Reputational risks and sustainable supply chain management: Decision making under bounded rationality

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Abstract

Purpose: This paper aims to apply the logic of bounded rationality to corporate reputation management and explores how constraints posed by bounded rationality impact on firms' implementation of sustainable supply chain management (SSCM). Design/methodology/approach: This study draws on primary and secondary data from 12 UK-based companies. The authors conducted 17 semi-structured interviews and analysed the data through an inductive methodology. Findings: Reputational risk exposure is a central driver in a company's decision to implement SSCM practices. However, managers face bounded rationality, in particular: conflicting priorities; capabilities and resources; commitment; and contextual setting, which in turn, means that companies do what they can to safeguard their reputation, but balance the extent to which they implement SSCM and the cost of doing so against the likelihood of exposure. Practical implications: By engaging in collaborative relationships with their supply chain partners, focal firms who wish to implement SSCM can spread the cost of SSCM across supply chain partners, which helps decrease the extent to which firms face the conflicting priorities of financial targets and SSCM. A long-term commitment to SSCM can also help build capabilities and resources necessary for SSCM implementation. Originality/value: The paper makes a significant contribution to the literature by conducting a cross-sectional study of the decision-making process involved in SSCM. The results suggest that managers are facing a number of constraints, which leads to sub-optimal choices regarding the level of SSCM implementation.
LanguageEnglish
Pages695-719
Number of pages25
JournalInternational Journal of Operations & Production Management
Volume34
Issue number5
Early online dateApr 2014
DOIs
StatusPublished - 2014

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Supply chain management
Decision making
Supply chains
Managers
Bounded rationality
Reputational risk
Management decision-making
Industry
Costs

Keywords

  • Sustainability
  • Decision making
  • Risk management
  • Bounded rationality
  • Multiple case studies
  • Reputational risk
  • Responsible supply chain management

Cite this

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abstract = "Purpose: This paper aims to apply the logic of bounded rationality to corporate reputation management and explores how constraints posed by bounded rationality impact on firms' implementation of sustainable supply chain management (SSCM). Design/methodology/approach: This study draws on primary and secondary data from 12 UK-based companies. The authors conducted 17 semi-structured interviews and analysed the data through an inductive methodology. Findings: Reputational risk exposure is a central driver in a company's decision to implement SSCM practices. However, managers face bounded rationality, in particular: conflicting priorities; capabilities and resources; commitment; and contextual setting, which in turn, means that companies do what they can to safeguard their reputation, but balance the extent to which they implement SSCM and the cost of doing so against the likelihood of exposure. Practical implications: By engaging in collaborative relationships with their supply chain partners, focal firms who wish to implement SSCM can spread the cost of SSCM across supply chain partners, which helps decrease the extent to which firms face the conflicting priorities of financial targets and SSCM. A long-term commitment to SSCM can also help build capabilities and resources necessary for SSCM implementation. Originality/value: The paper makes a significant contribution to the literature by conducting a cross-sectional study of the decision-making process involved in SSCM. The results suggest that managers are facing a number of constraints, which leads to sub-optimal choices regarding the level of SSCM implementation.",
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