Supply Chain Irresponsibility: The Role of Stakeholder Orientation and Institutional Distance

Global supply chains of goods and services frequently span developed and developing countries and, unfortunately, are often associated with poor environmental, social, and governance (ESG) practices. Drawing on the construct of corporate social irresponsibility, we focus specifically on supply chain irresponsibility (SCI) in global supply chains. Strategically developing and nurturing relationships with multiple stakeholder groups (i.e., strong stakeholder orientation) is one mechanism that might help attenuate the frequency and severity of a firm’s SCI. However, doing so also might raise expectations among stakeholders, thereby priming and amplifying the reach of SCI. We also draw from institutional theory to hypothesize that the regulatory institutional distance between the firm’s home country and that where SCI occurred moderates the stakeholder orientation-SCI relationship. Using a large multi-country panel dataset, our findings show that stakeholder orientation is positively related to frequency, severity, and reach of SCI incidents. Higher regulatory institutional distance increases SCI and strengthens the positive relationship between stakeholder orientation and SCI. Our findings provide novel evidence about the unintended consequences of stakeholder orientation and develop insights into the challenges that the degree of regulatory institutional distance between a firm and its globally scattered supply chain poses to managing ESG responsibility.