Chain of Blame: A Multi-country Study of Consumer Reactions Towards Supplier Hypocrisy in Global Supply Chains.

Author:Hoffmann, Nils Christian
Position:RESEARCH ARTICLE - Report
 
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1 Introduction

In the contemporary competitive marketplace, where consumers are increasingly demanding better quality and services, building a sustainable relationship with consumers poses a key challenge for companies. Research suggests that engaging in corporate social responsibility (CSR) (e.g., Aguinis and Glavas 2012) is becoming an essential channel for firms to attract and retain customers (Sen et al. 2006) and for marketers to improve brand reputation (Bolton and Mattila 2015). Despite this well-documented trend, corporations do not always act according to set standards and can even engage in corporate social irresponsibility (CSiR) (e.g., Kotchen and Moon 2012; Lin-Hi and Mueller 2013; Murphy and Schlegelmilch 2013). Consumers react to such incidents with moral outrage (Antonetti and Maklan 2016) and engage in a variety of damaging activities, such as spreading negative information to friends and families (Antonetti and Maklan 2018), suing the company (Voliotis et al. 2016), devaluing the brand (Sweetin et al. 2013), and engaging in protests (Grappi et al. 2013) or consumer boycotts (Klein et al. 2004).

A specific case of CSiR--and, from a moral standpoint, a particularly severe type of CSiR--is corporate hypocrisy. Wagner et al. (2009, p. 79) defined corporate hypocrisy as "the belief that a firm claims to be something that it is not." The firm's observable actions differ from its observable statements (Janney and Gove 2011) and it "does not practice what it preaches" (Monin and Merritt 2012, p. 170), thereby violating its own communicated ethical or moral standards. In other words, firms strive to uphold a reputation of being socially or environmentally responsible, yet act in the opposite manner. Recent cases of corporate hypocrisy gained broad media coverage around the world (e.g., Siano et al. 2017). For example, the CSR-leading German car manufacturer, Volkswagen, persistently claimed to care for environmental issues and positioned itself as a world leader in green technology, while simultaneously manipulating its emissions test results to bypass environmental regulations and increase sales. Since then, Volkswagen is increasingly facing legal consequences (Elgot 2018) and having to deal with a plummeting reputation (Mansouri 2016). Another example is Walmart's use of child labor at two factories in Bangladesh despite the company's claimed leadership in ethical supply chain management (Torres et al. 2012), which has resulted in a public outcry and a decline in their stock prices.

Previous studies that examined the dyadic relationship of consumers' reactions to corporate hypocrisy have focused on CSR claims (Arli et al. 2017; Kim et al. 2015) and on the egregious behaviors of firms (Wagner et al. 2009). However, firms rarely act as a single agent in the global economy. In the course of the ongoing globalization of trade and business, there is a growing need for firms to manage complex supply chains that span the globe, and to interact with suppliers of various cultural backgrounds (Ganesan et al. 2009). They are increasingly exposed to alarming incidents of non-compliance with CSR and sustainability in their upstream supply chains, which has subjected them to significant reputational risk and damaged performance (Gereffi and Lee 2016; Paulraj and Blome 2017).

For example, the US tech giant Apple was exposed to harsh criticism regarding the exploitative working conditions of their Chinese supplier, Foxconn (Enderle and Niu 2012). As one of the world's largest technology suppliers, Foxconn explicitly breached its own promises and responsibility claims, and acted hypocritically (Clarke and Boersma 2017), which resulted in many Western consumers boycotting Apple (Josephs 2012).

While some preliminary research has started to consider CSR-related issues extending beyond firm boundaries in inter-organizational structures, such as buyer-supplier relationships (Brammer et al. 2011; Homburg et al. 2013; Thornton et al. 2013), limited research has examined whether and how the hypocritical behavior of suppliers backfires on the firm that relies on such suppliers, especially in an international context. The triadic relationship that encompasses the CSR claims of the firm, the irresponsible behavior of the supplier, and consumer reactions to this firm-supplier hypocrisy has been under-examined thus far. This is surprising given that--as demonstrated by the Apple-Foxconn example--many firms claim to engage in CSR in their consumer communication, while neglecting to monitor the claims and irresponsible activities of their suppliers. This, in the end, can harm their reputation and evoke reprisals from consumers around the globe. Moreover, the CSR and CSiR literature indicates that consumers of various cultures and national backgrounds react differently to corporate transgressions, just as they perceive CSR differently (Kolk et al. 2015; Williams and Zinkin 2008), which influences their attitudes and consumption decisions towards firms. Thus, far, the literature is silent on how international consumers differ in their reactions to corporate hypocrisy, especially along the global supply chain.

To fill these voids, the present research makes the following contributions to the literature of global supply chains, corporate social (ir)responsibility, and hypocrisy. First, we expand the dyadic firm-consumer relationship in hypocrisy research to a triadic supplier-firm-consumer relationship that considers the consequences supplier hypocrisy has on the reputation of the firm and on consumers' boycott intentions. Contributing to the literature on chain liability and responsibility attributions in global supply chains (Hartmann and Moeller 2014) and supply chain contamination (i.e., the contaminating effect of supplier's misbehavior on different stakeholders, Fracarolli Nunes 2018), we introduce a 'chain of blame' that describes a backfire effect of the hypocritical behavior of the suppliers on the firm. Second, we integrate expectancy violations theory (Burgoon and Hale 1988; Burgoon 1993) to explicate the relevance of corporate hypocrisy and illustrate that it is a very specific and most relevant case of CSiR. Third, we test and replicate the 'chain of blame' in different country settings and offer explanations for national deviations in consumers' reactions along the 'chain of blame.' Building on expectancy violations theory (Burgoon and Hale 1988; Burgoon 1993), we show that consumers' reactions to corporate scandal is contingent on their expectations of suppliers with different countries of origin and on individual factors (i.e., consumer ethnocentrism).

We tested our proposed framework across one main study and two follow-up studies with consumers in four countries and a total of 1.177 respondents. We analyzed how sourcing from a hypocritical supplier affects the reputation of the firm and how this shapes consumers' intention to boycott the firm. Further, we tested how the supplier's country of origin influences the effect on the firms' reputation and how consumers' ethnocentrism moderates the relationship between the reputation of the firm and consumers' boycott intention. In the main study, we contrast the reactions of consumers from one highly industrialized and developed country (Germany) to those of one BRICS country (China). We run a 2 (hypocritical supplier vs supplier with integrity) * 2 (foreign vs domestic supplier) * 2 (Chinese vs German respondents) cross-national between-subjects vignette study. The follow-up studies then analyze another BRICS country (South-Africa) and an additional industrialized country (US). The rich and diverse datasets enable us to test our proposed 'chain of blame' in a multi-country setting with economically and socially heterogeneous consumers.

2 Conceptual Framework and Hypotheses

2.1 Corporate Hypocrisy

Corporate hypocrisy has become a growing field of research in the last decade. With increasing media attention devoted to corporate scandals and irresponsible behavior, academics have investigated the antecedents and effects of corporate hypocrisy in relation to a variety of variables, such as CSR beliefs and attitudes towards firms (Wagner et al. 2009), perceived corporate reputation (Arli et al. 2017), and brand trust (Kim et al. 2015). Corporate hypocrisy is a specific case of CSiR (Grappi et al. 2013; Murphy and Schlegelmilch 2013; Sweetin et al. 2013) because hypocritical behavior requires a specific ethical or responsibility statement of the corporation prior to or after a transgression.

Drawing on expectancy violations theory (Burgoon and Hale 1988; Burgoon 1993), we distinguish between CSiR and hypocrisy by considering how consumers' expectations differ during individuals' impression formation processes (Lin-Hi and Blumberg 2018). Expectancy violations theory posits that the predictive and normative functions which expectations fulfill (Burgoon 1993) become particularly relevant if they are significantly violated. Hence, a violation (positive and negative) of individuals' expectations exhibits stronger (positive or negative) impressions than a mere confirmation of expectations. For example, the collapse of the textile factory, Rana Plaza, in Bangladesh in April 2013 (Turker and Altuntas 2014), which killed approximately 1100 textile workers, was a horrific tragedy, yet was not specifically a case of corporate hypocrisy, because the companies that produced clothing in this facility (at least, not all of them) had not stated special care for their workers, nor that they engaged in workplace safety enhancing activities; consumers, therefore, had not developed specific expectations that were either confirmed or disconfirmed. However, the recent scandal involving the German car manufacturer, Volkswagen (Dans 2015), does represent an incident of corporate hypocrisy because Volkswagen for long publicly claimed to be a world leader in 'green mobility' and engaged...

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