Leveraging market forces and relational exchange to govern sustainable global supply chains

Global supply chains are powerful tools for building value, but are also subject to governance gaps that deter the development of sustainable practices. This governance failure is most acute between lead firms and those members at the base of the supply chain (i.e. sub-suppliers in developing countries) who are most vulnerable and disconnected. Much of the extant literature focuses on coercive and non-market mandates in order to improve sustainability in supply chains. Nevertheless, there is a further need to examine non-coercive but market-oriented measures. We fill this scholarly gap by proposing a relationship building mechanism that works in conjunction with, and not in spite of, market forces and self-interest. Through the use of unilateral initiatives, trust, contracts, repeated exchanges, relational contracts and relational rents, and by drawing on insights from multiple disciplines, we propose a process model that enables lead firms and sub-suppliers to generate a shared surplus arising from relation-specific investments and a long-term orientation. In consultation with external actors, that surplus may be applied to resolve pressing sustainability problems and alleviate the governance gap between lead firms and sub- suppliers. We open a new line of inquiry into non-coercive market-based solutions to sustainability problems in global supply chains.