Diffusion of labor standards through supplier–subcontractor networks: An agent‐based model

Gold, Stefan; Chesney, Thomas; Gruchmann, Tim; Trautrims, Alexander

Abstract

Subcontracting represents a popular business model in supply chains across industries. In the case of hidden subcontracting, subcontractors are beyond the visible horizon of the (focal) buying firm. Hence, buyers cannot intervene in the management of various subcontractor levels and must rely on a cascading effect for diffusing practices such as compliance with labor standards through their supply networks. Motivated by the case of the Bangladeshi garment industry, we constructed an agent-based model with buyers, first-tier suppliers, and subcontractors as agents in a supply network in order to study the impact of network characteristics on the diffusion of labor standards. Our model followed a power-based diffusion rule that emphasized the coercive power that buyers use to pressure their suppliers into adopting labor standards; such pressure thus causes these standards to cascade throughout the supplier-subcontractor network. This rule is a key 1 underlying assumption of compliance-based supplier management. Hypotheses regarding power asymmetries through centrality and density of specific network components, as well as structural elements of the network, such as complexity and distance, were tested for different industry scenarios. We analyzed the results at the network level and demonstrated that network asymmetries have ample negative effects on the adoption of labor standards, while complexity plays a minor role. Moreover, the impact of the tested structural determinants for sustainability diffusion were found to be contingent on specific industry types in the garment industry. This paper discusses the findings of the agent-based model in light of previous research on subcontracting and multitier supply chain management. Among others, we highlight how the logic of subcontracting vastly increases horizontal complexity at each supply chain tier, and how intermediaries such as "sustainability nexus supplier" may crucially affect the adoption of labor standards within industries. Finally, we point to the limitations of our research and future research avenues.

Citation

Gold, S., Chesney, T., Gruchmann, T., & Trautrims, A. (2020). Diffusion of labor standards through supplier–subcontractor networks: An agent‐based model. Journal of Industrial Ecology, 24(6), 1274-1286. https://doi.org/10.1111/jiec.13041

• Journal Article Type: Article
• Acceptance Date: Mar 30, 2020
• Online Publication Date: Jun 22, 2020
• Publication Date: 2020-12
• Deposit Date: Jun 8, 2020
• Publicly Available Date: Jun 23, 2022
• Journal: Journal of Industrial Ecology
• Print ISSN: 1088-1980
• Electronic ISSN: 1530-9290
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 24
• Issue: 6
• Pages: 1274-1286
• DOI: https://doi.org/10.1111/jiec.13041
• Keywords: Subcontracting; Supply networks; Agent-based modeling; Diffusion; Sustainable supply chain management
• Public URL: https://nottingham-repository.worktribe.com/output/4605382
• Publisher URL: https://onlinelibrary.wiley.com/doi/full/10.1111/jiec.13041
• Additional Information: This is the peer reviewed version of the following article: Gold, S., Chesney, T., Gruchmann, T., & Trautrims, A. (2020). Diffusion of labor standards through supplier–subcontractor networks: An agent‐based model. Journal of Industrial Ecology. https://doi.org/10.1111/jiec.13041, which has been published in final form at https://doi.org/10.1111/jiec.13041. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions