Impacts of leadership on corporate social responsibility management in multi-tier supply chains

As supply chains become more complex and multi-tiered, managing corporate social responsibility (CSR) of lower-tier suppliers is more challenging and draws increasing attention. In this paper, we develop a game theory model with a multi-tier supply chain, which consists of a Tier 0 buyer, a direct Tier 1 supplier and an indirect Tier 2 supplier. To reduce the CSR violations of Tier 2 supplier, the Tier 0 buyer can either provide funding to the Tier 1 supplier ( delegation strategy ) or fund the Tier 2 supplier directly ( control strategy ). We theoretically analyze the optimal strategy under two different supply chain leaderships: Tier 1 leads Tier 2 , and Tier 2 leads Tier 1 , and further discuss the impact of supply chain leadership. Unlike empirical studies arguing that delegation is more effective when the Tier 1 leads Tier 2, we find that when the funding factor is uniform among suppliers (exogenous), the control strategy is more likely to ensure a lower violation probability than the delegation strategy. Besides, when the loss of Tier 0 buyer due to violations in Tier 2 is relatively small, the buyer may adopt the strategy with a higher violation probability to maximize his profit. In addition, we also consider information asymmetry between the Tier 0 buyer and Tier 2 supplier, and find that the buyer is more inclined to choose the delegation strategy if he is more uncertain about the Tier 2 supplier. Finally, we explore four model extensions and show that the main results are robust.

Automated summary

As supply chains become more complex and multi-tiered, managing corporate social responsibility (CSR) of lower-tier suppliers becomes more challenging. This paper develops a game theory model to explore the optimal strategies for reducing CSR violations and the impact of supply chain leadership. The findings suggest that direct control of suppliers may be more effective than the delegation strategy in certain situations.