The effect of buyers' power on suppliers' motivations in managing their compliance mechanisms: a study of Indian apparel export firms

Abstract

The aim of this study was to investigate how Multinational Enterprises (MNEs) enforce Code of Conduct (CoC) policies, as well as how they affect suppliers' motivation to engage them in managing CoC compliance mechanisms of monitoring, enforcement and transparency in the Indian apparel industry.,A quantitative survey was conducted using face-to-face surveys. Overall, 210 usable data points were collected and analyzed by use of structural equation modeling.,Study findings highlighted that hard power strategies currently used by MNEs in the apparel Indian market were primarily coercive in nature. A clear power imbalance between MNEs and suppliers from India was evident. Results suggested that when MNEs attempted to use their powerful position to advance compliance goals, higher level of CoC monitoring was required and suppliers were only extrinsically motivated. Lack of intrinsic motivation in suppliers' resulted in under-developed suppliers' transparency mechanisms. Therefore, findings suggested that MNEs should use hard powers consciously considering the long-term and unintended consequences.,The paper proposes a buyer-supplier power-motivation interaction model that clarifies what MNEs can do to motivate apparel suppliers to implement CoCs successfully in the apparel supply chain. This relationship has not previously been empirically tested.