A Behavioral Theory of Sustainable Supply Chain Management Decision Making in Non‐exemplar Firms

• Published date: 01 January 2016
• Author: Ayman Omar,Brian S. Fugate,Jon F. Kirchoff
• Date: 01 January 2016
• DOI: http://doi.org/10.1111/jscm.12098

A BEHAVIORAL THEORY OF SUSTAINABLE SUPPLY

CHAIN MANAGEMENT DECISION MAKING IN NON-

EXEMPLAR FIRMS

JON F. KIRCHOFF

East Carolina University

AYMAN OMAR

American University

BRIAN S. FUGATE

University of Arkansas

Empirical evidence shows that investments in sustainable supply chain

management can improve economic-based performance. Thus, based on

standard economic theory, rational business decision makers should and

will implement sustainable supply chain management practices. However,

through inductive research methods, we uncovered an intriguing theme

that runs counter to both the existing empirical evidence and such eco-

nomic-based assumptions. We find that managers operating in firms with-

out exemplary sustainable supply chain management practices face

immense hurdles in developing a business case for implementing sustain-

ability initiatives. Despite the lack of such practices—and in tension with

the prevailing empirical evidence and theory—the firms within which

these managers operate were performing well on economic-based perfor-

mance metrics. Departing from the neoclassical economic theory of the

firm, we apply the Behavioral Theory of the Firm’s theoretical assumptions

to findings which suggest four segments of managers in non-exemplary

firms who vary based primarily on how they perceive strategic vulnerabil-

ity, evaluate choices, and utilize sustainability knowledge.

Keywords: sustainable supply chain management; human judgment and decision

making; environmental issues; social responsibility; grounded theory; qualitative data

analysis; behavioral theory of the firm

INTRODUCTION

The debate on whether or not a strong business case

exists for developing and implementing socially and

environmentally sustainable practices has attracted

considerable attention from practitioners and aca-

demics. In particular, research has shed light on this

debate by finding empirical support for a positive link

between sustainable supply chain management

(SSCM) and economic-based business performance

(e.g., Ageron, Gunasekaran & Spalanzani, 2012; Goli-

cic & Smith, 2013; Reuter, Foerstl, Hartmann &

Blome, 2010; Wolf, 2014). Importantly, these empiri-

cal findings are aligned with robust theoretical justifi-

cations, such as providing dynamic competencies,

satisfying external stakeholder pressure, and fostering

high-performing collaborative supply chain partner-

ships (Linton, Klassen & Jayaraman, 2007; Paulraj,

2011). Thus, standard economic theory would con-

tend that firms consisting of rational decision makers

will adopt and implement SSCM because it will

improve performance.

During the analysis of the data collected for this

research on SSCM, however, an interesting theme

emerged that initiated further exploration. Despite the

strong theoretical support and the empirical evidence

that rational managers will and should pursue SSCM,

some of the managers in our sample faced significant

hurdles in developing a business case to commit

January 2016 41

resources toward SSCM. Others experienced immense

difficulties implementing SSCM even when resources

were committed. Interestingly, and perhaps even an

unpopular notion, despite the lack of SSCM practices

ranging from virtually no interest to limited imple-

mentation, each of these firms was performing well

on accounting-based profitability metrics, including

positive net income and growth in their industry. Fur-

thermore, all the firms were performing as well or bet-

ter than their competitors that appear (according to

qualitative data and industry reports) to be success-

fully practicing SSCM.

In light of our findings, a review of the literature

suggests that the current application of theory may

not sufficiently explain nor predict the managerial

behavior observed with respect to SSCM. To better

understand this apparent contradiction, we applied

the behavioral theory of the firm (BTF) (Cyert &

March, 1963). The BTF departs from the standard,

neoclassical economic theory of the firm and concen-

trates on managerial decision making processes, but

has received scant direct and explicit attention within

the SCM discipline (although indirectly foundational

to many topics and studies within SCM; see Gavetti &

Levinthal, 2004). The BTF focuses on explaining the

realistic, boundedly rational decision making pro-

cesses of managers.

Rational individual-level attitudes, experiences, and

preferences about the importance of sustainability have

been shown to vary greatly across managers (Kauf-

mann, Michel & Carter, 2009; Klassen, 2001; Pagell &

Gobeli, 2009), which creates confusion regarding com-

mitment to SSCM. Conflicting pressures from internal

and external stakeholders often exacerbate these chal-

lenges. For instance, senior management, shareholders,

and supply chain members harbor concerns about

SSCM implementation and corresponding opportunity

costs, the reality of tangible outcomes, the impact on

customer demand, and the magnitude of improved

financial performance (Walker, Di Sisto & McBain,

2008). Decisions about SSCM practices are ambitious

in ideology, but in reality, may be a lower priority or

impractical in the minds of many managers (Bowen,

Cousins, Lamming & Faruk, 2006).

If the benefits of SSCM are to come to fruition,

managers need guidance on this socially complex and

challenging process of evaluating and implementing

SSCM (Zhu, Sarkis & Lai, 2012). To that end, more

theoretical and practical insight is needed to address

this common situation—the manager who is forced to

struggle with the SSCM phenomenon within organiza-

tions and supply chains that are not intrinsically and

strategically motivated to emphasize exemplary envi-

ronmental and social responsibility (i.e., non-exem-

plary). To advance theory and practice through a

better understanding of the complexities of the SSCM

phenomenon, this research undertakes an in-depth

exploratory investigation into the decision making

processes of SSCM practices and the corresponding

difficulties with which managers struggle. The objec-

tive of this research is to gain a better understanding

of how managers perceive, process, react to, and con-

tend with SSCM, from an emotive and cerebral

dimension, when their organizations are struggling to

adopt or implement SSCM. We approach this objec-

tive by inductively developing a grounded theoretical

model of SSCM in non-exemplary firms, which is

integrated with the BTF. Four segments of managerial

behavior which emerged from this model are pre-

sented and then juxtaposed with exemplary SSCM

organizations to provide a more comprehensive theo-

retical explanation of the complexities of SSCM from

a manager’s point of view.

LITERATURE REVIEW

Carter and Rogers (2008, p. 358) define SSCM as

“the strategic, transparent integration and achievement

of an organization’s social, environmental, and eco-

nomic goals in the systemic coordination of key

interorganizational business processes for improving

long-term economic performance.” The underlying

assertion is that SSCM creates value for organizations,

which has led to years of research seeking results

regarding the link between sustainable practices and

performance (Tate, Dooley & Ellram, 2011). Indeed,

empirical findings indicate that the “win–win–win” of

balancing environmental, social, and economic perfor-

mance leads to improved operational efficiency and

cost reductions, quality, compliance, risk mitigation,

supply chain security, company image, health and

safety standards for workers, market growth, and rev-

enue generation (Golicic & Smith, 2013; Hollos,

Blome & Foerstl, 2012; Pagell & Wu, 2009; Pagell, Wu

& Wasserman, 2010; Reuter et al., 2010; Zhu, Sarkis

& Lai, 2013). Yet despite this overwhelming prepon-

derance of evidence, the question remains as follows:

why are not more organizations adopting SSCM prac-

tices?

SSCM Decision Making

Firms face significant trade-offs and challenges asso-

ciated with the decision to develop and implement

SSCM. The sustainability concept itself is confusing

for many managers (Ehrenfeld, 2005). This is under-

standable, given that SSCM encompasses a wide vari-

ety of different, sometimes divergent, contexts,

priorities, and goals (e.g., environmental responsibil-

ity, growth limits, diversity, profitability, resource con-

servation, workplace safety, and labor rights) (Carter

& Jennings, 2002; Ehrenfeld, 2005). Also, the growing

number of external global stakeholders and regulations

Volume 52, Number 1

Journal of Supply Chain Management

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