The effect of controversial global sourcing practices on the ethical judgments and intentions of U.S. consumers

• DOI: http://doi.org/10.1016/j.jom.2015.01.001
• Date: 01 May 2015
• Published date: 01 May 2015
• Author: Wynne Chin,Robert Bregman,David Xiaosong Peng

Journal of Operations Management 36 (2015) 229–243

Contents lists available at ScienceDirect

Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

The effect of controversial global sourcing practices on the ethical

judgments and intentions of U.S. consumers

Robert Bregman, David Xiaosong Peng ∗, Wynne Chin

Department of Decision and Information Sciences, C.T. Bauer College of Business, University of Houston, 334 Melcher Hall, Houston, TX, USA

article info

Article history:

Received 25 October 2013

Received in revised form 5 December 2014

Accepted 2 January 2015

Available online 13 January 2015

Accepted by Thomas Younghoon Choi

Keywords:

Global sourcing

Consumer intentions

Ethical judgment

Hunt–Vitell

Structural equation modeling

abstract

Global sourcing has led to lower cost and more effective supply chains for many companies. However,

when the cost-driven practices of many suppliers in these chains come to light there is often considerable

debate over the ethics of these practices. This research uses the well-known Hunt–Vitell framework as

the theoretical foundation for a structural equation model of the deontological and teleological evalu-

ations used by consumers when making ethical judgments of a firm’s controversial cost-driven global

sourcing practices. Data from a large-scale U.S. consumer survey show the importance of deontological

and teleological evaluations in forming consumers’ ethical judgments of global sourcing practices, and

establish a strong relationship between ethical judgment and the intention of consumers to alter con-

sumption of a firm’s products. Extensions to the framework and demographic analyses for age, gender,

and income provide insights as to how perceptions of these practices affect consumer evaluations of a

company involved in global sourcing and how consumers actualize their resultant intentions.

© 2015 Elsevier B.V. All rights reserved.

1. Introduction

As corporations have become larger and more global in scope

they have become better positioned to take advantage of tem-

porary imbalances in wealth and political institutions to create

advantageous global economic models. These imbalances are fur-

ther enhanced by competition among governments using currency

devaluations, free-trade and enterprise zones, and other incentives

to attract foreign corporations. At the epicenter of these new eco-

nomic models are cost-driven global sourcing practices designed

to use the leverage of these large corporations to reduce the prices

charged by potential suppliers for materials and components. The

resultant competition among suppliers vying to participate in

these supply chains often leads to sourcing from underdeveloped

economies offering little or no institutional regulation, low wages,

and poor working conditions. While the exploitation of imbalances

is central to the idea of economic globalization, responses to recent

media revelations of unfair treatment of employees (Musgrove,

2006), worker suicides (Barboza, 2010), and unsafe working con-

ditions (Power and Devnath, 2012) suggest a growing uneasiness

∗Corresponding author. Tel.: +1 713 743 4734.

E-mail addresses: rbregman@bauer.uh.edu (R. Bregman), xpeng@bauer.uh.edu

(D.X. Peng), wchin@uh.edu (W. Chin).

among consumers as to the degree of exploitation in global supply

chains.

Firms have implemented strong corporate public relations

efforts (e.g., Ngak, 2012; Johnson, 2013) in response to media reve-

lations of these controversial cost-driven global sourcing practices

(global sourcing practices for short) or consequences of the practices

(such as layoffs, workplace injuries, pollution, and worker suicides).

This suggests that companies believe that negative consumer per-

ceptions of these practices may have an adverse effect on their

firms. However, little is known about how knowledge of a firm’s

use of these practices affects consumers’ ethical judgment of the

firm and whether consumers’ ethical judgment affects their inten-

tion to alter consumption of the firm’s products (consumer intention

for short). Although ethical consumption currently represents a rel-

atively small segment of the overall consumer market, it is growing

and has the potential to be much larger (Newholm and Shaw, 2007).

However, to our knowledge there has been no research on ethical

consumption related to the global sourcing practices covered in this

paper.

Consumer perceptions of global supply chains and the ethical

reasoning processes used by consumers to form those perceptions

are particularly important to operations managers in the consumer

products sector because the purpose of global supply chains is

to better drive and support sales to consumers. The cost-driven

global sourcing practices covered in this research are a result of

firms trying to meet consumer preferences for better value. Since

http://dx.doi.org/10.1016/j.jom.2015.01.001

0272-6963/© 2015 Elsevier B.V. All rights reserved.