Precursors of Unethical Behavior in Global Supplier Management.
A review of the literature suggests that unethical practices in buyer-supplier relationships are related to two broad categories of antecedents: (1) internal, organizational characteristics and (2) external, inter-organizational characteristics. The author examines how these two sets of factors affect unethical behavior that may occur in the relationships of U.S. purchasing managers and their non-U.S. suppliers, through a combination of focus group and individual interviews and a mail survey that employs a dyadic methodology.
The recent news media attention given to ethical issues is scarcely limited to governmental matters such as the presidential impeachment or improprieties surrounding fund-raising. Consider the following quotes:
"A free-wheeling environment that lacked even basic controls allowed more than 20 employees to carry out a widespread fraud, according to new evidence from an internal investigation into Cendant Corp." (Nelson 1998).
"The Justice Department said it has joined a whistleblower lawsuit against Columbia/HCA Healthcare Corp. and Quorum Health Group Inc. that alleges widespread Medicare fraud stretching back 14 years, and involving more than 200 hospitals across 37 states." (Lagnado 1998).
"DuPont Co. and an Atlanta law firm agreed to pay nearly $11.3 million to resolve allegations that they withheld critical evidence from a group of commercial growers during the trial of a lawsuit involving the company's Benlate DF fungicide five years ago." (Geyelin 1999).
Ethical issues in industry are at the forefront of media attention and can result in negative publicity, substantial fines and penalties, and ultimately decreased sales and profits (McGuire et al. 1988).
In today's competitive business environment, pressures to increase sales on the outbound side and to lower costs and improve supplier performance on the inbound side continue to rise. Functions such as purchasing and sales are boundary-spanning functions (Webster 1992; Williams et al. 1994), and might have a significant influence on how other members of the supply chain view a firm (Dobler and Burt 1996). Further, because these functions are exposed to a firm's external environment, they may be under even greater pressure than other internal functions to deviate from the firm's accepted norms of behavior (Ferrell and Gresham 1985; Osborn and Hunt 1974). This may be compounded when business transactions occur across national boundaries and cultures (Donaldson 1996).
Perhaps due to purchasing's boundary-spanning role, the majority of ethical transgressions discussed in the extant literature involve interactions with suppliers. While ethical issues have been studied extensively in the areas of domestic (U.S.) procurement (Mayer 1970; Dubinsky and Gwin 1981; Forker and Janson 1990; Cooper et al. 1997), marketing and sales (Ferrell and Gresham 1985; Levy and Dubinsky 1983; Robin and Reidenbach 1987), and business in general (see, for example, recent issues of the Journal of Business Ethics), the author is unaware of any other study that has simultaneously examined the perspectives of U.S. purchasing managers with a matched (dyadic) sample of their foreign suppliers. A study of the buyer-supplier dyad is the next link needed to advance not only the field of ethics related to international purchasing and supplier management, but also ethics in the management of the international supply chain as a whole.
A broad review of the literature, which is integrated into the next section, suggests that unethical practices in buyer-supplier relationships are related to two broad categories of antecedents: (1) internal, organizational characteristics and (2) external, interorganizational characteristics. The objective of this research was to examine how these two sets of factors affect unethical behavior that may occur in the relationships of U.S. purchasing managers and their non-U.S. suppliers. Figure 1 illustrates the article's conceptual framework.
This article presents the results from an earlier study sponsored by the Center for Advanced Purchasing Studies (CAPS) (Carter 1998). In the CAPS study a series of focus group interviews with U.S. purchasing managers were used to identify the potential activities associated with unethical behavior surrounding their relationships with non-U.S. suppliers. The results from these focus group interviews were combined with findings from an extensive literature review to develop a survey instrument that was completed by both U.S. purchasing managers and their non-U.S. suppliers. Finally, after an analysis of the survey results, individual interviews with U.S. purchasing managers were conducted to provide additional insights and richness to the survey findings.
The next section of the article presents hypotheses about the relationships between each of the factors in the conceptual framework and unethical practices that may exist. The first set of hypotheses focuses on how practices within the purchasing organization might affect the unethical practices of purchasing managers. The second group of hypotheses examines how factors from outside the firm affect both U.S. purchasing managers and their foreign suppliers. Next, the study's methodology is explained, followed by a discussion of the results and their implications. The article ends with a discussion of the study's limitations and suggestions for future research.
Company culture consists of the values, convictions, and perceptions shared by members of an organization (Smircich 1983). It consists of visible artifacts such as employee behavior, symbols, and stories, and far less tangible values and assumptions that develop through the social interplay of employees (Trice and Beyer 1984). A true measure of company culture is very difficult to pinpoint empirically using a survey instrument. Accurately assessing culture can require months of fieldwork for a single organization. In this study, the actions of supervisors and co-workers are used as proxy measures for organizational culture, representing the deeper, underlying value system of the organization's culture and ethical values.
Both the behavior of an employee's immediate supervisor (Daft 1992; Laczniak et al. 1995; Wood 1995) and examples set by top company management (Chonko and Hunt 1985; Chonko et al. 1996; Cullen and Victor 1988; Daft 1992; Donaldson 1996; Dubinski and Gwin 1981; Hunt et al. 1984; Laczniak et al. 1995; Turner et al. 1994) have the potential to shape company culture and to impact an employee's actions in ethically questionable situations. Similarly, actions of co-workers can be indicative of a company culture that either encourages or discourages unethical behavior (Duerden 1995; Laczniak et al. 1995; Tsalikis and Fritzsche 1989; Wood 1995). Thus, the following hypotheses are introduced:
H1a: Ethical actions by a buyer's leaders are negatively related to unethical behavior on the part of the buyer.
H1b: Ethical actions by a buyer's co-workers are negatively related to unethical behavior on the part of the buyer.
Past research has suggested that individuals may be willing to sacrifice personal ethics to achieve the goals of the organization (Bowman 1976; Carroll 1975). The focus group interviews suggested that as firms continue to downsize and cut costs, purchasing personnel are under constant pressure to improve their results. One interview participant stated, "As companies are pushing for improved performance, people will take greater risks and push the envelope ... the fear of losing your job is great." Purchasing managers experiencing strong pressure to perform may, for example, be more likely to engage in unethical practices, such as using obscure contract terms or exaggerating the seriousness of a problem when doing business with a supplier, in order to gain price concessions and meet performance goals and expectations. This leads to the following hypothesis.
H2: A buyer's perceived pressure to perform is positively related to unethical behavior on the part of the buyer.
Besides the informal effect of organizational culture and the perceived pressure to perform, an organization can explicitly identify ethically acceptable and unacceptable behavior through a code of ethics (Brenner and Molander 1977; Donaldson 1996; Dubinsky and Gwin 1981; Forker and Janson 1990; Guertler 1968; Turner et al. 1994; Laczniak et al. 1995; Wiley 1995; Wood 1995). Codes of ethics can serve to effectively communicate the importance of a policy, provide justification for purchasers to act the way they do, and identify penalties for unethical behavior (Rudelius and Buchholz 1979). Still, evidence of the actual positive effect of such codes is at best mixed, even though they are used widely by organizations (Mathews 1987; Murphy 1989).
In addition to codes of ethics, post-purchase audits might influence unethical behavior and activities (Dobler and Burt 1996). For example, Reebok uses a three-tiered auditing system performed by plant managers, an internal audit team, and an external audit team that makes sure facilities are run in accordance with local laws as well as Reebok's own standards. Similarly, instituting an ethics hotline and effectively communicating ethics policies to suppliers may act as deterrents to purchasing personnel tempted to act in an unethical manner. Thus, the following hypothesis is offered.
H3: The degree to which ethics policies exist is negatively related to unethical behavior on the part of the buyer.
Here, the term "ethics policies" refers to the presence of a written code of ethics at the corporate and functional levels, along with requirements for buyers to read the code and for periodic communication of ethical standards to suppliers.
Authors have speculated that ethics training programs and seminars might positively influence ethical behavior (Ferrell and Gresham 1985; Laczniak et al. 1995; Wiley 1995; Wood 1995). While most managers would agree that breaking the law is an unethical activity, other activities, such as showing favoritism toward certain suppliers, are more ambiguous. It is in these gray areas that guidance in the form of ethics training might be particularly helpful. This leads to the following hypothesis.
H4: The amount of training that a buyer has received is negatively related to unethical behavior on the part of the buyer.
Beets and Killough (1990) note that behavioral standards, such as a code of ethics, without associated sanctions are really just window dressing. Appropriate and enforced sanctions might not only positively affect the behavior of purchasing personnel, but also serve to demonstrate to those outside of purchasing, including suppliers, those behaviors that the firm really values (Trevino 1992). For example, Mitchell et al. (1996) found that a reinforcement system lacking appropriate sanctions was related to some aspects of illegal activity within a firm. The following hypothesis is offered.
H5: Sanctions against unethical behavior are negatively related to unethical behavior on the part of the buyer.
Prior studies suggest that the length of interfunctional and interorganizational relationships might be positively associated with such outcomes as trust and communication (Doney and Cannon 1997; Fisher et al. 1997). Similarly, the length of a buyer-supplier relationship might affect the degree of unethical practices that exist between buyers and their suppliers. In particular, a long-term relationship between buyers and suppliers might be associated with reduced unethical activity as well as a smaller difference or "gap" between the perceptions of buyers and suppliers. A smaller gap in perceptions may exist because the perceptions of buyers and suppliers might be shaped and formed through a series of iterative interactions (Epstein 1989), where each organization increasingly learns about the values and ethical norms of the other. Thus, the following hypothesis is introduced.
H6a: The length of time that the buying firm has had a relationship with a supplier will be negatively related to the size of the gap between a buyer's and supplier's perceptions of unethical behavior in the relationship.
Here, the "size of the gap" refers to differences between the buying firm's perceptions of its unethical behavior and its supplier's perceptions of the buying firm's unethical behavior.
The type of relationship that purchasing managers have with their international suppliers might also influence the degree of unethical practices found in the relationship, where the anticipation of future transactions deters a party from seeking a short-term gain at the expense of the other party (Maitiand et al. 1985; Parkhe 1993). Specifically, the level of ethical behavior may vary based on the nature of the interorganizational governance structure. For example, Ring and Van de Ven (1992) note that "recurrent (transactions) enable the parties to build trust, by demonstrating norms of equity and reciprocity." Buyer-supplier partnerships and strategic alliances, which are characterized by a long-term perspective and a relatively open sharing of information, might also be associated with lower levels of unethical behavior (Eliram and Cooper 1990; Gardner and Cooper 1988). The type of governance structure can more formally be construed as the level of vertical coordination, as defined by Heide and John (1992) and Webster (1992), which can range from a market-oriented governance structure, such as a one-time transaction, to a relational governance structure, such as a strategic alliance. This leads to the following hypothesis.
H6b: The level of coordination that the buying firm has with a supplier is negatively related to the size of the gap between a buyer's and supplier's perceptions of unethical behavior in the relationship.
Finally, researchers have shown that differences in work-related values, including ethics, exist across national cultures (Becker and Fritzsche 1987; Ferrell and Gresham 1985; Hofstede 1984; Hunt and Vitell 1986). This phenomenon might result because individuals who are raised in different countries are exposed to unique cultures and values (England 1975). Others argue that even though there may be different approaches to dealing with ethical issues, this does not necessarily mean that there are "country differences in ethical principles, nor that it is impossible to formulate universal ethical principles" (Schiegeimlich and Robertson 1995).
Following Hofstede (1994) the term "national culture" is broadly defined as "collective programming of the mind which distinguishes the members of one group or category of people from those of another." Although there are many different methods that could be used to classify culture across large geographic distances, the most frequent method is to use the geo-political borders of nations as a measure of culture (Clark 1990; Hofstede 1980; Hofstede and Bond 1984).
Of the five dimensions of national culture identified by Hofstede (1980) and Bond et al. (1987), the most relevant within the context of ethics is the Power Distance dimension (Clark 1990). Power Distance is the "extent to which less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally" (Hofstede and Bond 1988). In society, differences in status and power include differences in occupation and income. It is easier to move among these in low Power Distance countries, such as the United States and Australia, as opposed to high Power Distance countries like Italy and the Philippines. While inequality in power is inevitable in organizations, the level of inequality varies from society to society.
Subordinates, such as sales representatives in supplier organizations in high Power Distance countries, may feel undercompensated in terms of rewards, income, autonomy, and advancement opportunities (Tannenbaum et al. 1974). Further, it has been shown that subordinates in high Power Distance countries are significantly more likely to feel that their managers are not concerned with helping subordinates advance within the organization and that the subordinates feel it less appropriate to request a salary increase, as opposed to employees in low Power Distance countries (Hofstede 1980). Thus, supplier representatives in high Power Distance countries may feel justified in engaging in unethical practices in order to increase sales and improve their performance. For example, the job of an Indian customs agent, though historically paying less than that of almost any other civil servant, was one of the most highly sought-after government positions due to the agent's ability to supplement low government salaries with large bribes.
Based on the preceding paragraphs, the following hypothesis is introduced.
H7: Buyers who purchase from suppliers in high Power Distance countries will perceive higher levels of unethical behavior on the part of the supplier than will buyers who purchase from suppliers in low Power Distance countries.
The following sections describe the methodology and analyses used to test the research hypotheses. The results and implications are discussed next. Finally, the author addresses the study's limitations and suggests areas where additional research is needed.
Four focus group interviews were conducted to build upon the findings of the literature review in developing a list of activities that might comprise unethical behavior in international buyer-supplier relationships (Carter 1998). These interviews were conducted with purchasing managers from organizations that purchase from non-U.S. suppliers, and resulted in the identification of many of the same activities as were found through the literature review. The findings from the focus group interviews, which add a richness and depth that can often not be attained through the sole use of mall surveys, are integrated into the Results and Implications section that follows.
Based on the findings from the literature review and focus group interviews, two survey questionnaires were generated and pretested: a questionnaire to be completed by a U.S. purchasing manager and a second, near-mirror-image questionnaire. This second questionnaire was forwarded by the purchasing manager to one of his/her non-U.S. suppliers, which allowed the researcher to examine not only the perspectives of purchasing managers but also the matched, dyadic perspectives of their suppliers.
The survey was sent to the purchasing executives of 1,300 U.S. firms. This sample consisted of members of the National Association of Purchasing Management (NAPM), participants in previous CAPS purchasing performance benchmarking studies, and participants in a CAPS-sponsored Executive Purchasing Roundtable. The purchasing executives were asked to assign the survey to a buyer in their organization with experience purchasing from a supplier located outside of the United States and Canada, and who had close and frequent contact with at least one foreign supplier. Respondents from the buying firm were asked to focus most of their responses on their relationship with a particular supplier and were also asked to forward the second questionnaire to an individual at the chosen international supplier with whom they most frequently interacted. Like the buyer survey, this supplier questionnaire was returned directly to CAPS. The supplier was also asked to specifically consider the buyer's firm when answering the survey questions.
A total of 132 surveys were received from the buying firms and 88 surveys were received from suppliers. Another 157 surveys were returned stating that the survey subject was not applicable because the buying firms did not purchase from international suppliers. This resulted in an 11.5 percent response rate from buyers and a 66.7 percent response rate from their suppliers. In addition, follow-up phone calls to nonrespondents indicated that the primary reason for not participating in the survey was its nonapplicability. because the buying firm purchased only domestically. As a result, the actual response rate for eligible firms is most likely quite a bit higher than reported here.
Buyer respondents represented a wide-ranging group of industries including petroleum, aerospace, consumer products, pharmaceuticals, electronics, chemicals, foodstuffs, telecommunications, transportation, and metals. Other industries included apparel, biotechnology, construction, financial services, and pulp and paper. Respondents came from a mix of firms in manufacturing (80.0 percent), distribution and retail (5.4 percent) and other services (14.6 percent). The respondents were purchasing personnel who had "close and frequent contact" with an international supplier. They included individuals from a broad range of managerial levels ranging from buyers and materials specialists to directors and vice presidents. Median annual sales for the responding companies were $1.8 billion, with a range from $12 million to $30 billion; median purchases from the international supplier were $3 million, with a range from $10,000 to $200 million. These figures suggest that the respondents represent medium to large firms.
Supplier respondents came from such industries as aerospace (aircraft components and subassemblies), forgings and castings, chemicals, and electronics. Other products and services provided to buyers ranged from dehydrated vegetables to fiber optic cable to testing results. Most suppliers were in manufacturing industries (84.3 percent) with the remainder in distribution (9.7 percent) and other services (6.0 percent). The supplier respondents represented 23 different countries located in Europe (60 percent), Asia (31 percent), and Latin America (9 percent). The overall supplier sales figures suggest that the supplier respondents range from small to large firms, with median annual sales of $65 million and a range from $2 million to $125 billion.
As is common with studies employing a dyadic methodology, the response rate from buyers was quite low, and an effort was made to assess the presence of non-response bias. Non-response bias occurs when the opinions and perceptions of the survey respondents do not accurately represent the overall sample to whom the survey was sent. One test for non-response bias is to compare the answers of early versus late respondents to the survey (Lambert and Harrington 1990). The idea is that late respondents are more likely to answer the questionnaire like non-respondents than are early respondents (Armstrong and Overton 1977).
A multivariate T test was computed using the key study variables in order to examine whether significant differences existed between early and late respondents. The results indicated that early respondents do not display statistically significant differences from late respondents (p=0.36l3).
Social Desirability Bias
Social desirability bias can occur in survey research if respondents inaccurately answer questions to conform to social norms or the expectations of the researcher, in order to portray themselves in a more favorable light. To solicit candid responses about their level of involvement in unethical activities, purchasing personnel were asked to answer these questions with regard to the activities of the purchasing department in general, rather than the actions of the individual buyer or purchasing manager. Rudelius and Buchholz (1979) used a similar technique in an attempt to minimize social desirability bias. This type of "other-based" questioning has been shown to be more effective in lowering social desirability bias than the major competing method, the randomized response technique (Armacost et al. 1991).
In addition to taking this precautionary measure, a scale was included in the survey to measure social desirability bias. This scale was an abbreviated version of the Crowne-Marlowe Social Desirability Scale (Crowne and Marlowe 1960). The scale used in the survey was shorted due to (1) length considerations and (2) the nonapplicability of some of the scale items in the original Crowne-Marlowe Social Desirability Scale, which was developed for the population in general rather than businesspeople in particular.
The three questionnaire items representing social desirability were summed to create a social desirability scale, and the statistical relationship between this scale and the survey questions representing unethical behavior were examined. No statistical relationship was found between buyers' scores on the social desirability scale and their perceptions of either of the dimensions of unethical behavior that are identified through factor analyses in the next section (p=0.7673 and 0.3926). This was also true regarding suppliers' scores on the social desirability scale and their assessment of their unethical activities (p=0.1795). The lack of a statistical relationship between the social desirability scale and respondents' perceptions of their unethical behavior suggest that respondents answered the survey questions without distorting their responses to appear as though their firms are less involved in unethical behavior than they actually are.
The constructs representing unethical behavior of purchasing managers and their suppliers were measured using scale items from an earlier analysis in which the constructs were developed through exploratory and confirmatory factor analyses (Carter 1998). These prior analyses showed that the construct representing supplier activities was unidimensional, while the construct representing buyer activities consisted of two distinct dimensions, which were subsequently labeled "deceitful practices" and "subtle practices." The scale items used to measure these constructs, along with the other constructs from this research, appear in the Appendix. The statistical values used to assess construct reliability and validity are provided in the body and footnotes of the Appendix.
Three separate sets of analyses were performed to test the study's hypotheses: (1) the organizational variables from hypotheses H1a-H5 were compared to the unethical behavior of buyers, (2) the interorganizational factors from Hypotheses 6a and 6b were compared to the gaps in perceptions between buyers and suppliers of the unethical actions of buyers, and (3) suppliers' national culture was compared to the buyers' perceptions of the suppliers' actions. The gaps in perceptions between buyers and suppliers were calculated as a difference between the perceptions of informants (Kumar et al. 1993), in a manner similar to that of Ellram and Hendrick (1995).
RESULTS AND IMPLICATIONS
Consistent with Figure 1, the results and their implications are discussed in two separate subsections. The first subsection examines the relationship of organizational characteristics and unethical practices of purchasing managers. The second section considers the affect of interorganizational characteristics on unethical practices of both purchasing managers and their suppliers.
Organizational Factors: Deceitful Practices
Tables IA and IB display the results from analyses that were performed for the deceitful practices dimension of buyers' unethical behavior. None of the five organizational variables shown in Table IA were significantly related to the deceitful practices dimension. However, the results displayed in Table IB indicate that communicating ethics standards to suppliers and having an ethic hotline in place were significantly related to the level of deceitful practices in the buying firm's organization (p[less than]0.05, [R.sup.2]=0.14).
The results suggest that the activities comprising deceitful practices are not affected by the actions and examples of either leadership or co-workers, nor are they influenced by formal evaluation or training in ethical matters. One interview participant suggested that the type of purchasing manager who will tend to rely heavily on deceitful practices will use these tactics regardless of the amount of training he or she receives: "It's a personal inadequacy that's rewarded by short-term recognition but long-term failure." However, buyers appear to be dissuaded from undertaking these activities when firms formally communicate their ethical standards to suppliers, and have a hotline in place through which these unethical activities can be reported. These findings regarding ethics policies corroborate, in part, the assertions of other researchers (Rudelius and Buchholz 1979; van den Hengel 1995).
In addition, the presence of a code of ethics was not significantly related to deceitful practices. However, the influence of a code of ethics is probably at least somewhat dependent on the firm's commitment to the code. This commitment can be demonstrated in a number of ways, including communicating the code to suppliers and having an ethics hotline to report violations of the code. It appears that buyers who might be tempted to engage in deceitful practices will do so regardless of the amount of training they have received or how ethically their managers act. Instead, a fear of being reported by either an informed supplier or personnel in the buying organization may dissuade buyers from engaging in these behaviors.
Organizational Factors: Subtle Practices
Table IIA shows the results of a second regression of leadership, actions of co-workers, sanctions, training, and buyer pressures on subtle practices. Here, evaluation and training were significantly and negatively related to the level of these unethical behaviors (P[less than]0.001, adjusted [R.sup.2]=0.12). The results from the analysis of variance, displayed in Table IIB, indicate that none of the seven ethics policy variables were significantly related to subtle practices.
Whereas engaging in deceitful practices is often more clearly unethical, the activities that encompass subtle practices tend to fall into a grayer area. Training appears to help educate buyers and make them aware of these more subtle ethical issues. This may not only be useful for new and inexperienced purchasing managers, but also for more experienced personnel who find themselves in unfamiliar situations. Similarly, including ethical issues in a buyer's formal evaluations can help to reinforce material and policies covered during training.
Interestingly, the pressures experienced by buyers were not significantly related to either the deceitful practices or subtle practices dimensions of buyers' unethical behavior. One possible explanation for these findings is that savvy buyers realize that engaging in unethical practices will hurt them professionally in the long run. First, their firm's reputation will be damaged. If an agreement is entered into unethically or if unethical actions occur during the course of a contract, this is not a win-win or even a win-lose transaction, but rather a lose-lose situation. When the contract opens up again, the supplier may choose not to do business with the buying firm. Further, as suggested by one of the study's participants, "Pretty soon word gets out and everyone is adding 10 percent into their pricing because of the buying company's unethical reputation. It's the cost of doing business, and suppliers figure that out."
Many buyers probably also realize that unethical behaviors will hurt them personally. It's likely that buyers who act unethically toward suppliers will not only lose the trust of those suppliers, but also of employees inside the buying firm with whom they interact. Respondents indicated that it's a "small world" and that an unethical reputation can spread quickly, not only within a company but throughout an industry.
Tables IIIA and IIIB display the results from regression analyses examining the affect of governance structure and the length of the buyer-supplier relationship on the gaps in perceptions between buyers and suppliers concerning buyers' behavior. Neither the length of time that the relationship has been in existence nor the type of governance structure was significantly related to differences in the perceptions of buyers' behavior. It is possible that once a pattern and practice of behavior is established in the relationship, there will be no change unless there is intervention. One respondent commented, "If they start dirty, it stays that way. If they start clean, they stay that way." The type of governance structure also had no impact in differences in perceptions. This result may be explained by a respondent's statement that, "The old phrase that 'he would cheat his own mother' has a certain amount of truth. Whether it's a partner or a one-time deal, if you're going to be unethical, the identity of the party getting the short shrift makes little difference. Business is business."
The results shown in Table IV indicate that the Power Distance of a supplier's culture was unrelated to a buyer's perception of the level of unethical behavior on the part of the supplier. A possible explanation for these findings is that there are fundamental, core values that cross cultures. For example, Husted et al. (1996) found similar ethical values among MBA students in Mexico, Spain, and the United States. Still, this is probably an overly simplistic and somewhat inadequate explanation that may be due to the preselection of that study's subjects into MBA programs.
Another possible reason for the insignificant differences in buyer perceptions among supplier nationalities is that the norms and expectations of ethical behavior have been established and communicated as part of the specific buyer-supplier relationship studied, as well as through international suppliers' prior relationships with other U.S. customers. Some of the study's participants suggested that, in today's global economy, foreign suppliers generally understand the activities and behaviors that U.S. buyers consider to be acceptable and unacceptable.
LIMITATIONS AND SUGGESTIONS FOR FUTURE RESEARCH
While the 88 matched buyer-supplier surveys may seem a small number, it is actually typical for this type of research method where matched responses are solicited across organizations using a set of mail surveys. For example, over a five-year period in the Journal of Marketing, from 1993 to 1997, the average number of matched buyer-supplier surveys reported for this type of methodology was 98. Like Ellram and Hendrick (1995), this research made a trade-off between obtaining a larger sample size from one member of the dyad and obtaining a smaller but richer and more insightful sample that included the perspectives of suppliers.
In order to generate an adequate sample size, purchasing managers were sampled across multiple industries. Research suggests that responses might differ across purchasing and sales settings (Churchill et al. 1985; Weitz 1981). Given the small sample size, it was not possible to control for the large number of buy-types or industries. Future research is needed to study the potential differences that may exist across these factors.
Finally, the reader should note that the research findings are based only on the perceptions of U.S. buyers and their foreign suppliers. Interviews with purchasing managers suggested that when purchasing occurs entirely offshore, such as purchasing In a foreign country for a plant or facility in that country, activities may occur that would not be acceptable in the U.S. Further, the study's participants proposed that some of the activities deemed unethical were not necessarily unacceptable to them, if they occurred entirely within a foreign country or culture that considers the activities to be both legal and ethical. This is an area that remains relatively unexplored, yet will only grow in importance as businesses continue to expand production and operations internationally. One possible extension of the present study would be to investigate ethical issues when both the buyer and supplier are located outside of the United States and to compare the results with those from this study. With such an extension, it is possible that a distinct set of ethical issues, such as bribery (Donaldson 1996) and the use of child labor (Duerden 1995), may exist.
Craig R. Carter is assistant professor of international supply chain management at the University of Maryland's Robert H. Smith School of Business. He earned his Ph.D. degree from Arizona State University. Dr. Carter's primary research stream focuses on social responsibility issues surrounding the management of the supply chain. A second and often intersecting stream of research examines international purchasing and supply chain management.
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REGRESSION RESULTS, DECEITFUL PRACTICES Analysis of Variance Sum of Mean Source DF Squares Square F Value Prob[greater than]F Model 5 6.2583 1.2517 1.127 0.3494 Error 125 138.7895 1.1103 C Total 130 145.0478 R-square 0.0431 Adjusted R-square 0.0049 Parameter Estimates Standardized T for [H.sub.O]: Estimate Parameter=0 Prob[greater than]ITI Intercept 0.0000 5.584 0.0001 Leadership 0.0285 0.208 0.8357 Co-workers -0.1068 -0.794 0.4288 Pressures 0.0577 0.586 0.5593 Evaluation -0.1542 -1.540 0.1260 Training 0.1216 1.306 0.1938 ANALYSIS OF VARIANCE RESULTS, DECEITFUL PRACTICES Sum of Mean Source DF Squares Square F Value Prob[greater than]F Model 7 16.2774 2.3254 2.15 0.0434 Error 117 126.3775 1.0801 C Total 124 142.6549 R-square 0.1141 Mean Source DF Type I SS Square F Value Prob[greater than]F Policy1 1 0.7966 0.7966 0.74 0.3922 Policy2 1 0.4639 0.4639 0.43 0.5135 Policy3 1 0.2444 0.2444 0.23 0.6352 Policy4 1 7.2082 7.2082 6.67 0.0110 Policy5 1 3.1767 3.1767 2.94 0.0890 Policy6 1 4.3779 4.3779 4.05 0.0464 Policy7 1 0.0097 0.0097 0.01 0.9246 REGRESSION RESULTS, SUBTLE PRACTICES Analysis of Variance Sum of Mean Source DF Squares Square F Value Prob[greater than]F Model 5 27.8198 5.5640 4.475 0.0009 Error 125 155.4221 1.2434 C Total 130 183.2419 R-square 0.1518 Adjusted R-square 0.1179 Parameter Estimates Standardized T for [H.sub.o]: Estimate Parameter=0 Prob[greater than]ITI Intercept 0.0000 6.381 0.0001 Leadership 0.0975 0.756 0.4513 Co-workers -0.2413 -1.904 0.0592 Pressures 0.0974 1.049 0.2961 Evaluation -0.2835 -3.009 0.0032 Training 0.2285 2.607 0.0102 ANALYSIS OF VARIANCE RESULTS, SUBTLE PRACTICES Sum of Mean Source DF Squares Square F Value Prob[greater than]F Model 7 3.9074 0.5582 0.38 0.9126 Error 117 171.9714 1.4698 C Total 124 175.8788 R-square 0.0222 Mean Source DF Type I SS Square F Value Prob[greater than]F Policy1 1 0.4646 0.4646 0.32 0.5750 Pllicy2 1 2.0609 2.0609 1.40 0.2388 Policy3 1 0.0510 0.0510 0.03 0.8526 Policy4 1 0.0074 0.0074 0.01 0.9436 Policy5 1 0.3376 0.3376 0.23 0.6327 Policy6 1 0.4570 0.4570 0.31 0.5782 Poiicy7 1 0.5289 0.5289 0.36 0.5498 REGRESSION RESULTS, DIFFERENCES IN PERCEPTIONS OF BUYER'S DECEITFUL PRACTICES Analysis of Variance Sum of Mean Source DF Squares Sauare F Value Prob[greater than]F Model 2 4.3430 2.1715 1.651 0.1996 Error 67 88.1359 1.3155 C Total 69 92.4789 R-square 0.0470 Adjusted R-square 0.0185 Parameter Estimates Standardized T for [H.sub.o]. Estimate Parameter=0 Prob[greater than]ITI Intercept 0.0000 3.178 0.0022 Governance Structure -0.1251 -1.037 0.3035 Relationship Length 0.1965 1.629 0.1079 REGRESSION RESULTS, DIFFERENCES IN PERCEPTIONS OF BUYER'S SUBTLE PRACTICES Analysis of Variance Sum of Mean Source DF Squares Square F Value Prob[greater than]F Model 2 0.3791 0.1896 0.155 0.8563 Error 68 82.8909 1.2190 C Total 70 83.2700 R-square 0.0046 Adjusted R-square 0.0002 Parameter Estimates Standardized T for [H.sub.o]: Estimate Parameter=0 Prob[greater than]ITI Intercept 0.0000 3.513 0.0008 Governance Structure -0.0626 -0.513 0.6098 Relationship Length -0.0185 -0.151 0.8801 ANALYSIS OF VARIANCE RESULTS, BUYERS' PERCEPTIONS OF SUPPLIER PRACTICES Sum of Mean Source DF Squares Square F Value Prob[greater than]F Model 1 0.1099 0.1099 0.22 0.8892 Error 92 517.7704 5.6279 C Total 93 517.8803 R-square 0.0002 Mean Source DF Type 1 SS Square F Value Prob[greater than]F Power Distance 1 0.1099 0.1099 0.02 0.8892
QUESTIONNAIRE SCALE ITEMS AND RESULTS FROM CONFIRMATORY FACTOR ANALYSIS [a,b]
Buyer Activities: Deceitful Practices (Currently, our purchasing function ...) [c]
Invents (makes up) a second source of supply to gain competitive advantage (0.56)
Uses obscure contract terms to gain an advantage over suppliers (0.64)
Exaggerates the seriousness of a problem to gain concessions (0.70)
Purposefully misleads a salesperson in a negotiation (0.62)
Coefficient [alpha]= 0.71
Buyer Activities: Subtle Practices (Currently, our purchasing function ...) [c]
Gives preference to suppliers preferred by top management (0.51)
Allows personalities of the supplier to impact decisions (0.55)
Writes specifications that favor a particular supplier (0.72)
Coefficient [alpha]= 0.61
Supplier Activities (Currently, the supplier ...) [c]
Lies to or grossly misleads us in a negotiation (0.62)
Uses less competitive prices or terms for buyers who purchase exclusively from the supplier (0.52)
Uses backdoor selling techniques (such as approaching personnel in engineering, manufacturing, or other departments outside of purchasing) (0.73)
Increases prices when there is a shortage of supply of the purchased material or product (0.50)
Offers gifts in excess of nominal value (0.62)
Asks us for information about their competitors (0.48)
Knowingly over-commits resources or production schedules (0.63)
Coefficient [alpha]= 0.79
My immediate supervisor acts in an ethical manner (0.92)
Top purchasing management acts in an ethical manner (0.96)
Top company management acts in an ethical manner (0.84)
Coefficient [alpha]= 0.93
Actions of Co-Workers[c]
The co-workers in my department act in an ethical manner (0.87)
My company's own sales force acts in an ethical manner (0.66)
Coefficient [alpha]= 0.73
Pressure to Perform[d]
I feel pressure to perform well in my position (0.71)
I feel pressure to meet or exceed performance expectations (0.94)
Coefficient [alpha]= 0.80
The formal evaluations that I have received take into consideration how ethical my behavior has been (0.52)
There are explicit sanctions and punishments in my firm associated with unethical behavior (0.79)
Sanctions and punishments against unethical behavior are enforced (0.78)
Coefficient [alpha]= 0.69
I have received training in ethical issues from my firm
Policy 1: Our company has a corporate code of ethics
Policy 2: We have a code of ethics dealing with activities specific to purchasing
Policy 3: I have been required to read our code of ethics
Policy 4: We periodically communicate our ethical standards to suppliers
Policy 5: My firm has an ethics committee
Policy 6: My firm has an ethics hotline
Policy 7: My firm performs an ethics audit or has some other way of reviewing the actions of the purchasing department to ensure ethical behavior
The type of relationship that my firm has with the selected supplier is best characterized as ...
Length of Relationship
How long have you been doing business with the supplier?
National Culture (Power Distance)[h]
In what country is the supplier whom you chose located?
(a.) Standardized factor loadings are given in parentheses, where applicable.
(b.) Chi-square=185.05 (160df, p=0.09), GFI=0.90, CFI=0.95, NNFI=0.95.
(c.) These items were measured on a 5 point Likert scale where 1 = Never and 5 = Always.
(d.) These items were measured on a 5 point Likert scale where 1 = Strongly Disagree and 5 = Strongly Agree.
(e.) This item was measured on a 5 point Likert scale, where 1 = No Training and 5 = More Than One Day.
(f.) This is a summed scale where individual items were measured on a Yes/No scale.
(g.) This item was measured on a 5 point Likert scale where 1 = Occasional Transaction, 2 = Repeated Transactions, 3 = Longterm Contract, 4 = Partnership, and 5 = Strategic Alliance. These terms were defined for the respondents in the section of the questionnaire immediately before the question. Definitions were based on extant literature in logistics and marketing channels.
(h.) Supplier countries were coded as either small (low) or large (high) in Power Distance, based on Hofstede's (1984) categories.