Do Corporate Customers Prefer Socially Responsible Suppliers? An Instrumental Stakeholder Theory Perspective

This paper studies the way supplier firms' corporate social responsibility (CSR) affects their likelihood of being selected as new suppliers. Using a large sample of US public firms with detailed supply chain and CSR data, we provide empirical evidence that corporate customers prefer socially responsible suppliers, and that the effect is more prominent when the supplier industry is more competitive, the customer's own CSR performance is better, or the supplier and the customer have more similar CSR focuses. Our paper contributes to the literature of instrumental stakeholder theory (IST) by confirming corporate customer attraction as a desirable outcome of supplier CSR engagement. It complements the existing IST studies on customer responses by showing that CSR attracts not only final customers but also corporate customers. Moreover, by focusing on corporate customers' revealed preferences for socially responsible suppliers, our paper also complements the stated-preference-based evidence in the literature of sustainable supply chain management. Our paper's findings encourage supplier firm managers to invest in CSR to gain competitive advantages in the form of a higher likelihood of selection while simultaneously making positive contributions to society.

Automated summary

This paper examines how corporate social responsibility (CSR) of supplier firms influences their chances of being selected as new suppliers. The study finds that corporate customers prefer socially responsible suppliers, especially in industries with greater competition, where the customer's own CSR performance is better, or when the supplier and the customer have similar CSR focuses. The research contributes to instrumental stakeholder theory (IST) by confirming the attractiveness of corporate customers as a desirable outcome of supplier CSR engagement. It also complements existing studies on customer responses by showing that CSR attracts both final customers and corporate customers. The findings encourage supplier firm managers to invest in CSR for competitive advantages and positive contributions to society.