institutions such as Solidaridad and UNICEF, in order to improve the sustainability of the apparel industry. In preparation of signing the agreement, buyer A conducted due diligence of its suppliers, finding that some suppliers did not adhere to buyer A’s code of conduct and auditing requirements. It also realized its dependence on suppliers at times: “..those

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well as the complexity behind the current state of SSCM. Buyer A is met with supplier power asymmetry as changing suppliers would lead to high searching and switching costs. The Agreement on Sustainable Garment and Textile, in which buying firms and institutions work together, may be able to give buyer A more leverage in order to overcome the power asymmetry with its suppliers.

Since having signed the agreement in 2017, buyer A has gotten “invited to conferences, working groups with each other, sharing experiences, giving openness of business” (A1.18) , working

together with competing Dutch clothing companies on sustainability issues. Within these conferences and working groups, buyer A finds that “it is all confidential and nameless if you’d like” (A1.18) . Furthermore, within this agreement, buyer A has shared its suppliers’ names and addresses with the other participating firms. The Dutch government played a key role in organising and facilitating these conferences and working groups. Through these working groups, buyer A believes that “giving transparency of business, sharing information, or if you come across the same issues and try to tackle that together” (A1.19), buying firms can

communally “have a little more voice” (A1.19) over their suppliers. This indicates that through

exchanges of information and experiences, improving the level of knowledge on suppliers and sustainability, as well as by tackling sustainability issues together, buying firms will be able to increase their leverage over their larger suppliers in terms of sustainability issues.

4.2 Buyer B

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environmentally more sustainable. Buyer B believes it is incredibly lucky as they receive all the

“cooperation, time and budget” (B1.4) required for these investments, due to the mutual vision and interest in sustainability. However, buyer B is highly dependent on its suppliers of knots, yarn and zippers, since these parts only make up 2% of buyer B’s clothing, ordering at very small quantities. Buyer B states about these suppliers: “I also have to get them enthusiastic [about sustainability] and that is a completely different story of course” (B1.7). For these suppliers,

buyer B has to “start from scratch in order to get the supplier enthusiastic about going into that sustainability trajectory, which is a very long, difficult process” (B1.16) .

4.2.1 Buyer B’s horizontal collaboration in SSCM

Following the 2013 Rena plaza disaster in Bangladesh, buyer B started to “ look much more

critically at what actually happens in those far-away countries, the working conditions there and the impact of the substances that they produce there on the environment” (B1.11) . Buyer B found that there was a lot of “unfair competition” (B1.10) , where other clothing firms are producing clothing at very low prices and where unsold products end up in “textile mountains” (B1.12). Buyer B further explains about this unfairness: “ it is foolish that an H&M can call itself sustainable by burning clothing to generate energy” (B1.12) . Buyer B has therefore chosen to engage in horizontal collaboration, in order to make the consumer more aware of what is currently happening. Buyer B also hopes to improve the overall sustainability of the apparel industry by being a “showcase” (B1.24) to its collaboration partners.

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to think about that, to see how we change that mindset, that the consumer believes the sustainability aspect is important” (B1.25) . According to buyer B, it “must be done together. All interest groups have to cooperate, everyone can get their own advantage, but together we have to communicate that message” (B1.27) . Buyer B believes that this will lead to consumers choosing its products due to its “well-communicated story of sustainability and transparency” (B1.15). By

improving consumer awareness, buyer B and its collaboration partners will be able to “convince

the supplier to spend time and money” (B1.33) on sustainable practices, increasing their

leverage.

4.3 Buyer C

Buyer C is small buying firm that sells corporate clothing to large multinationals such as Qatar Airways, Staples, Tesla and Duracell. Buyer C strives for a circular economy, in which its products will be 100% reusable. In order to accomplish this, buyer C has initiated projects to produce circular clothing for several of its customers. Additionally, buyer C works together with the Fair Wear Foundation, a non-governmental organisation, who audits its suppliers in accordance with ILO standards. Buyer C’s focus is on both “social and environmental.

Environmentally, we believe in recycling. Socially, we now have a living wage in Turkey. We are now working to apply that in Pakistan” (C1.29).

Buyer C has very little leverage over its large suppliers: “given the size of our orders, we are part of the smaller production companies” (C1.6). Buyer C explains for their buyer-supplier power asymmetry: “if you are an H&M or Nike, you can reasonably dictate what a supplier has to do. But if you are a small-medium enterprise like us, you have to deal with it differently” (C1.1) . Buyer C does not believe that dictating suppliers, where “only punishment” (C1.4) exists, is the “right and fair” (C1.1) thing to do. Instead of punishing suppliers for sustainability non-compliance, buyer C wants to reward suppliers for good behaviour, while requiring

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resources and power over suppliers, resorting to multiple forms of horizontal collaboration as solution.

4.3.1 Buyer C’s horizontal collaboration in SSCM

In addition to the competition faced by large multinationals, such as H&M and Nike, buyer C has seen that their customers “are asking for more” (C1.14) in terms of sustainability. Although buyer C is unsure of “whether that is with the right intentions or as a marketing idea” (C1.14) ,

buyer C has felt the obligation to pursue sustainability and horizontal collaboration in order to stay competitive and keep its customers satisfied.

Buyer C joined the Agreement on Sustainable Garment and Textile in 2016, collaborating with competing buying firms and institutions. Before this agreement came to be, buyer C was already engaged in “all kinds of discussion groups to improve certain themes” (C1.20) of sustainability with other buying firms, being organised by the Dutch government. These themes included for example marketing of sustainability, child labour, and chemicals. The Dutch government also required buyer C and other participating firms to conduct its due diligence of its suppliers’ sustainability, based on the ILO convention themes. Within this agreement, buying firms have shared a list of its suppliers with the government, which the government has published publicly. This allows the participating firms, such as buyer C, who share the same suppliers and factories, to work together on sustainability issues, improving their power over suppliers.

In addition to participating in the agreement and collaborating with competing buyers, buyer C has been “talking to a number of companies to see what is possible” (C1.21) to make the

industry more sustainable, in the form of “joint information exchange and return flows” (C1.21) . This is hindered by the competitive nature of industry and the complexity of interorganizational trust: “It is still difficult, because of the competition sensitivity. Socially it is not all that bad, but we are very far with recycling. We do not want to give away all our secrets in it” (C1.12) . Buyer

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It has been working together with the Fair Wear Foundation (FWF) since 2010, who monitor the social conditions at buyer C’s production sites. Trust plays an important role in this relationship:

“they know everything about your supply chain, those people who work for you have access to confidential information” (C1.26) . Buyer C expects FWF to look at buyer C’s sustainability issues “objectively, which is also a bit of trust” (C1.27) . Within this collaboration with FWF,

buyer C states: “they (FWF) also ask you to work with other companies in the same factory. Yes, that's possible. If we produce at a certain factory and another company is connected to the same factory, then we can work together to solve the problems there” (C1.16) . By combining forces,

buyer C can increase its leverage over the supplier to solve issues there.

4.4 Buyer D

Buyer D is a small buying firm active in the Chinese consumer electronics industry. It mostly sources from small and medium-sized suppliers, all based in China. Buyer D requires its suppliers to show a report “that they are 100% compliant to the law, mainly about labour protection” (D2.13) . Furthermore, they hire well-known auditing companies such as SGS to

“check the compliance” (D3.7) . However, Buyer D finds itself in a difficult position, having very little leverage over its suppliers since they are “a relatively small company in terms of volume. Given the volume, we are just happy that they [suppliers] do business with us” (D1.1).

When business was better, they “had a lot of power over our suppliers because we took such large quantities” (D3.3) . For its medium-sized suppliers, buyer D is faced with supplier-buyer power asymmetry: “our business is maybe only 1%, or less than 5%, so we are not important” (D4.2) . This makes it difficult to work with its medium-sized suppliers, with buyer D stating:

“they refuse my MOQ (minimum order quantity), or if I just want to change something, my business is not important enough for them to do the modification” (D4.3) .

4.4.1 Buyer D’s horizontal collaboration in SSCM

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keep things to themselves, in terms of their channel, or their customer or their source” (D2.2) .

Buyer D describes its industry as very competitive, “because electronic products, due to the technology, change very frequently” (D2.1) . This has negative consequences for buyer D’s

pursuit of sustainability: “everybody needs to invest in order to make the jump to a more sustainable supply chain. If there are no long term relationships [with suppliers] and with the high changeover of the products and technology, it’s very difficult to earn back the investments” (D1.8) .

The Chinese government has had a large hand in creating a more sustainable business environment in buyer D’s industry, such as labour protection: “in the past few years, labour has

benefited and protection is more complete, getting better and better” (D2.6) , where suppliers

have to “follow the law and also create a better environment for the workers” (D2.7) . The

Chinese government has the leverage and power over Chinese suppliers to, for example,

“enforce stricter policies for the factories, such as environmental or dangerous goods” (D4.9) .

The government’s power is further evidenced by buyer D: “In some districts, suppliers made

power banks. They are classified as dangerous goods. One day, the government decided that they are longer allowed to make them and have to make out” (D4.9) . Buyer D’s statements really

depict the pressure that the Chinese government has been placing on its suppliers to improve the overall sustainability of the industry and country. It is not a choice for suppliers: “Once a law or regulation is set up, the industry has to follow and they will find a way to follow” (D2.10) .

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formal horizontal collaborations with other buying firms is restricted due to interorganizational trust issues and the risk of opportunistic behaviour by other buying firms, leaving informal horizontal collaboration through social networks as the only option. This risk of opportunistic behaviour by other buying firms is shown by buyer D’s example: “Say, I’m buying for customer

A and you are buying for customer B, even though we don’t really have any collaboration with you, I might have the idea of how to take your customer’s business away from you. I mean, this is Chinese logic” (D2.12) . To combat this, buyer D has had the idea of setting up an online platform for buying firms, “listing out suppliers on their weaknesses and strengths, based on

user feedback. Like a TripAdvisor… And that possibility, could create a methodology or pressure and power to put on vendors in general to make changes” (D1.18) .

4.5 Overall findings of horizontal collaboration in SSCM

4.5.1 Steps towards horizontal collaboration in SSCM

We find that choosing the right type of partners is an essential element in preparing for horizontal collaboration. Buyers A, B and C all formally work together with other Dutch clothing firms, who are part of the Dutch Sustainable Textile and Clothing Agreement and whom have consciously decided to pursue a more sustainable supply chain, either with environmental or social considerations. Additionally, these buying firms have made considerable efforts in preparation of collaborating, through due diligence of its suppliers, attending conferences and workshops. By getting a more detailed understanding of their supply chain performances, they are able to recognize the best fitting approaches towards horizontal collaboration. This in strong contrast to buyer D, who exclusively collaborates with competing firms through interpersonal relationships, not having much freedom of choice, and has not made any efforts in preparation of collaborating. It could explain the low level of horizontal collaboration adopted by buyer D.

4.5.2 Approaches and types of horizontal collaboration in SSCM

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knowledge are shared, as well as sharing supplier base lists and sustainability reports. Although this agreement is still in its early phases, there are promising signs for how this type of horizontal collaboration can lead to overcoming buyer-supplier power asymmetry. As buyer B states: “It

needs time, but it will come. I think people will start to see that it has to change” (C1.24) .

This agreement will aid developing a sustainability campaign, communally communicating the message of sustainability to its consumers: “I want to show the consumer how it’s made, where the goods come from and how it ends up in the Netherlands” (B1.26), increasing consumer

awareness and therefore indirectly placing pressure on suppliers to increase their use of SSCM. By learning from each other on how to communicate with the supplier, it would make the suppliers “understand that something has to change in their factory. That the way they have always done things, that we cannot do that anymore” (C1.2) . Moreover, by formally working

together between low-power buying firms and collectively improving the consumer awareness and marketability of sustainability, it would allow the low-power buying firms “to convince the

supplier to spend time and money” (B1.33) on sustainability. For buyer C, the Dutch Agreement on Sustainable Garment and Textile has also lead to talks with other buying firms, discussing the possibilities of shared return flows, recycling clothing after use. In their case, horizontal collaboration would lead to actual more sustainable output and in the best case, a recycling

“coalition” (C1.21) between the firms.

Horizontal collaborations between low-power buying firms in which institutions such as governments are involved, may prove to be less intricate and more effective than horizontal collaborations exclusively between low-power buying firms. This is illustrated by all three cases active in the Dutch apparel industry who take part in the Dutch Agreement on Sustainable Garment and Textile. As buyer A explains: “You get invited to conferences, working groups with each other, sharing experiences, giving openness of business. It is all confidential and nameless if you’d like. There is a lot of room for that, it is not all very secretive” (A1.21) . Here we find that

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will increase their ability of low-power buying firms to tackle issues together with suppliers that are unwilling to cooperate. This is further shown by buyer A: “Giving transparency of business, sharing information, or if you come across the same issues and try to tackle that together. So that together, we have a little more voice” (A1.22) .

Additionally, the Dutch government requires its participating firms of the agreement, buyers A, B, C, to share their current supplier base. When issues arise with a supplier, the Dutch government places pressure buying firms that operate at the same factory, to collaborate together and solve these issues, increasing the level of volume size that the low-power buying firms represent. We find that this creates more leverage for the low-power buying firms, as their increased volume size makes them more important to the supplier. Within these horizontal collaborations, the government plays an important role in facilitating and governing transparency between buying firms, reducing the risk of opportunistic behaviour. In the case of buyer D, where the government is not involved at all in facilitating horizontal collaboration in SSCM, the lack of trust and the high risk of opportunistic is preventing higher levels of collaborating with competitors.

4.6 Drivers of horizontal collaboration in SSCM 4.6.1 Institutional pressure

From our cases, we find that institutional pressure, especially that of the government, can play a large role in determining whether firms engage in horizontal collaboration in SSCM. Comparing the situation between cases operating in the Netherlands and the case in China, we find significant differences in how they utilize this pressure.

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The influence of the Chinese government is further shown by buyer D’s statement: “once a law or regulation is set up, the industry has to follow and they will have to find a way to follow” (D2.10) . Although the Chinese government has done little to promote horizontal collaboration in SSCM, they have had a much more effective approach, directly improving the sustainability of the manufacturing industry. This is in contrast to the Dutch government, where buyer C states:

“they [the Dutch government] should be much stricter and introduce more demanding legislation and ensure that companies have to comply with it” (C1.17) . Buyer C further explains:

“legislation is made in such a way that 90% of the companies can get away with it. They do not want people to get into trouble. The result is that it [legislation] is underdeveloped” (C1.17) . We

conclude by finding that the Dutch government has therefore taken a much more careful and indirect approach towards institutional pressure than the Chinese government, introducing the Agreement and facilitating horizontal collaboration by buying firms in SSCM, rather than directly introducing and enforcing legislation.

4.6.2 Competitive intensity

In all cases, competition is very intense. In the Dutch apparel industry, as shown by cases A, B and C, the high intensity is influenced by the competition of large MNEs, who have begun specializing in niche markets that the case have been operating in. As a response, these buying firms have to “encourage” their “differentiation” and make themselves “specialists” (A1.7) . This strategic choice has mostly come in the form of implementing SSCM, in order to utilize that as competitive advantage over their competition. As buyer B states: “I want the consumer to have the choice between my product and one that is 10 or 20 euros less, but it chooses my product, because of my well-communicated story of sustainability and transparency” (B1.15) .

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on the other hand you also have to take into account the commercial importance of your company” (C3.13) . In their case, horizontal collaboration may lead to a loss in their sustainable competitive advantage. We find therefore that different approaches to horizontal collaboration may have different effects on the ability to handle the competitive intensity.

It is clear from the findings per case that competitive intensity plays a large role, but we find that buyer D is engaged in a low level of horizontal collaboration in SSCM compared to the other cases. Although we find that both industries are met with high competition, the Dutch apparel industry seems to be more engaged in SSCM and in return, horizontal collaboration in SSCM. We find here that it may be due to the nature of the electronics manufacturing industry, which is characterized by high-tech developments and short product life cycles. We find that this has led to very little need for SSCM, making it difficult for buyer D to find other low-power buying partners to engage in horizontal collaboration with. The strategic choice for Chinese electronics low-power buying firms is to focus on low-costs, rather than differentiation through sustainability. This is backed up by buyer D’s statements: “If it’s a small company, they will not care about sustainability. For those small companies, they may look for smaller factories to do their products” (D4.8) . Buyer D further states: “I think only big companies with very good brand

names will care about the codes of conduct, because they are concerned with the customer awareness, whether their products are made by a child or made in a very bad environment” (D4.15) . We find here that there is a big difference between the Dutch apparel- and Chinese electronics industry, in the drive for SSCM of low-power buying firms. Competitive intensity is influenced by the country and industry that low-power buying firms are active in, resulting in a certain level of horizontal collaboration.

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own business, competing for our own business, making sure that our customers are happy and we are meeting their needs” (D1.4, D1.5) . Furthermore, buyer C feels more pressure towards sustainable thinking and in turn towards more horizontal collaboration due to awareness of their business consumers, which is in contrast to buyers A and B, who find that there is “very little

traction with customers” (A1.12) , who “really do not think about sustainability” because they “do not have that money” (B1.16) . The pressure by its corporate customers is confirmed by buyer C: “We now also see that our customers are asking for more. Whether that is with the right intentions or as a marketing idea, the demand increases” (C1.17) . In buyer D’s case, the low level of horizontal collaboration in SSCM can be linked to the low requirements of its corporate customers, for which sustainability “is not a point of attention” (D1.10) . Here we find that

corporate customers who prioritize sustainability, will be able to pressure low-power buying firms in adopting horizontal collaboration in SSCM, since competitive intensity is heavily increased.

4.7 Other findings

4.7.1 Vertical collaboration

An interesting finding is that supplier-buyer power asymmetry can also be overcome with the use of vertical collaboration, in which low-power buyers actually utilize its suppliers in an innovative and organised manner. In 2013, buyer C built a living wage model for its Turkish suppliers, bringing them together and “discussing supplier ratings. Not 1-on-1, but with each other,

transparently” (C1.30) . This way, buyer C was able to increase its power, by publicly discussing the sustainability performance of each Turkish supplier, showcasing to the suppliers what “some

do well, some do wrong, and what we can learn from each other” (C1.30) . After having

established a living wage model with its Turkish suppliers, it used them in order to influence its other suppliers: “Last year we met with all Turkish suppliers and there we presented that model

[to Pakistani suppliers]. To show how we rolled it out in Turkey, and to say ‘you are the next one to which that will happen'. All suppliers are there, not that that it happens 1-on-1. It’s just very public, to put pressure on the suppliers, so everyone knows that that will happen” (C1.31) . Buyer

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5. Discussion

Where in regular supply chain management cost reductions are a main reason for horizontal collaboration (Essig, 2000; Birru, 2011; Bahinipati, 2009) , we find that in SSCM, horizontal collaboration is a decision by firms to improve the knowledge and capabilities of SSCM, improve consumer awareness, and to work together directly on issues at shared suppliers, which in some cases gives more leverage to low-power buying firms in order to overcome buyer-supplier power asymmetry. Considering that sustainability does not always lead to economic value for suppliers, buyers have to be able to convince suppliers to engage in sustainability for non-economic value, such as social results, reputation and profitable gains in the long-term (Lindgreen and Wynstra, 2005) . According to Terpend and Krause (2015) , utilizing power advantages by buying firms over suppliers will lead to an increase in suppliers’ quality, innovation and flexibility. It confirms the thought that low-power buying firms have to find a way to increase their power over suppliers and utilize that leverage to implement more sustainable practices with their suppliers.

As seen in our findings, meetings and conferences on sustainability allows for information and experience exchange in the form of SSCM tools, supplier sustainability reports, and how to deal with issues. This type of horizontal collaboration, in which the flow of advanced information is priority, allows for firms to increase their leverage over suppliers. This is in line with Brito et al

(2017) research, who state that when one organisation has a higher level of knowledge over another organisation, it will allow the former organisation to hold non-mediated expert power over the other party.

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participative role, co-creating value with firms by contributing knowledge, resources and information (Soosay & Hyland, 2015) . According to Soosay and Hyland (2015) , these proactive consumers are able to aid in supplier relationship management. From our findings and literature, we therefore consider customers an important element in increasing knowledge and resources, improving the leverage by low-power buying firms over suppliers.

Low-power buying firms who decide to work together on issues with the same suppliers, are able to bundle their resources and volume of orders together, improving their ability to exercise mediated power over suppliers. Due to their increased importance to suppliers, they have the option to reward good behaviour in terms of sustainability by suppliers or coerce suppliers into adopting more sustainable practices (Brito et al, 2017) . We therefore propose the following:

Proposition 1a: Utilizing horizontal collaboration in SSCM, to increase the level of knowledge on SSCM practices, tools and issues, will increase non-mediated over suppliers.

Proposition 1b: Utilizing horizontal collaboration in SSCM, to raise consumer awareness of sustainability, will increase both non-mediated and mediated power over suppliers.

Proposition 1c: Utilizing horizontal collaboration in SSCM, by working together directly on sustainability issues at shared suppliers, will increase non-mediated power over suppliers.

Sustainable Supply Chain Management: Horizontal Collaboration by Low-power Buying Firms to Overcome Supplier Power Asymmetry