Master Thesis, MSc Supply Chain Management University of Groningen, Faculty of Operations Management

COMPETITION VERSUS SUSTAINABILITY IN SUPPLY CHAINS:

WHY MANAGERS STILL DO NOT MAKE SUSTAINABLE DECISIONS

Master Thesis, MSc Supply Chain Management University of Groningen, Faculty of Operations Management

Date: June 20

, 2018

LEA HAMANN Student number: 2013355 E-Mail: lea.r.hamann@gmail.com

Supervisor: Dr. ir. Niels Pulles / University of Groningen Co-assessor: Dr. ir. Stefania Boscari / University of Groningen

Acknowledgements: I would like to thank my supervisor for his advice and support and the

co-assessor and reviewers for their constructive and insightful comments, which all helped me

improve the quality of this research paper. Also, I would like to thank the participants and

interviewees of the experiment company for their contribution. It has been a great pleasure

working together with all of you.

ABSTRACT

Purpose: This research investigates the impact of competition on sustainable decision making in supply chains of Business-to-Business companies and how managers can be motivated internally to make more sustainable decisions.

Methodology: An experiment with two studies is conducted to test the research hypothesis and answer the research question. The first study is a survey based on vignette scenarios to measure the effect of managerial decision making in competitive supply chains, and the second study contains interviews with managers to investigate managerial motivation for decision making in sustainable supply chain management.

Findings: The statistical analysis shows that competition tends to influence managerial decision-making behaviour in sustainable supply chain management and the qualitative analysis revealed that managers become motivated through top management acting as a role model in the form of enforcing a sustainable code of conduct.

Originality/ value: New theoretical and managerial knowledge are gained in the sustainable supply chain management field.

Keywords: Sustainable supply chain management, Competition in supply chains, Managerial decision making in supply chains

Paper type: Research paper

Word count: 9,702

TABLE OF CONTENT

I. Introduction p. 4

II. Theoretical background p. 6

1. Sustainable supply chain management p. 6

2. Managerial decision-making behaviour p. 8

3. Competition p. 8

4. Motivation for SSCM p. 9

5. Literature gap p. 11

III. Research hypotheses p. 13

IV. Overview of studies p. 14

1. Study 1 p. 14

2. Study 2 p. 17

V. Results p. 20

1. Study 1 - Downstream results p. 20

2. Study 1 - Upstream results p. 22

3. Study 2 - Interview results p. 25

VI. Conclusions and discussion p. 27

1. Managerial implications p. 30

2. Limitations p. 30

3. Directions for further research p. 30

VII. List of references p. 31

VIII. Appendix p. 34

1. Appendix A – Vignette-based scenarios p. 34

2. Appendix B – Interview questions p. 39

3. Appendix C – Results of statistical analysis p. 40

4. Appendix D – Coding tree p. 41

I. INTRODUCTION

Sustainability is considered as the “license to do business in the twenty-first century” (Carter

& Easton, 2011: 59). Nearly every organisation has this word imbedded in their strategy, but their code of conduct rarely leads to sustainable supply chain management, especially not in a competitive business environment (Bennett, Pierce, Snyder, & Toffel, 2013).

This research paper aims to reveal how competition for increasing market share affects behaviour of supply chain management practitioners with respect to sustainable decision making. Sustainable supply chain management has a long-term perspective to coordinate supply chains and includes marketing and supply concerns (Closs, Speier & Meacham, 2011:

101). Sustainability in the supply chains also involves decision making outside the organisation and a relationship with chain partners based on environmental and social pillars.

Research has shown that stakeholder interests and profit orientation of managers is required in order to stay competitive; however, this may force these managers to behave unethically or even make illegal decisions (Bennett et al., 2013: 1725). The research by Bennett et al. (2013) revealed that competition might be related to unethical behaviour. Yet, the effect of competition on the sustainability of supply chain management decisions has not been measured. According to Steinbacher (2009) the role of managers in the decision-making processes is enormous as their decisions affect costs, projects, and even resources throughout the supply chain. Based on this it is important to stimulate managers to act ethically when making supply chain decisions. However, there are no widespread motivations for managers, which encourage them to manage their supply chain in a sustainable way and not make unethical decisions due to competitive forces.

After reviewing sustainable supply chain management (SSCM) literature from the past twenty

years, Carter and Easton (2011: 58) and Ansari and Kant (2017: 2537) analysed academic

literature in this research topic and found a lack of both field experiments and quantitative

data for SSCM research. The reason is that there could be new conclusions drawn if such

research methods are used in the context of SSCM. Therefore, the present research gathers

quantitative data through experiments including surveys based on vignette scenarios. Vignette

scenarios can measure the effect of managerial decision making in competitive supply chains

and by conducting traditional interviews with experts, additional knowledge

(Rungtusanatham, Wallin & Eckerd, 2011: 10) on manager incentives is gained.

Prior research shows that competition for increasing market share affects supply chain management and managerial behaviour with respect to sustainability. However, it is not researched yet, if and how competition influences manager decision making for SSCM. When competition has an influence, managers tend to make more unsustainable decisions in order to ensure the survival and success of their business. Therefore, this is the key gap to be analysed.

This research paper will investigate whether managers are more likely to make unsustainable supply chain decisions when competition is high and what motivates the managers’ company internally to encourage sustainable decision-making behaviour. Thus, the main research question for this paper to answer is: How does competition influence sustainable decision making in supply chain management and what are the manager motivations that support sustainable decision making?

In order to answer the research question, this master thesis is structured as follows: The

theoretical background section will provide the current state of the literature about SSCM,

managerial decision-making behaviour, competition and motivations for SSCM, and provides

definitions of the research topics. Then, the methodology section explains the research

procedure for the vignette-based scenario experiment by discussing the experiment procedure

as well as the data collection and analysis for each of the two research studies. Thereafter, the

results of each study are presented. The discussion places the findings into the current

literature context, provides theoretical implications and concludes the research with the

lessons learned. Lastly, an overview of the managerial implications plus limitations of this

research and directions for further investigations is given.

II. THEORETICAL BACKGROUND

2.1 Sustainable supply chain management

In the past years the research in sustainability shifted its focus from single organisations and their local optimization to the optimization of the entire supply chain (Tay, Rahman, Aziz &

Side, 2015: 892). The most suitable definition of SSCM for the present research is the one of Ahi and Searcy (2015: 339): “The creation of coordinated supply chains through the voluntary integration of economic, environmental, and social considerations with key inter- organizational business systems designed to efficiently and effectively manage the material, information, and capital flows associated with the procurement, production, and distribution of products or services in order to meet stakeholders requirements and improve the profitability, competitiveness, and resilience of the organization over short- and long-term.”

Ahi and Searcy (2015) made a comparative literature analysis on the definitions of green and sustainable supply chain management. Their results show that integration of sustainability into supply chain management begins with a focus on the merging of “green” considerations with supply chain management practices. Therefore, SSCM can be seen as an extended concept of green supply chain management. Moreover, green supply chain management definitions have a more narrow focus than SSCM (Ahi and Searcy, 2015: 329), which is helpful when considering especially the economic and social aspects of this research. Thus, the above mentioned definition confirms the broad impact that sustainability has on supply chains of organisations and is used in this research as a basis to understand SSCM and why managers need to start acting accordingly.

To illustrate the impact of sustainability, Carter and Rogers (2008) introduced a theoretical framework of sustainability applicable for supply chains. The framework is based on the three components natural environment, society and economic performance. This is similar to the triple bottom line concept cultivated by Elkington (1998, 2004 in Carter & Rogers, 2018:

364). In addition, Carter and Rogers (2008) introduced four facilitators: strategy, risk management, organisational culture, and transparency, which were added to the framework.

This concept of SSCM can be seen as the starting point for managers to understand SSCM and more importantly it “allow(s) managers to take tangible actions” (Carter & Easton, 2011:

49).

This thesis will specifically focus on the environmental and social aspects of sustainability and how managers can preserve SSCM with their behaviour. Hence, these two pillars will be described explicitly. Firstly, environmental sustainability can be seen as a way to improve the competitive advantage of a firm (Piecyk & Björklund, 2015; Dubey et al., 2017 in Bask et al, 2018). Furthermore, Bask et al. (2018) argue that supply chain members need to fulfil certain minimum requirements concerning environmental criteria to remain within the supply chain, while still meeting customer needs and other economic criteria (Seuring and Müller, 2008;

Wolf and Seuring, 2010 in Bask et al, 2018: 2987). These requirements are, for instance, ISO certifications. Secondly, the concept of social sustainability, which was first defined by Wood (1991), from a supply chain perspective are “the product and process aspects that affect people’s safety and welfare” (Mani & Gunasekaran, 2018: 151). The social perspective is especially important for this research as the managerial behaviour mainly impacts supplier and customer relationships. Therefore, it is the responsibility of managers to sustainably maintain their supply chain and relationships.

To sum up this literature review on the SSCM topic, the extensive study of the authors Ansari

and Kant (2017) was examined on the state of the art literature of SSCM. The authors

reviewed SSCM literature from 2002 to 2016 and showed that a significant amount of studies

focused on the implementation of sustainability concepts in industrial supply chains. Most

reviewed articles were published in the past five years and case studies were the most used

research methodology followed by conceptual models and interviews. The majority of SSCM

studies were conducted in the manufacturing and industrial sectors and were published in the

Journal of Cleaner Production. Ansari and Kant (2017, 2537) noticed a lack of quantitative

research in SSCM and suggested further research with quantitative data that analyses the

relationships in SSCM. Moreover, the authors predicted that in the upcoming years

sustainability incentives and the adoptability of sustainable practices would be more

important in research. On top of that, their literature review suggested future research in

sectors that have a significant impact on supply chain sustainability like the automotive,

energy or logistics industry. All this indicates that SSCM literature is still focusing on specific

aspects and building theory. Therefore, the present research is a quantitative data collection in

the logistics industry to add new SSCM knowledge with practical implementations.

2.2 Managerial decision-making behaviour

Managers have a duty to sustain the environment (Hussain, 19999 and Hume & Gallagher, 2010 in Tay et al., 2015: 894) and need to make decision making in supply chains more sustainable. This concerns the ethical behaviour of managers, i.e., their conduct and that they act appropriately. Since this thesis focuses on what stimulates sustainable behaviour, the literature on incentives is reviewed, but first the unsustainable behaviour is defined in the context of competition. The description of “unethical behaviour” is often used in literature and in comparison with unsustainable behaviour it not only entails that the decision is made without respect to the environment but also neglecting the people affected. Kilduff, Galinsky, Gallo and Reade (2013) studied how unethical behaviour is increased by rivalry. They found that competition raises the status concerns and thus psychological stakes of managers, making them adopt a more performance orientated approach. This results in an increasingly unethical behaviour of the manager. Kilduff et al. picture rivalry as “a powerful motivational and corruptive force“ (2013: 1529), which has a significant impact for companies. However, they do not give an approach on how to deal with this rivalry and its consequences on unethical behaviour of managers.

2.3 Competition

Competition in a business environment is described as the contest of two or more firms for

market share, profit or even leadership. Porter (1986) assessed the competition in global

industries more than thirty years ago and his conceptual framework “Five Forces” is still the

best-known. It is also applicable in theory to the present research, as a company is impacted

by rivalry in its supply chain, suppliers and buyers, as well as substitutes and new entrants. In

addition to global competition, internal competition among organisations is a result of the

diversified customer demand and the complexity of product components (Karthik et al., 2015

in Ansari & Kant, 2017: 2525). For this master thesis, the competition is expected to impact

managerial behaviour and for this aspect competition can have either positive or negative

effects for a firm and its managers. On one side, “competition among firms produces many

positive societal outcomes, including lower prices, higher productivity, and greater consumer

surplus” (Bresnahan and Reiss 1991, Syverson 2004 in Bennett et al., 2013: 1725). On the

other side, Bennett et al. (2013) investigated the negative impact of competition that engages

corrupt and unethical activities of firms to meet customer requests. The authors studied this

impact in the vehicle testing market and examined the illegal form of quality. Competition

impacts managers in their decision as they tend to accept an unethical supplier, for instance,

success of their business. The present research will focus on the negative impact of competition on managerial decision-making behaviour and places it in the supply chain management field.

Furthermore, to assess the level of competition, Nagurney, Tu and Floden (2013) developed a supply chain network model that captures competition. The competitive firms of their study differed by brands and the competition affected their supply chain in production, transport, storage and distribution. The authors concluded that firms can succeed in making profit as well as lowering their emissions when they weight their environmental emissions more. In this case, competition can be beneficial for supply chain managers and so for the present research measuring competition may have positive implications too.

The literature on competition was also reviewed on the impact of competition on supply chains and how it drives decision making. The authors Tay et al. (2015) defined internal and external drivers and barriers for sustainable development in supply chains. Important to notice is that the authors state competitors as an external driver or even an enabler for sustainable practices. The external barriers for sustainable development are the desire for lower prices by customers and poor supplier commitment. Concluding, the effect of external forces on an organisation is anticipated in literature but not yet researched. Finally, the literature review on competition showed that scientific articles on this topic are limited or out-dated and that no literature was found about competition for market share in the context of sustainable decision- making behaviour.

2.4 Motivation for SSCM

Motivation of employees and managers is crucial for the success of SSCM. In spite of this cruciality, managers lack an understanding of what kind of initiatives can be part of sustainable performance (Berns et al., 2009 in Isaksson, 2018). The most common are environmental management initiatives for firms (Benn, Teo & Martin, 2013), however; the participation of managers and employees in SSCM often needs to be triggered. Their motivations are either monetary incentives like bonuses or non-monetary like role modelling.

Some type of incentive for managers is needed to motivate them to behave ethically and sustainably in contrast to making decisions for the supply chain forced by competition.

In general, sustainable initiatives have a broad scope, from small superficial changes to

radical business procedure changes (Closs, Speier & Meacham, 2011: 101). However,

literature does not provide an approach on how individual managers can be affected by these incentives. These managerial incentives are seen as a type of compensation for their performance. Thus, the sustainable actions and ethical decision making of the managers are first encouraged and second, compensated for instance, with money or with other benefits.

Nevertheless, no literature is found that investigated motivation in this SSCM field yet.

On the other hand, Ray and Violanti (2018) researched followership characteristics and found out that role modelling can provide motivation to achieve goals. Moreover, role modelling is effectively influencing individuals (Ray & Violanti, 2018). This can be helpful with regard to behaviour motivation towards sustainable decision making. Adding to this, Sharma (2018) describes that role modelling “is a powerful tool that enhances a person’s effectiveness and brings about change in a short duration” and that it can be a pathway for transforming a company conduct (Sharma, 2018: 137).

Finally, the present research will mainly focus on personal incentives for managers and not on incentives for the company as a whole, like incentives from the government, for instance. In small companies employees can be rewarded with gift cards to show appreciation. In bigger companies a formalized reward system is often set up. There, the employees can earn big items like trip tickets or electronic devices. Generally, these employee incentives are like a system rewarding success and employees can earn prizes or recognition. To conclude, it is relevant to distinguish that rewards are simply a recognition of good work and are not necessary always monetary.

2.5 Literature gap

This theoretical background chapter can be concluded with the gap in supply chain management literature. What is missing in the research mentioned above is the impact of competition on SSCM and how managers can be motivated towards sustainable operational solutions in their decision making. Table 2.1 displays the literature reviewed and the gap of an investigation incorporating all four research topics.

To investigate this gap more closely, a research hypothesis is defined and the following subquestions are posed:

• What are the reasons for managers not to take sustainable options even though they

are available?

• Why would managers make unsustainable choices for their supply chain in the first place?

• What are the decision circumstances for the managers?

• Which incentives could motivate managers?

• How can managers be stimulated to make more sustainable decisions?

TABLE 2.1 Literature reviewed per research topic

Literature

Research topic

SSCM

Managerial decision-

making behaviour

Competition Motivation for SSCM

Ahi & Searcy (2013) Comparative literature analysis Ansari & Kant (2017) Comparative

literature analysis Bask et. Al (2018) Definition

environmental sustainability

Influences

Benn et al. (2013) Initiatives

Bennett et al. (2012)

Implications Definition &

influences

Berns et al. (2009) Definition Implication

Brandenburg & Rebs (2015) Comparative literature analysis Carter & Easton (2011)

Comparative literature analysis

Comparative literature

analysis Carter & Rogers (2008) Definition &

Framework with facilitators Closs et al. (2010)

Dimensions Sustainability

leadership

Desmet et al. (2015) Influence,

ethical decision-

Definition of market competition

making

Isaksson et al (2018) Green

initiatives

Kilduff et al. (2016) Unethical

behaviour Relationship Mani & Gunasekaran (2018)

Definition social

sustainability Implications

Structural model of

forces Markman et al. (2009)

Definition Conceptual

theory Mir et al. (2017)

Definition Relationship management

Nagurney et al. (2013) Sustainable

network

Porter (1986) Definition &

framework

Ray & Violanti (2018) Followership

motivation &

role modelling

Sharma (2018) Role

modelling &

company conduct

Steinbacher (2009) Decision

making Incentives

Tay et al. (2015)

Sustainable supply

chain development Implications

External drivers &

barriers

III. RESEARCH HYPOTHESIS

Based on the above elaboration of the current state of literature it can be argued that competition has an impact on SSCM and on managerial behaviour. One concluding assumption is that managers in a highly competitive environment will tend to make less sustainable decisions. They feel pressured to assure their business and are more likely to withhold information to supply chain partners or accept unsustainable offers.

Bennett et al. (2013) studied that competition increases the threat of customer loss, which is why firms are more likely to respond by matching their rivals’ behaviour and crossing legal boundaries. Kilduff et al. (2013) concluded their study on how unethical behaviour is triggered by rivalry. Managers are more corruptive in decision making when competition is high because they will make decisions in favour of winning the competition and making profit and not with the perspective of sustainability. The managers fear to lose market share, their suppliers and customers and/or profit. Their unethical behaviour is therefore more likely to increase when the level of competition rises. This brings up the assumption that when competition is high, the decision-making behaviour will be impacted and become less sustainable or even unethical.

Moreover, Bennett et al. (2013) point out that competition can lead managers to act and behave in an unethical way just because they aim to satisfy their customers. Together with Tay et al. (2015) this competitive pressure may force managers to act unethically and thus less sustainably, in order to please their customers and suppliers with the long-term aim to keep them in their supply chain. The literature review revealed that sustainability does not play a main role in this decision-making process and is often the less favourable option due to constraints and higher costs. This leads to the following research hypothesis:

Hypothesis: If competition increases, decision-making behaviour of managers is less

sustainable.

IV. OVERVIEW OF STUDIES

Two studies were conducted to test the research hypothesis with the aim to answer the research questions. Study 1 examines quantitative data of a scenario-based experiment to test the hypothesis and study 2 uses interview data to get more in-depth knowledge regarding managerial behaviour in SSCM decisions. Each study is explained individually but together they form a complete experiment and contribute to the supply chain management research field with new knowledge.

4.1 Study 1

The purpose of this study was to collect data as evidence whether the level of competition has an impact on SSCM decision making. As quantitative data is reliable to test the research hypothesis, a vignette-based scenario experiment was conducted (Rungtusanatham, Wallin &

Eckerd, 2011). A vignette is a “carefully constructed description of a person, object, or situation, representing a systematic combination of characteristics” (Atzmüller & Steiner, 2010: 28). Hence, this vignette study uses “short descriptions of situations or persons (vignettes) that are usually shown to respondents within surveys” (Atzmüller & Steiner, 2010).

4.1.1 Method

The method of study 1 is an experiment with two vignette-based scenarios for the environmental and social aspects of SSCM. The environmental vignette describes a scenario in which a company called BatteriesCo supplies batteries to the automobile industry and due to a high demand for batteries within the industry the company has to increase production.

The social vignette is about a fashion brand called HotFashion and explains a typical scenario in the clothing production industry, where a company wants to expand a product line. The complete vignette-based scenarios can be found in Appendix A. In order to test the level of competition and its impact, both vignettes will be manipulated by either high or low competition descriptions that will eventually influence the decision-making behaviour of managers. The manipulation is a statement in the case that business analysts of the company report that other firms are seeking business with the same suppliers or that there are no rivals.

However, it is not explicitly stated that there is competition or that there is none.

4.1.2 Participants and design

The participants for this survey are managers with customer or supplier contact in a Business- to-Business (B2B) company. The vignettes for the survey are developed in cooperation within a research group and the results are jointly shared to achieve a higher rate of responses and thus a higher significance of the data. Twenty-one responses from eleven upstream and ten downstream supply chain managers of a logistics service provider were gathered. An overview of the details of participants can be found in Table 4.1. This data was added to a combined data excel sheet we share with the group of fellow SCM master students that conducted the scenario-based survey in other companies as well.

TABLE 4.1 Details of participants

Downstream Upstream

Number of participants 10 11

Age span of participants 26-52 years 27-57 years

Function of participants Logistics, Operations Operations, Purchasing Nationality of participants German, Turkish Austrian, Danish, German

4.1.3 Procedure

Pre-developed vignette-based scenarios were used to conduct the experiment physically at a B2B company in order to research the decision-making behaviour of the managers.

4.1.4 Measures

The following measures were used for this study: “sharing information” with colleagues and

“sourcing”. Next to that the behavioural measures “reporting decisions” and “amorality” are

used. An overview of all four measures can be found in Table 4.2. The measures are slightly

different between the upstream vignette-based scenarios and the downstream once. The first

measure, the measure “sharing information” about decisions with colleagues is used to

evaluate the manager decision behaviour of the downstream survey about the information on

a new supplier. The measure “sourcing” has the same intention but for the upstream survey on

information given to the customer regarding supplies. The amorality measures both sides on

the organisation and the manager’s behaviour. Amorality is a measure for not involving

questions of right or wrong, so without moral quality and it is adopted from a research

conducted by Dahling, Whitaker and Levy (2009). The measurement model is used to prepare

the survey statements in a way that they can generate enough quantitative data useable for

statistical testing.

The survey statements were developed accordingly to the scenarios. This survey intended to capture the behaviour of managers and the final version is attached in Appendix B. The statements were set up to be answered by a Likert scale where managers have to rate their feelings and decisions regarding the decision making in these two vignette-based scenarios.

The seven-point Likert scale format forces the participants to answer on a scale between 1, meaning “no, completely disagree” and 7, meaning “yes, completely agree”. These participants’ responses reveal perceptions, values, social norms, and impressions.

TABLE 4.2 Measures in survey statements Sharing

information

Please assess the following statements on your decision of sharing information about your supply chain department’s decision to source nickel from AsianMining (1 = no, completely disagree to 7 = yes, completely agree)

For instance:

BatteriesCo will share

information on its new source for nickel with the OEM

Sourcing Please assess the following statements on your decision of sharing information about your supply chain department’s decision to source from the subcontractor

(1 = no, completely disagree to 7 = yes, completely agree)

For instance:

It is likely that HotFashion will inform the Nordic retailer on its decision to start sourcing from DenimFabric’s subcontractor with the Nordic retailer Reporting

decisions

How likely are you to report on this decision to...

(1 = not likely at all to 7 = very likely)

…your direct colleagues

…your supervisor / manager

…your subordinates Amorality Please assess the following statements

(1 = no, completely disagree to 7 = yes, completely agree)

For instance:

I am willing to be unethical if I believe it will help me succeed

4.1.5 Data analysis

The outcome is quantitative data, which was prepared to be tested statistically with a program

called SPSS. The quality of the results is linked to the amount of respondents. As this study is

part of a group research, the data was combined to capture a more significant number of

participants. Therefore, the results were analysed by classifying a number of interviewee

attributes, e.g., age, function, nationality, and companies, as descriptive statistics to create an

overview of the data gained with the vignette survey. By following the suggested design elements of vignette-based scenario experiment from Steiner, Atzmüller & Su (2016: 55) the research set up ensured reliability and construct validity.

4.1.6 Manipulation checks and hypotheses testing

A manipulation test was done to check the impact level of competition (high or low). This check helped to determine whether high competition manipulates the behaviour of a manager.

Because the competition variable is manipulated also a Hawthorne test was done to test the manipulation caused by the participants’ bias. Then, internal reliability and construct was tested with Cronbach’s alpha and a reliability analysis. The reliability analysis was performed to identify significant relationships between the managerial decision-making behaviour (dependent variable), competition and SSCM (independent variables). Lastly, a two-sided t- test was utilized to identify significant differences between sustainable decision-making behaviour of managers and competition and to test the hypothesis.

4.2 Study 2

This second study aims to find in-depth insights into managerial behaviour in SSCM decisions and therefore interviews are chosen to obtain qualitative data and up-to-date results.

4.2.1 Method

The explorative approach of quantitative data collection is used, as this research is in the early stages and the purpose is to acquire in-depth insights in a new context (Yin, 2003). A qualitative research was chosen because it is particularly suitable for explaining and providing in-depth and rich information (Ellram, 1996, Rungtusanatham et al., 2011). This research approach facilitated exploring the relationship between the impact of competition and managerial decision making in SSCM. First-hand knowledge from the interviewees was gained and carefully analysed according to the guidelines described in the following.

The reliability of the second study is moderate as the gained data is qualitative and

interviewee dependent, but by following the interview procedure trustworthiness can be

guaranteed (Yin, 2003). The validity is granted through the face-to-face interviews that allow

clarifying the questions if the interviewees do not understand them (Rowley, 2012). The

results are generalizable but only within this research context (Karlsson, 2009). For other

contexts this is not advisable, thus this is a research limitation. However, the overall quality of

this second study is guaranteed: as literature from Ellram, (1996), Rowley (2012) and Karlsson (2009) about research interviews was studied and the study built up accordingly.

4.2.2 Participants and design

A case company was chosen based on the business-to-business criteria and on the ease of having a personal contact to a logistics service provider. The interviewees were selected based on their position in up- and downstream functions within the logistical service company and their responsibilities in the supply chain. They were approached via email and voluntarily offered to share their thoughts and knowledge after taking part in the survey of study 1. It was ensured, however, that at least two participants of each supply chain side were interviewed and that their responsibilities differed. Some interviewees are more involved in daily operations and the others have predominantly management functions. These face-to-face interviews helped to gain more knowledge about incentives. The interview questions were designed based on a literature review and focused on the motivation of managers to show decision-making behaviour in favour of SSCM (Appendix B). The questions were semi-open questions in order to receive as much insight as possible and are pilot tested.

4.2.3 Procedure

The interviews took between twelve to thirty minutes and were conducted in April and May 2018. The target was three to four interviews from each of the supplier side managers and the customer side managers of an organisation, respectively. Moreover, the researcher also spoke with a top manager of the case company to verify the statements of the other interviewees and to receive an even better insight.

4.2.4 Data collection

As the interviews are a form of conversation that facilitates the gathering of valuable in-depth understanding on how the concepts are related, they help to build up theory (Ellram, 1996).

Semi-structured questions provide the needed flexibility during the interview to gather as

much insight as possible (Ellram, 1996). Qualitative data was the outcome of this study and

consists of textual data and the spoken word. The quality depends on the answers given from

the interviewees. This exploratory research design may be slightly risky due to the flexibility

and answer possibilities (Rowley, 2012). However, by following the guidelines in selecting

the right interview partners, following the interview protocol (Appendix B) and procedures

during the interview process the right outcome was ensured and trustworthiness is enhanced (Yin, 2003).

The interviews, in case of agreement of the interviewee, were recorded and transcribed for a comprehensive data analysis. The information gained was analysed by linking them to the research context and grouping the textual data into codes based on the concepts decision making, sustainable supply chain management, competition, and manager incentives.

4.2.5 Data analysis

The data was analysed using a coding approach from Miles and Huberman, which is threefold: first data reduction, then data display and third, drawing and verifying conclusions (Miles, Huberman & Saldana, 2014). The first analysis step was reading the transcripts and labelling the relevant quotes. As a result, some statements were excluded, as they explained no motivation for SSCM but ethical behaviour in society. Then all relevant data was reduced to only those quotes and phrases that are truly applicable to answer the research question.

These were then transferred to an excel file and summarized. The measures for the coding

process were relevant quotes, meanings, descriptions, definitions, concepts, metaphors or

characteristics concerning manager decision making and possible incentives in SSCM. From

this, first order codes were derived and finally categorized. All these are summarized in a

coding tree to make the data available for future investigations (Appendix D). Finally, the

data analysis process can be briefly described as data reduction, followed by applying

descriptive codes and a focus on SSCM, and at the end the link to motivation, incentives and

circumstances from SSCM.

V. RESULTS

This chapter presents the results of the research in three subchapters. As the data gained with the vignette-based scenario experiment of study 1 is separately analysed for down- and upstream respectively. Followed by the findings and insights of the second study, the interviews, which is the third subchapter.

5.1 Study 1 – Downstream results

In this first subchapter the results of the quantitative analysis of the downstream surveys of study 1 are presented. The aim of the statistics tests was to answer the research hypothesis “If competition increases, decision-making behaviour of managers is less sustainable”.

5.1.1 Downstream data - Descriptive statistics

The Table 5.1 below provides an overview over the descriptive statistics of the data in order to obtain background information about the participants that conducted the surveys.

TABLE 5.1 Overview of downstream participants

Age span of participants 22-58 years

Function of participants Logistics, Marketing, Sales (majority)

Nationality of participants American, Brazilian, Dutch (majority), German, Turkish, Spanish Company type Financial services, Logistics services, Manufacturing, Product retail

5.1.2 Downstream data - Manipulation checks

To determine that the two levels of competition have an impact, the manipulation check was

performed. This check was done through comparing the means of both competition groups

(high/low) for each of the two cases environmental (Env) and social (Soc) and the results

showed that manipulation in this experiment was successful. Hence, there is a significant

difference in the participant answers of the manipulation questions with high or no

competition, shown in Table 5.2. For the environmental case with high manipulation the mean

was 5.7 on the seven-point Likert scale and 3.5 for the responses not manipulated with

competition. This confirms that the participants recognized the competition in this case. For

the social case the mean was 5.3 with competition manipulation and 3.3 without, which is

positive, as the participants did not agree with the competition statements of the survey. In

addition, it was tested if the participants did not manipulate the surveys with their biased

means as well, see Table 5.2. The outcome is that the participants answered unbiased, as the difference between the means for high and low competition is 5.0 to 5.3 in Likert scale numbers for the environmental case and 4.4 to 4.6 for the social cases. This implies the data could be further analysed.

TABLE 5.2 Means of downstream survey responses

Cases with competition Manipulation check Hawthorne check

Environmental high 5.762 5.357

Environmental low 3.563 5.000

Social high 3.370 4.659

Social low 4.467 4.435

5.1.3 Downstream data - Reliability analysis

To ensure that the adapted measures meet the reliability and validity of the experiment and its construct, the data was tested for reliability. The minimum threshold of 0.7 Cronbach’s alpha for this analysis is accepted as good (Yang & Green, 2011). As can be seen in Appendix C, Table 1 the Cronbach's alpha coefficient is above this threshold (0.921). The results of all 90 cases were used and the mean of the answers was above four in the seven point Likert scale, which shows no biased answers between the average answers. Therefore, internal consistency is high according to the threshold and the construct of the survey is supported by literature.

The measures used were confirmed valid in prior research (Dahling et al., 2009; Connelly, Ketchen et al., 2016; Meertens & Lion, 2008). Based on this analysis the variables and measures used in the survey were accepted, and finally, reliability and validity were confirmed to continue with the hypothesis testing.

5.1.4 Downstream data - Hypothesis results

To test whether there is a significant relationship between managerial decision-making

behaviour and the level of competition, the two-sided t-test was utilized. The dependent

variable in this test was the behaviour of the managers and the independent one the level of

competition. The threshold for this test has a significance level of smaller than 0.05, which

means that both competition level groups are not the same. The results of the t-test can be

found in Table 5.3. They revealed that the values for the items in the sharing information

category were all above this level. The means of the three sharing information responses were

for the environmental case with competition manipulation around 4.29 to 4.57. For the

environmental without competition they were 5.21 to 5.63. For the social case the Likert scale

responses mean was between 3.91 and 4.36 for the high competition and above 5.17 to 5.43 for the sharing information without competition manipulation. This clarifies that managers under competition are a little less willing to share information on their decisions. The significance levels were acceptable as they are close to the threshold and therefore the hypothesis test shows a trend that if competition increases, the decision-making behaviour of managers gets less sustainable.

TABLE 5.3 T-test results for downstream cases Variable Case Number of

participants

Mean (high competition)

Mean (without competition)

Significance

SharingInfo1 Env 45 4.29 5.50 0.050

Soc 45 4.05 5.39 0.069

SharingInfo2 Env 45 4.43 5.63 0.080

Soc 45 3.91 5.43 0.130

SharingInfo3 Env 45 4.57 5.21 0.221

Soc 45 4.36 5.17 0.188

SharingInfo AVERAGE

Env 45 4.43 5.44 0.197

Soc 45 4.10 5.33 0.278

To conclude, the results of the statistical analysis of the two downstream cases express support for the research hypothesis but are not entirely significant. Furthermore, the impact and effect of competition on decision-making behaviour of the downstream participants is verified.

5.2 Study 1 – Upstream results

Next are the results of the quantitative analysis of the upstream surveys of study 1 generated with the same statistics tests as for the downstream data to test the research hypothesis.

5.2.1 Upstream data – Descriptive statistics

Similar to the downstream surveys, the descriptive statistics of the upstream participants were analysed and then summarised in the Table 5.4 to build a fundamental understanding of the data gained.

TABLE 5.4 Overview of upstream participants

Age span of participants 19-61 years

Function of participants Logistics, Operations, Purchasing (majority), Procurement, Supply chain management

Nationality of participants Austrian, Danish, Dutch (majority), German, Swedish

Company type Financial services, Logistics services, Manufacturing, Product retail

5.2.2 Upstream data - Manipulation checks

The principles for this manipulation check are the same as mentioned under 5.1.2. The results of the manipulation check for the upstream data are positive. For the environment cases with high manipulation the mean was 5.5 on the seven-point Likert scale and 3.5 for the non- manipulated. The means show that participants recognized the impact of competition. For the social case the mean is 4.8 and 3.3 without competition manipulation. The comparison of means reveals an impact, which is displayed per case and competition level in the Table 5.5 below. Also, the Hawthorne check for participant’s bias had a positive result. The mean comparison displayed as well unbiased answers as the environmental case responses are for high and low manipulation cases 5.3 to 5.5 on the Likert scale and for both social cases 4.8.

The exact means can be found in Table 5.5 and the mean comparison can be concluded with the fact that the data can be further analysed.

TABLE 5.5 Means of upstream survey responses

Cases with competition Manipulation check Hawthorne check

Environmental high 5.522 5.500

Environmental low 3.518 5.286

Social high 4.848 4.848

Social low 3.375 4.768

5.2.3 Upstream data - Reliability analysis

The results of the reliability analysis are gained with similar thresholds as mentioned above in section 5.1.3. The analysis for the upstream data reliability revealed that Cronbach’s alpha for the sourcing variables and measures is 0.936. The statistical overview can be found in Appendix C, Table 2. This is thus slightly above the commonly accepted threshold. On the other hand, construct validity is based on the same measures and the standard deviation of the answers was above 4.0 in the seven point Likert scale. In total, 98 cases were used with hardly any outliers. Overall, this analysis result recommends the continued testing of the data for hypothesis support.

5.2.4 Upstream data – Hypothesis testing

For this hypothesis test, the significance level, and therefore the threshold, should also be

smaller than 0.05 as explained in subchapter 5.1.4. The same variable relationship was

analysed with the modification that for the upstream cases the variable is called sourcing. The

mean of the Likert scale responses of the two competition levels does not vary much. For the environmental case the responses with high competition manipulation have a mean of 4.35 to 4.74 and the not manipulated responses have mean of 4.22 to 4.41. In the social cases the means are lower and the difference between competition levels is less: 3.65 to 4.04 for the competition manipulated responses and 2.93 to 3.32 for the ones without. This clarifies that for the downstream respondents the behaviour with regard to sourcing is less influenced by the competition. The outcome of the two-sided t-test is, except for the environmental sourcing statements, all close to the threshold level as shown in Table 5.6. For this data the results can be seen as supporting a trend, which is evidence of a negative relationship between the variables stated in the research hypothesis. Finally, these outcomes are considered to be a support for the research hypothesis, as there is a trend that supports the impact of competition on sustainable and ethical decision-making behaviour shown with the manipulation check.

TABLE 5.6 T-test results for upstream cases Variable Case Number of

participants Mean (high

competition) Mean (without

competition) Significance

Sourcing1 Env 50 4.74 4.26 .922

Soc 51 3.91 3.04 .168

Sourcing2 Env 50 4.35 4.22 .482

Soc 51 4.04 2.93 .042

Sourcing3 Env 50 4.70 4.41 .662

Soc 51 3.65 3.32 .042

SourcingA VERAGE

Env 51 4.59 4.03 .738

Soc 51 3.87 3.10 .287

5.3 Study 2 – Interview findings

The aim of the second study is to find motivations and incentives to support managerial decision-making behaviour towards SSCM. Five employees of a logistics service provider were interviewed. They had different task backgrounds in the supply chain and therefore their insights varied, which was helpful to acquire as much new knowledge as possible. Their hierarchal position differed also from top to operations management. This was best in order to obtain different viewpoints on the topic.

5.3.1 Coding process

The interviews were transcribed and then coded into different categories, which were based

on the definitions and knowledge gained during the literature review. The following

categories were chosen for data analysis:

• Sustainable code of conduct

• General change of mind set

• Motivation

• Role modelling

• Types of incentives

“Circumstances for sustainable decision making” can be linked to the subquestion, posed in the final subchapter of the literature review, about the reasons for managers to not make sustainable decisions even though options are available. Circumstances for sustainability and for unethical, thus not sustainable, decision making were coded under this category. With the category “sustainable code of conduct” all the requirements made by the company were collected. All statements made regarding the general behaviour of employees and world citizen were grouped in the category “general change of mind set”. In the categories

“motivation” and “types of incentives” all comments made suitable to the definitions explained in the literature review were added. Finally, the category “role modelling”

incorporated all statements and quotes about this management technique. The line between the categories was thin and some quotes are overlapping. The link between the categories is that the first three are focusing more on the fundamentals for SSCM while the second half is oriented to give an answer to the research questions on what incentives could motivate managers, i.e., the second part of the overall research question. The complete coding tree is given in Appendix D.

5.3.2 Interview results

In this section the interview insights are summarised. The main motivation for the

respondents to make sustainable decisions in their daily business was for all middle and

operations managers clearly role modelling. The four operations interviewees said that the

role model concept like in child education, would probably be the best to meet SSCM in the

long run. Thus, in their description, the top management and superiors should set an example

in their behaviour and decision making. The interviewees explicitly stated the importance of

SSCM to be lived by the top management and not just to be delegated. On the question which

incentives they would prefer, all answered that monetary motivation is of course tempting, but

first of all a code of conduct has to be created in the company. Generally, they proposed that

the mind set of all businesses has to be changed towards sustainability and not only money

making. The company culture has to become sustainable in order to transfer it into the supply

chain by the managers. All motivations are summarized in Table 5.7 on the next page.

TABLE 5.7 Manager motivations for sustainable decision making

Motivations for sustainable decision making

- Role modelling of top managers - Incentives

- Sustainable ode of conduct

Regarding the type of incentives, the interviewees preferred getting more leisure time and doing something for the environment like an electric car or a public transport yearly subscription over pure monetary incentives. Their motivation for sustainable decision making was already high but it collides with the company targets, and “Me as a small employee cannot make the difference” was often given as reasoning. Moreover, the interviewee with a high responsibility mentioned that the internal tension between sustainability and making profit is still forcing managers to choose the unsustainable option, not just external competition. Additionally, all interviewees pointed out that defining ethical decision making is a fine line and depends on each individual situation. To find a common behavioural conduct for SSCM is thus difficult.

Concluding this interview insight summary, the circumstances for the managers’ decision- making behaviour are displayed in Table 5.8. These circumstances are the answer to the questions what are the reasons for managers not to take sustainable options even though they are available and why they still make unsustainable choices. For example, the interviewees answered that customers demand a low price transport, so the sustainable option to take the train instead of the truck would be more expensive, and above that, the infrastructure for train transport in Germany is out-dated. Therefore, these decision circumstances indicate that the interviewees outweigh making profit and pleasing customers with sustainable decision making. The problem is that the sustainable decision environment is not given as infrastructure or multi-channel option are lacking.

TABLE 5.8 Circumstances for sustainable decision making

Circumstances for sustainable decision making

- multi-channel options

- recognition of customers / suppliers

- better infrastructure (for transport and in general) Circumstances for unsustainable

decision making

- make profit

- customer demand for low prices

To sum up this section, the results of both studies give enough insights to further discussion.

VI. CONCLUSIONS AND DISCUSSION

The present master thesis provides new insights about the impact of competition on sustainable and ethical behaviour of managers in supply chain management. The literature review has shown that SSCM is essential in modern business and that managers need to adjust their behaviour in decision making. To do so, the managers need stimulation from the internal leadership of their company. Hence, to investigate the impact of competition on managerial decision making in SSCM a vignette-based scenario experiment was undertaken consisting of two studies, a quantitative data collection to partly support the research hypothesis and field interviews to contribute with new insights in manager motivation. The purpose of the first study was to investigate the decision-making behaviour of managers in the field of sustainable supply chain management with the impact of competition. The aim of the second study was to find out more on how to stimulate SSCM behaviour amongst managers. This discussion section first focuses on the findings of both studies and then on the resulting implications.

The first and most remarkable finding is that there is an impact of competition on SSCM behaviour in the respondents of the vignette-based scenario experiment. The literature review already suggested that competition leads managers to act and behave in an unethical way due to their aim to satisfy their customers (Bennett et al., 2013). Kilduff et al. (2013) found that competition raises the status concerns and thus psychological stakes of manager. This forces managers to adapt to a more performance-orientated approach, which is often not as sustainable. Furthermore, Tay et al. (2015) examined how unethical behaviour is increased by rivalry and since the manipulation of the vignettes was successful and the present paper supports both of them with the finding that increasing competition impacts managerial behaviour. Clearly, one has to agree that competition is not only negative for a business similar to Nagurney et al. (2013). In their study, sustainable decisions could be made while still competing for market share. This of course differs per industry and when SSCM is not only measured for one single indicator but rather the management decisions in the whole supply chain. To sum up the first finding, the current research concluded that competition is an external factor with the trend to impact decision-making behaviour in SSCM.

The second discussion point is the new insights on the managerial motivation for SSCM.

When external forces like competition are still hindering the sustainable behaviour in decision

making then the organisations need to choose SSCM internally. In the theoretical background

in the beginning of this thesis some managerial motivations and incentive options are mentioned. It became clear that company managers lack an understanding of what kind of initiatives can be used to stimulate sustainable performance between their colleagues (Berns et al., 2009 in Isaksson, 2018). The second study gave new insights about the manager motivation for SSCM. The first four interviewees all stated that more internal promotion opportunities for SSCM and ethical behaviour are needed and that they are willing to offer the often more expensive sustainable solutions towards their supply chain partners. Then, surprisingly all interviewees mentioned that monetary incentives are of less importance and second-best when implementing a more sustainable decision-making conduct in a company.

The majority of interviewees would be motivated if the top management behaved sustainably and would act as a role model for sustainability and decision making. “Role modelling as in child education” was the description of the interviewees and some participants during informal talks after the survey. The conclusion of Sharma (2018) that role modelling can be a pathway for transforming oneself to achieve desired outcomes not only in the workplace fits into this SSCM context. Therefore, motivation for the sustainable managerial behaviour has to be built within a company and hierarchically by the top management.

The third aspect to discuss is the relationship between SSCM, competition and managerial decision-making behaviour. Referring back to the definition of SSCM, Ahi and Searcy (2015) defined that SSCM implies the coordination and improvement of the supply chain towards sustainability. This includes mainly the management of processes and people. These people can be either company internals or supply chain partners, like customers or suppliers.

According to Tay et al. (2015) customers with their desire for lower prices and poor supplier

commitment are external barriers for sustainable development of an organisation and

therefore affect the decision-making behaviour of managers. During the informal talks in the

case company, the experiment participants supported that sustainable decision making is

colliding with the company’s interest of earning money and that most customers are not

willing to pay more for a sustainable solution. Therefore, the participants are caught between

pleasing and retaining their supply chain partners to keep them and making sustainable

decisions. For sure the sustainable decisions are obviously better for the environment and the

long term success of an organisation. However, in SSCM one advantage is that it “allow(s)

managers to take tangible actions” (Cater & Easton, 2011: 49). So, a certain stretch between

pleasing supply chain partners and sustainable decisions should be possible. But where does

ethical and sustainable behaviour start? The interviewees raised this question and it is a valid

consideration that for each manager the definition of ethical behaviour will be different and the line to unethical decision making is narrow. One interviewee mentioned the grey area for decision-making behaviour in SSCM and that it is common for managers to bend the definitions, for example when buying a high amount of new supplies, which may not be defined as a completely sustainable purchase. This illustration answers the posed subquestions about the why and what of unsustainable decision making and unethical manager behaviour.

Thus, managerial behaviour is the dependent variable and in practical terms managers are still impacted by the organisational requirements for sustainable management as well as external factors like competition. The findings of the experiment demonstrated that there is a relationship between these research variables as the t-test results show a trend. Together with the interview statements this expands the knowledge about SSCM and increases understanding on why managers still do not make sustainable decisions.

Bringing all findings together, it is important to point out that both studies contribute to answer the research question and that the experiment and interviews not only confirmed the impact of competition on managers decision-making behaviour. The interviews also revealed how managers can be motivated through role modelling to promote sustainable decision making in supply chain management on both sides, down- and upstream, of a business-to- business company. Consequently these findings have implications for the theory. This master thesis builds upon the studies of Bennett et al. (2013), Kilduff et al (2013) and Tay et al.

(2015) in the field of unethical behaviour and the impact of competition on managerial decision making. The theoretical outcome of this research is adding new knowledge to the theory of SSCM and managerial decision-making behaviour. The finding that competition tends to impact decision-making behaviour in SSCM is supported by qualitative analysis and creates a better understanding of this research field. Additionally, there are in-depth insights about decision-making behaviour and managerial motivation that complement the current literature.

Subsequently, the research question “How does competition influence sustainable decision

making in supply chain management and what are the manager motivations that support

sustainable decision making?” can be answered as the results show that competition has an

influence and managers are mainly motivated when within the company the top management

promotes the sustainable management conduct through role modelling.

6.1 Managerial implications

Managerial recommendations can be derived from the present research. The results of the second study recommended following a two-step approach when aiming to motivate managers and employees for more sustainable and ethical decision making. First, the top and middle management have to promote the sustainable conduct via role modelling and secondly, start to motivate the long-term success through incentives programs, which are measuring the sustainable decisions with key performance indicators and reward the managers. Placing this into context with the motivation literature this two-step approach is a new insight and strategic implication for organisations. Ray and Violanti (2018) stated that role modelling effectively influences individuals and that it can provide motivation to achieve goals, but the real effect for organisations and in the context of SSCM still needs to be tested in a long term experiment. Moreover, the company management should focus on adjusting their code of conduct strategically not only in decision making, but also in relationship management with their supply chain. This way these findings can provide guidance for future changes in SSCM and a solution for organisations to cope with the effect of external competition on their manager’s decision-making behaviour.

6.2 Limitations

In order to apply the present research into a greater academic and professional environment, there are still some limitations to consider. First, the level of competition is only defined as high or low but not medium. This would have eventually had a more differentiated impact on the results of the manipulation. Then, it is important to consider that this research is undertaken in business-to-business companies, which are all based in Europe. Subsequently, in a business-to-customer company or in other business cultures the findings may be different and not applicable. Moreover, profit was not really mentioned to respondents thus competition but also profit could manipulate respondents. The last limitation of this study is the qualitative data collection. Responses are biased as the interviewees answered with the positive perspective for their business and answers differed according to the function of the interviewee. Depending on the function and hierarchy the answers differed.

6.3 Directions for further research

The findings suggest investigating the long-term impact of role modelling motivation and

incentives to support managerial decision making in SSCM. Furthermore, it can be

investigated how competition as an external force can be useful on the pathway of SSCM.