Multi-principal collaboration and supplier’s compliance with codes-of-conduct

Abstract

Purpose The purpose of this paper is to articulate propositions on how collaborating multi-national corporations (MNCs) can manage their supplier base in order to reduce the risk of suppliers’ non-compliance with shared codes-of-conduct. Design/methodology/approach The study utilises a conceptual theory development approach. In doing so, it utilises key tenets of agency theory that are applied in a multi-principal–supplier relationship context and synthesised in a series of propositions. Findings The study shows that MNCs have a variety of mechanisms for reducing the risk of suppliers’ non-compliance by decreasing information asymmetry, increasing their bargaining power and simultaneously use of both rewards/sanctions, and reputation-based safeguards. Research limitations/implications This is a conceptual theory development study, offering testable propositions, which have then to be empirically validated. Practical implications The study showcases that managers of MNCs who find themselves in relationships with non-compliant suppliers have at their disposal a variety of mechanisms to reduce the risk of suppliers’ non-compliance. Originality/value This is one of the first studies that explore suppliers’ non-compliance with codes-of-conduct at the level of a relationship, rather than a single firm. In this way it proposes a theoretical framework grounded in agency theory on managing relationships between multi-principal collaborators and their suppliers.