Spillover effects of supply chain news on consumers' perceptions of product quality: An examination within the triple bottom line

DOIhttp://doi.org/10.1002/joom.1033
Date01 September 2019
Published date01 September 2019
RESEARCH ARTICLE
Spillover effects of supply chain news on consumers' perceptions
of product quality: An examination within the triple bottom line
Bridget Satinover Nichols
1
| Hannah Stolze
2
| Jon F. Kirchoff
3
1
Haile/US Bank College of Business,
Northern Kentucky University, Highland
Heights, Kentucky
2
Wheaton College, 501 College Ave.,
Wheaton, Illinois
3
East Carolina University, Bate Building,
Greenville, North Carolina
Correspondence
Jon F. Kirchoff, East Carolina University,
3103 Bate Building, Greenville, NC 27858.
Email: kirchoffj@ecu.edu
Handling Editor: Brian Jacobs
Abstract
The purpose of this research is to examine the impact that news about supply chain
operations related to the triple bottom line (TBL) has on consumers' perceptions.
Specifically, it focuses on how sustainability successes and failures in a company's
supply chain operations influence consumer perceptions of product quality. These
perceptions are based on a spillover effect. The research study is set up across three
experiments. Study one tests for the spillover effect in supply chain TBL-related
news and demonstrates that negative supply chain news across all three TBL
dimensions reduces quality perceptions. Study two examines the effect across three
levels of negative news intensity and finds that the spillover effect is consistent,
even with stronger levels of negativity. Study three investigates whether a firm can
improve damaged quality perceptions and purchase intentions through a recovery
effort. The results of study three suggest that consumers' perceptions and purchase
intentions are generally reparable. Collectively, the findings should encourage
firms to more rigorously consider how news about their supply chain operations
may impact consumers' perceptions and intentions toward the firm's products.
KEYWORDS
consumer perceptions, spillover effect, supply chain management, sustainability, triple bottom line
1|INTRODUCTION
The triple bottom line (TBL) framework of sustainability
reflects a firm's social, environmental, and economic perfor-
mance (Elkington, 1998). Many firms have adopted TBL to
account for a broader assessment of their supply chain man-
agement performance. However, TBL sustainability goals
are challenging for firms to achieve, despite demand for
greater transparency into their global operations and their
commitment to TBL, fueled by the rapid adoption of tech-
nology and the prevalence of social media. This has extended
awareness of firms' supply chain operations downstream to
end consumers. Consumers are now powerful stakeholders
and major constituents of the supply chain (Ta, Esper, &
Hofer, 2015). Their role is no longer limited to providing
demand data to increase supply chain agility; consumers care
how the products they buy are sourced, produced, and
brought to market (Kirchoff, Nichols, & Rowe, 2019). Fur-
thermore, consumers now have more access to operations and
supply chain-related TBL news, which has the potential to
impact their evaluations of firms and products.
Consumers respond when alerted to unethical supply
chain practices. For example, consumers reacted negatively
to news that Mattel's supply chain was responsible for loose
magnets in toys, a potential health hazard. The ensuing fallout
was further compounded and complicated by Mattel's admis-
sion of internal design flaws (Carvalho, Muralidharan, &
Bapuji, 2015). In 2018, the operations of the global clothing
retailer H&M were called into question following a series of
allegations that H&M contract manufacturers mistreated
workers and followed poor environmental practices (Bergeson,
2018). Consumer backlash against the company's supply chain
Received: 13 June 2018 Revised: 25 March 2019 Accepted: 26 April 2019
DOI: 10.1002/joom.1033
536 © 2019 Association for Supply Chain Management, Inc. J Oper Manag. 2019;65:536559.wileyonlinelibrary.com/journal/joom
sustainability practices resulted in a 33% revenue loss from
2016 to 2018. In another case of TBL accountability, consumers
boycotted grocery company Trader Joe's for not disclosing
genetically engineered ingredients in their food products
(Parmigiani, Klassen, & Russo, 2011). Trader Joe's responded
by working with stakeholders to implement increased supply
chain accountability (Kowitt, 2010).
Despite evidence that consumers pay attention to infor-
mation about firms' TBL supply chain activities, the extent
to which this knowledge affects consumers is not well
understood. The role of consumers in SCM remains an
under-researched topic area and questions remain, such as:
how does visibility into the TBL performance of a firm's
supply chain affect consumers' brand perceptions? This
question is interesting to both supply chain and marketing
managers because positive news about a firm's supply chain
and positive product perceptions may lead to brand equity
and higher sales (Ahluwalia, Unnava, & Burnkrant, 2001;
Bell, Mollenkopf, Meline, & Burnette, 2016). Conversely,
negative news and supply chain failures can hurt brand and
product image, as well as threaten firm performance and
their ability to compete (Ma, Zhang, Li, & Wang, 2010).
Ultimately, both positive and negative supply chain news
may have unintended spillover effects, defined as the extent
to which information provided in messages changes beliefs
about attributes that are not mentioned in the messages
(Ahluwalia et al., 2001, 458). A spillover effect can influ-
ence consumer perceptions about product performance that
is not mentioned in news related to SCM processes at all.
The limited spillover research in the operations manage-
ment literature has focused on upstream supply chains. For
example, Goebel, Reuter, Pibernik, Sichtmann, and Bals
(2018) suggest that firms are willing to pay more for TBL
certified suppliers due to potential negative spillover effects
of supplier actions. According to Muthulingam and Agrawal
(2016), quality knowledge does not spillover easily from
buyers to suppliers. Their study was done in the context of
German purchasing agents across multiple industries. How-
ever, spillover effects occur in a variety of firm and product-
related scenarios, many of which affect consumer brand and
quality evaluations. While studies are starting to examine
consumers' desire for supply chain visibility into socially
responsibility actions (Kraft, Valdes, & Zheng, 2018), few
explore how publicity or news not intentionally released by
the firm impact these same evaluations.
Furthermore, concurrent exploration of all TBL dimensions
remains relevant in empirical OM research as few firms have
moved beyond one or two dimensions. Even fewer firms have
fully embraced TBL despite a growing interest in sustainability
issues (Elkington, 2018; Winter & Knemeyer, 2013). In a
world of ubiquitous information flow where consumers have
access to even the most detailed aspects of a firm's supply
chain processes, financial gains (or losses) may also be inextri-
cably tied to the way consumers interpret news and information
about firms. Therefore, the purpose of this research is to exam-
ine the impact of a firm's supply chain TBL-related news, here-
after supply chain news, on consumers' evaluations of product
quality. The present article reports on a series of three experi-
ments focused on this phenomenon. The results produce a con-
sistent and triangulated account of how consumers respond to
negative supply chain news involving dimensions of the triple
bottom line.
2|LITERATURE REVIEW
2.1 |Sustainable supply chain management
Sustainable SCM is broadly defined as the cooperative man-
agement of material, information, and capital flows among
companies along the supply chain with a strategic focus on
all three dimensions of the TBL, derived from an under-
standing of customer and stakeholder requirements and per-
ceptions (Seuring & Müller, 2008). Within the sustainable
supply chain literature, social SCM is defined as product-
or process-related aspects of operations that affect human
safety, welfare, and community development(Klassen &
Vereecke, 2012, p. 103). Environmental SCM is integrating
environmental thinking into supply chain management,
including product design, material sourcing and selection,
manufacturing processes, delivery of the final product to the
consumer, and end-of-life management of the product after
its useful life(Srivastava, 2007, p. 54). Economic sustain-
ability in SCM is defined as the effort to enhance total
(firm) value while reducing supply chain cost associated
with the manner in which the firm conducts its business
(Closs, Speier, & Meacham, 2011, p. 107).
Supply chain managers today still tend to focus first on
the economic dimension of TBL, although the inclusion of
the environmental and social dimensions may yield even
greater overall benefits for firms than the economic dimen-
sion alone (Elkington, 2018). For example, environmental
initiatives can reduce firms' carbon footprint, fuel consump-
tion, and transportation miles (Golicic, Boerstler, & Ellram,
2010), while social initiatives can increase revenue, mitigate
risks, and improve operational performance (Tate, Ellram, &
Kirchoff, 2010). The inclusion of social and environmental
goals in corporate strategies have gained importance, albeit
slowly, as managers seek competitive advantage through
transparency and trust (Galvas & Mish, 2015).
2.2 |Spillover effect
Unfortunately for firms, transparency can have unintended
consequences and negative news about activities occurring
NICHOLS ET AL.537

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