THE ROLE OF PURCHASING IN CORPORATE SOCIAL RESPONSIBILITY: A STRUCTURAL EQUATION ANALYSIS

THE ROLE OF PURCHASING IN CORPORATE SOCIAL RESPONSIBILITY: A STRUCTURAL EQUATION ANALYSIS

by

Craig R. CarterUniversity of Nevada, Reno

and

Marianne M. JenningsArizona State University

Researchers over the past several years have advocated that the role of logistics must expand toencompass social responsibility (Bowersox 1998; Poist 1989; Stock 1990). Most recently, Murphyand Poist (2002) noted that research in the area of socially responsible logistics has lagged behind thatof other functional areas of the firm, despite logistics managers’ beliefs that social responsibility isan important component of logistics that will increase in importance over time. Somewhat similarly,the subject of purchasing and supply management has received insufficient coverage in the past (LaLonde 1988) and continues to be underrepresented vis-à-vis other logistics topics (Miyazaki,Phillips, and Phillips 1999), despite the key role that purchasing plays in a firm’s overall logistics sys-tem including product design and selection, procurement of transportation and third-party logisticsservices, supplier selection, and the management of inventory and supplier relationships (Bowersoxet al. 1992; Cavinato 1992; Gentry and Farris 1992; Lambert and Stock 1993).

Purchasing managers span the boundary between the firm’s internal functions and its externalstakeholders, including suppliers and third parties (Cavinato 1992; Webster 1992). These man-agers are advantageously positioned to affect a firm’s involvement in socially responsible activities.The literature in the area of purchasing and supply management has begun to investigate several issuesrelating to socially responsible logistics, including environmental purchasing (Carter and Carter 1998),purchasing from minority/women-owned business enterprise (MWBE) suppliers (Dollinger, Enz, andDaily 1991), labor conditions at supplier plants (Emmelhainz and Adams 1999), and ethical issues inbuyer-supplier relationships (Turner, Taylor, and Hartley 1994). These issues, however, have beenexamined in a standalone fashion, without theoretical or empirical consideration of their relationshipto a higher-order construct of corporate social responsibility (CSR), which can largely be defined as,“corporate activity and its impact on different social groups” (Sethi 1995, p. 18).

The broad purpose of the paper is to empirically examine CSR issues in the narrower context ofthe purchasing function. The paper provides an initial look at the drivers and constructs of CSR for

JOURNAL OF BUSINESS LOGISTICS, Vol. 25, No.1, 2004 145

purchasing. Though exploratory in nature, the framework that is introduced and tested furnishes managers with an understanding of the dimensions and drivers of CSR in purchasing. This researchsheds light on the interrelatedness of these dimensions, suggesting that purchasing managers can buildupon their experiences in one area of CSR when initiating other areas of CSR.

The involvement of the purchasing function in CSR has been labeled as Purchasing SocialResponsibility (PSR) and working definitions of these terms are provided in the ensuing section of thepaper. PSR has the characteristics of CSR, but is divergent because of the purchasing manager’s dis-tinct interaction with a broad set of stakeholders including buyers, suppliers, contractors, the com-munity, and internal employees in most of the other functional areas of the company. While some ofthese activities may overlap with the general CSR of the firm, the purchasing manager occupies a dis-tinct role in garnering support from and coordinating with other groups for socially responsibleconduct in the company’s relationship with suppliers.

The specific goal is to answer the following research questions:

1. What are the specific activities that comprise PSR?

2. What are the drivers of PSR?

Anew concept of PSR is developed through a review of the CSR and related purchasing and sup-ply chain management literature and an integration of extant findings from in-depth interviewswith supply chain managers. The concept is further developed and the study’s research questions are answered by creating a reliable and valid scale to measure PSR, and by advancing and testing atheoretical model of the antecedents to PSR through the use of a large-scale mail survey.

The following sections of the paper provide a brief overview of the extensive literature in thebroad area of CSR and then focus more specifically on the purchasing and supply management lit-erature concerning PSR. Hypotheses are next developed, through an integration of the social respon-sibility literature with literature from the fields of organizational behavior and organizational theory.In both these sections and the sections that follow, findings are integrated from an earlier, standaloneproject involving exploratory interviews conducted with 26 managers and executives in the areas ofpurchasing, transportation, and warehousing. These interviews were conducted prior to the devel-opment of this study’s hypotheses and survey instrument. For a more detailed description of the inter-views, see Carter and Jennings (2002, pp.150-152). These interviews, along with the literatureintroduced in the literature review section that follows, helped us to understand PSR, the measurementof PSR, and the antecedents to PSR.

After the introduction of the study’s hypotheses, the methodology used to test the hypotheses isdescribed and results are presented. Finally, the implications of our findings, both from a theoreticalperspective and from the standpoint of managers and executives who initiate and manage PSRactivities and programs, are discussed.

146 CARTER AND JENNINGS

LITERATURE REVIEW

Within the CSR literature, there are three schools of thought on the definition of CSR. In one view,CSR consists of specific sets of activities or dimensions and includes charitable and philanthropic dona-tions (Wokutch 1998), community considerations (Mallot 1998), the advancement of gender, racial,and religious diversity in the workplace (Clair et al. 1997), safety (Wokutch 1992), human rights (Jennings and Entine 1999), and the environment (Fryxell and Dooley 1997).

The second view, found in several taxonomies and frameworks, defines business ethics to be akey dimension of corporate social responsibility (Llewellyn 1998) and uses the term business ethicsinterchangeably with CSR (e.g., Beauchamp and Bowie 2001; Velasquez 1982). Streams of researchhave been developed here in specialty journals such as the Journal of Business Ethics and BusinessEthics Quarterly, with empirical research in these specialty journals often focusing on the avoidanceof unethical practices. The second view emphasizes fewer stakeholder issues and focuses on thoseareas traditionally associated with compliance programs and more likely to be labeled businessethics including antitrust issues, pricing policies, dubious sales inducements, deceit, and foreign bribery(Wokutch and Mallot 1998).

A third school incorporates both of the prior views regarding what firm behaviors and activitiesactually comprise corporate social responsibility. For example, Carroll (1979, 1991) attempted to bringgreater precision in answering the question of what constitutes social responsibility by offeringfour hierarchically related duties: 1) Economic Responsibilities – to transact business and provideneeded products and services in a market economy; 2) Legal Responsibilities – to obey laws whichrepresent a form of “codified ethics;” 3) Ethical Responsibilities – to transact business in a mannerexpected and viewed by society as being fair and reasonable, even though not legally required;and 4) Voluntary/Discretionary – to conduct activities which are more “guided by business’s discretion”than actual responsibility or expectation. Figure 1 exhibits the hierarchical nature of these four levels of corporate social responsibility.


FIGURE 1

THE HIERARCHY OF CORPORATE SOCIAL RESPONSIBILITY

Source: Adapted from Carroll (1979, 1991)

There is some disagreement among the above viewpoints over the application of moral devel-opment theory to these approaches to CSR. One view holds that the compliance component ofCSR is simply a lower order of moral development and that the addressing of issues related tohuman rights, diversity, and the environment reflect a higher order of moral development on the partof the company (Jennings and Entine 1999). Such a compromise conceptual framework is helpful, butresearchers have yet to empirically examine the dimensionality of CSR from a managerial per-spective. Instead, much of this research has been conceptual and normative in nature, and has discussedunderlying values and debated managerial responsibilities (e.g., Wartick and Cochran 1985). Whileempirical work has examined antecedents such as corporate governance and institutional ownership(e.g., Johnson and Greening 1999) and consequences including financial outcomes (e.g., Alexanderand Buchholz 1978), CSR itself has been operationalized in a multitude of fashions without recog-nition of the need to develop a common measurement approach.

Early definitions of CSR have also been somewhat contradictory. Davis (1960) defines CSR as,“Decisions and actions taken for reasons at least partially beyond the firm’s direct economic or

DiscretionaryResponsibilities

EconomicResponsibilities

LegalResponsibilities

EthicalResponsibilities


technical intent” (p. 70). Conversely, Friedman (1962, 1970) contends that the only social responsibilityof a business is to make as much money as possible for shareholders. These definitions have coalescedto a great degree with the introduction of Carroll’s framework and definition of CSR: “The socialresponsibility of business encompasses the economic, legal, ethical, and discretionary expecta-tions that society has of organizations at a given point in time” (1979, p. 500).

The viewpoints of Carroll (1979, 1991), Llewellyn (1998), and Sethi (1975) are adopted here toprovide a working definition of CSR as, “meeting the economic, legal, ethical, and discretionaryresponsibilities expected by society.” Thus this definition encompasses activities relating to diversity,the environment, human rights, philanthropy, and safety, as well as activities relating to business ethicsas described above. The reader should note that in following Carroll’s framework, ethical responsi-bilities are considered as a building block, and at a hierarchically lower level of CSR, in terms of moraldevelopment (Jennings and Entine 1999), than Carroll’s discretionary responsibilities such as diver-sity, the environment, human rights, philanthropy, and safety. The reader should also note that the CSRliterature tends to focus more upon the ethical and discretionary dimensions of Carroll’s model, as thereis much less debate among managers regarding the need to meet the economic and legal dimensionsof the model.

Review of the Purchasing and Supply Management Literature

In this section, the focus is narrowed by reviewing literature that encompasses purchasingand supply management activities relating to environmental, diversity, ethics, and human rights issues.These issues were recognized in the prior section as being encompassed within CSR and wereidentified through a review of the supply chain management literature as existing or emergingstreams of research. Further, these topics, along with safety and philanthropy, were also identified during the course of interviews with managers. In the latter sections of the paper, hypotheses are developed and empirical support is provided for the inclusion of these issues within PSR.

The Environment

Ellram and Birou (1995) suggest that one way in which the purchasing function can contributeto a firm’s socially responsible purchasing is through environmental initiatives. Purchasing literaturein the area of environmental management includes the use of case studies of environmental supplymanagement (Handfield et al. 1997; Narasimhan and Carter 1998), along with survey researchemployed to study environmental purchasing (Min and Galle 1997), including its antecedents(Carter and Carter 1998; Carter, Ellram, and Ready 1998) and economic consequences (Carter,Kale, and Grimm 2000).

Some of the key antecedents identified by these studies are:

• the influence of downstream members of the supply chain, including distributors, retailers, andultimate customers (Carter and Carter 1998);


• the extent of coordination between buying and supplying organizations (Carter and Carter 1998;Narasimhan and Carter 1998; Walton, Handfield, and Melnyk 1998);

• management support (Carter, Ellram, and Ready 1998; Drumwright 1994; Narasimhan andCarter 1998);

• organizational culture and philosophy (Drumwright 1994);

• initiatives of individual employees (Drumwright 1994; Kopicki et al. 1993);

• the establishment of specific goals (Carter, Ellram, and Ready 1998; Narasimhan and Carter1998); and

• the provision of training (Carter, Ellram, and Ready 1998).

Evidence of the influence of government regulation on environmental purchasing is mixed. Melnyk et al. (1999) find that environmental management systems are positively related to envi-ronmental regulations; case study research by Walton, Handfield, and Melnyk (1998) and thedescriptive statistics presented by Min and Galle (1997) suggest a positive relationship between government regulation and environmental supply chain management, but also indicate that regula-tion can act as a barrier to green purchasing due to the constant changes to existing regulation.Empirical research by Carter and Carter (1998) found no relationship between regulation and environmental purchasing.

Ethics

Ethical issues in buyer-supplier relationships have long been studied from the standpoint of pur-chasing management (Felch 1985; Guertler 1968; Rudelius and Buchholz 1979; Turner, Taylor, andHartley 1994), sales management (e.g., Chonko, Tanner, and Weeks 1996; Hunt and Vitell 1986; Levyand Dubinsky 1983), and the concurrent perspectives of both the buyer and supplier (Carter 2000a;Dubinsky and Gwin 1981). The purchasing and marketing management research in this area has sug-gested that examples set by top company management have the potential to shape company culturewith regard to ethics (Chonko and Hunt 1985; Chonko, Tanner, and Weeks 1996; Hunt, Chonko, andWilcox 1984; Turner, Taylor, and Hartley 1994). Other antecedents identified in the extant literatureinclude the presence of a code of ethics (Forker and Janson 1990) and ethics policies and stan-dards (Carter 2000b). More recent empirical research finds that ethical issues in buyer-supplierrelationships consist of two unique dimensions (Carter 2000a). The first dimension, “deceitfulpractices,” includes activities such as using obscure contract terms to gain advantage of suppliers; the second dimension, “subtle practices,” encompasses somewhat more subtle activities such as showing favoritism when selecting suppliers.

Diversity

Diversity issues in the purchasing management literature center upon purchasing from minority/women-owned business enterprises (Carter, Auskalnis, and Ketchum 1999; Dollinger,Enz, and Daily 1991). Here, researchers have found that top management support and policies that


require inclusion of MWBE purchasing criteria in the formal evaluation of purchasing managers arepositively related to the extent of purchases from MWBE suppliers. Additionally, Krause, Ragatz, andHughley (1999) suggest that some firms’ MWBE programs are driven not only by social concerns,but also customer considerations as minorities can represent large and growing market segments formany consumer organizations.

Human Rights, Safety, and Philanthropy

Purchasing management research in the areas of human rights and philanthropy, and safety hasbeen rare, with only scant focus on subjects such as human rights issues at suppliers’plants (Emmel-hainz and Adams 1999). Here, issues center upon selecting suppliers that pay a living wage and thatavoid the use of inhumane working conditions in their factories. Emmelhainz and Adams advocatethat these issues have become relevant for purchasing managers due to increased awareness ofU.S. consumers and increased regulatory scrutiny. Exploratory interviews with purchasing managersfor the current research suggest that purchasing’s involvement in CSR also includes safety issues suchas ensuring safe operations at suppliers’ plants and more general philanthropic issues includingvolunteering at local charities.

Overall Assessment

The literature review shows that close parallels exist between the dimensions of activitiesconsidered within CSR and those examined in the purchasing literature and identified throughinterviews with purchasing managers. Purchasing managers who participated in these interviews con-centrated on the ethical and discretionary responsibilities of Carroll’s model, as has the standalone sup-ply management literature reviewed in the prior paragraphs. Thus, PSR is labeled as purchasing’sinvolvement in CSR. The following specific, working definition of PSR, based on Carroll’s defini-tion and modified in accordance with the perspectives of purchasing managers participating inthese interviews is offered: “purchasing activities that meet the ethical and discretionary responsibilitiesexpected by society.” The dimensions of PSR appear to mirror those of CSR; however many of thespecific activities appear to be unique to purchasing.

While conceptual frameworks and a working definition of CSR exist, and can be adapted for PSR,empirical research that holistically examines the dimensions and drivers of the general notion of CSRfor business or for supply chain management is missing. Further, managers’views on the presence ofvirtue ethics and their relationship to the presence or non-presence of CSR has not been subjected toempirical examination. Similarly, the relationship of various components of PSR and their driversremains unexplored empirically. Thus despite CSR theory and the interview findings, there is no empir-ical examination of how the purchasing activities reviewed in the prior section interrelate andpotentially fall beneath a common “social responsibility” rubric. Based on the CSR literature and thesemanagers’defined areas of CSR, it is next posited that these potentially related groups of activities maybe linked to a newly defined umbrella, or second-order construct of PSR, a specific operationaliza-tion of CSR. Hypotheses are introduced concerning potential drivers of PSR.


HYPOTHESES

Research Question 1: What Are the Dimensions of PSR?

The extant research described in the literature review, along with interviews conducted with pur-chasing managers, suggest that PSR is a multidimensional, higher-order construct consisting ofactivities relating to the environment, diversity, human rights, safety, and philanthropy. Thus, the fol-lowing hypotheses are introduced:

H1a: Purchasing activities relating to the environment constitute a dimension of PSR.

H1b: Purchasing activities relating to diversity constitute a dimension of PSR.

H1c: Purchasing activities relating to human rights constitute a dimension of PSR.

H1d: Purchasing activities relating to philanthropy constitute a dimension of PSR.

H1e: Purchasing activities relating to safety constitute a dimension of PSR.

Some authors do not make a hierarchical distinction between the terms business ethics and CSR(Beauchamp and Bowie 2001; Velasquez 1982), while others suggest that ethical responsibilities areencompassed within CSR, although at a lower level of moral development (Carroll 1979, 1991; Jen-nings and Entine 1999). While Carroll’s viewpoint and definition of CSR have been adopted here, itis also recognized that managers may not view ethical responsibilities as falling under the sameumbrella as discretionary responsibilities, since ethical responsibilities are considered to be at a lower,more fundamental level of social responsibility within our working definition of PSR. Like theconceptual literature, the results from the interviews are mixed, with some managers categorizing ethicsas being subsumed by PSR and others viewing ethics at a lower, base level. Thus both extant litera-ture and interview data suggest two plausible and competing, alternative camps regarding the rela-tionship between ethics and social responsibility. For this reason, both a hypothesis and a competing,alternative hypothesis, as is common in related business disciplines such as management and marketing(e.g., Ely 1995, p. 596; Pechmann and Shih 1999, p. 3) are stated.

H1f: Purchasing activities relating to ethics constitute a dimension of PSR.

H1fAlternative: Purchasing activities relating to ethics do not constitute a dimension of PSR.

Research Question 2: What Are the Drivers of PSR?

Organizational culture and top management leadership

Organizational culture can be defined as a set of values, beliefs, assumptions, and ways of thinking shared by organizational members and taught to new members of an organization (Barney 1986; Chatman and Jehn 1994; Smircich 1983; Wiener 1988). This definition suggeststhat organizational culture influences work behavior, and studies have shown that organizational culture is associated with employee behavior (Sheridan 1992).


While research has failed to uncover a universally accepted model of cultural components(Ostroff, Kinicki, and Tamkins 2002), there is consensus that organizational culture consists ofmultiple, diverse layers (Schein 1984; Trice and Beyer 1984) and it is thus common to test specificdimensions of an organization’s culture within a nomological network (e.g., Autry and Daugherty2003; Homburg and Pflesser 2000; Mohr and Nevin 1990). Chatman and Jehn developed a multi-itemscale to measure organizational culture and find that organizational culture consists of distinctdimensions, including innovation, stability, and people-orientation. People-orientation encom-passes items relating to considering the welfare of others, and being fair and supportive. The currentresearch interview findings suggest that the dimension of organizational culture most supportive of PSR is the people-oriented dimension. The people-orientation dimension of Chatman and Jehn’sorganizational culture scale almost perfectly operationalized organizational culture as described bythe interviewees who participated in the first phase of our study.

Past research has suggested that organizational culture can lead to the attainment of specific goalsand sets of activities that are congruent with the values of that culture (Barney 1986; Denison 1990;Denison and Mishra 1995; Kotter and Heskett 1992; O’Reilly 1989). For example, researchershave found that a market-oriented culture, including openness of market-related internal commu-nication and the market-related responsibility of employees, significantly influences market-orientedbehavior such as the generation of and responsiveness to market intelligence (Homburg and Pflesser2000). Similarly, it can be posited that a people-oriented culture, as defined above, should positivelyaffect the degree of socially responsible activities and programs within an organization, including PSR.While it may seem obvious that the people-oriented dimension of culture is related to PSR, qualita-tive results from this study suggest that PSR can often occur in the absence of such a supportive orga-nizational culture. Thus this relationship is certainly worthy of study within a multivariate context.This leads to the following hypothesis:

H2: A people-oriented organizational culture is positively related to PSR.

Top management can be a key driver of an organization’s extended programs and initiatives(Mintzberg 1973). More specifically, Lambert, Stock, and Ellram (1998) submit that top managementsupport, leadership, and commitment to change are important antecedents to the implementation ofsupply chain management activities and programs. Further, authors have proposed that examples setby top company management have the potential to impact an employee’s actions in ethically uncer-tain and ambiguous areas that may not be clearly outlined by company policy (Chonko and Hunt 1985;Chonko, Tanner, and Weeks 1996; Cullen and Victor 1988; Donaldson 1996; Dubinsky and Gwin1981; Hunt, Chonko, and Wilcox 1984; Turner, Taylor, and Hartley 1994) and can likely also play animportant role in providing leadership and examples of socially responsible behavior. Thus the fol-lowing hypothesis:

H3: Top management leadership is positively related to PSR.

Some argue that corporate culture is determined historically and not easily changed (Hofstedeet al. 1990; Kabanoff and Holt 1996). This suggests that top management has little influence on


organizational culture. Others propose that corporate cultures can be changed to emulate the culturesof more successful organizations (Quinn 1980) and advocate that it is the responsibility of top man-agement, through its actions, to create and maintain a culture that supports socially responsiblebehavior (Murphy and Enderle 1995). Thus top management may be able to influence organizationalculture through their own actions and behaviors, or in other words, “lead by example” by “walkingthe walk” rather than just “talking the talk” (Peters and Waterman 1982; Stead, Worrell, and Stead1990). For example, Denny’s restaurants and Texaco faced litigation and consumer backlash from thepublic release of information regarding their alleged racism in everything from the treatment ofemployees to customer access. In both cases the public relations issues, boycotts, and impact on earn-ings were ended when the CEOs of the companies took a hands-on approach to the issue. Beyond set-tling the legal cases, the CEOs began minority business programs and scholarship programs forminorities. The result was a company-wide transformation of attitudes and conduct as well as animproved public image. Since their CEOs adopted a more hands-on approach, both Denny’s and Texaco (now part of Chevron Texaco) have been recognized for their CSR with regard to diversity.Thus, the views of Quinn (1980) and of Murphy and Enderle (1995) are taken here and it is proposedthat top management’s actions can not only directly influence PSR, but can also indirectly influencePSR through their mediated effect on corporate culture.

H4: Top management leadership is positively related to a people-oriented organizational culture.

Employee initiatives and values

Employees themselves can likely play a key role in initiating PSR. Through her case study analy-sis, Drumwright (1994) found that the primary initial driver of environmental purchasing camefrom workers who were personally committed to environmental values. Carter, Ellram, and Ready(1998) lend empirical support to Drumwright’s findings by demonstrating a significant relationshipbetween middle management initiatives and environmental purchasing. It is also likely that employeeinitiatives are a key driver of the broader PSR construct. The research interviews provided additionalsupport for Drumwright’s qualitative findings. As one interviewed purchasing manager stated so suc-cinctly regarding the establishment of a minority business enterprise (MBE) sourcing program,“Whatever I have done has been purely on my own.”

H5: Employee initiatives are positively related to PSR.

Personal values of employees have been espoused as one potential precursor to ethical behav-ior in organizations (Weber 1993). In a similar fashion, the individual values of purchasing employ-ees are likely to be a direct facilitator of PSR programs. Time after time interviewees stated that theirinvolvement in socially responsible programs was the “right thing to do” and that it allowed them to “go home and sleep at night.” Thus employee values appear to be an additional, direct antecedentto PSR.


Similarly, employee values appear to also drive their initiatives to develop PSR programs.For example, another purchasing manager made the following comment regarding the implementationof an MWBE purchasing program:

“I just wanted to start it because I felt a personal responsibility. It was just the right thing to do.”

This causal relationship between employee values and their initiatives is also supported byDrumwright’s case study findings, which suggested that environmental purchasing initiatives wereoften driven, in turn, by employees’ individual values and commitment to the programs/cause.Based on this work and the interview results, the following hypotheses are provided:

H6a: Individual values of purchasing employees are positively related to PSR.

H6b: Individual values of purchasing employees are positively related to employee initia-tives to develop socially responsible programs.

Government regulation

Organizations are required to comply with government regulation including legislation in theareas of safety, the environment, and diversity. Interestingly, the findings have been mixed as towhether government regulation is a significant driver of individual dimensions of PSR. Marcil(1992) argues that environmental regulation creates operating barriers and increases costs for busi-nesses and Wu and Dunn (1995) suggest that compliance with environmental regulations is a short-term response by businesses. Stock (1992, 1998) and Kopicki et al. (1993) maintain that firms that aremore involved with environmental supply chain management transcend basic compliance withregulations, while Porter (1991) proposes that environmental regulation and subsequent actionsby firms can lead to competitive advantage.

The findings from empirical investigations have also been mixed. Carter and Carter (1998) foundthat government regulation is not a significant driver to environmental purchasing and Dean and Brown(1995) found that environmental regulation can actually act as a barrier to entry. Conversely, case studyfindings from Handfield et al. (1997) suggest that regulation has a meaningful, positive effect on afirm’s environmental initiatives. In the area of diversity, Carter, Auskalnis, and Ketchum (1999) foundthat government regulation was not significantly related to the level of procurement from MBE sup-pliers. Based on the mixed assertions and findings in the extant literature, the following hypothesisand alternative hypothesis are proposed:

H7: Government regulation is positively related to PSR.

H7Alternative: Government regulation has no relationship to PSR.

Customers

Researchers in the areas of innovation management and new product development have sug-gested that customer demands can be a significant driver of organizational innovation and change(Quinn 1985; von Hipple 1982). Increasingly, customers are concerned about the safety, environmental


impact, and origin of products (Brown and Dacin 1997; Handelman and Arnold 1999). This customerconcern could directly impact PSR. For example, on the environmental front, customers mightdemand products and packaging made from recyclable materials or products that are themselves moreeasily reused or recycled. This type of customer demand can lead the purchasing function to evalu-ate the environmental friendliness of products and packaging, reduce packaging material, andengage in the design of products for disassembly, recycling, and reuse (Carter and Carter 1998). Similarly, consumers are shunning products that contain materials manufactured under sweatshop laborconditions (Emmelhainz and Adams 1999). This leads to the final hypothesis:

H8: Customer pressures for socially responsible products are positively related to PSR.

The relationships suggested by Hypotheses 2-8 are presented in Figure 2. Note that an additionalvariable, “Organizational Size,” is also included as an antecedent in the figure. Murphy, Smith,and Daley (1992) found that organizational size was a significant predictor of ethical behavior in themotor carrier industry, while Klassen and Angell (1998) found a marginally significant relationship(p < 0.10) between firm size and firms’ level of environmental ambition. Similarly, it is possible thatorganizational size may explain some of the variance in a firm’s socially responsible initiatives, as largefirms may have infrastructural economies of scale that facilitate the development and managementof socially responsible programs (Klassen and Angell 1998). For this reason, we include firm size, asmeasured by annual revenues, as a control variable. As is common when control variables areincluded in empirical, inferential models, a hypothesized relationship was not stated, as the purposeof the control variable is to minimize random error (e.g., Klassen and Angell 1998; Tsai 2000).


FIGURE 2

HYPOTHESIZED DRIVERS OF PURCHASING SOCIAL RESPONSIBILITY (PSR)

METHODOLOGY

A mail questionnaire was constructed based on review of the extant literature and findings fromthe interviews with purchasing managers. Valid and reliable existing scales were employed wheneverpossible (Churchill 1979; Flynn et al. 1990). Scale items used to assess the posited environmentaldimension of PSR are based on the environmental purchasing scale developed by Carter and Carter

TopManagementLeadership

EmployeeInitiatives

Individual Values ofPurchasing Employees

GovernmentRegulation

CustomerPressures

OrganizationalSize

PurchasingSocial

Responsibility

H2 (+)

H3 (+)

H4 (+)

H6a (+)

H6b (+)

H5 (+)

H7 (+)

H8 (+)

People OrientedOrganizational

Culture


(1998). In Carroll’s model of CSR, ethical responsibilities are defined as “preventing ethical normsfrom being compromised” (1991, p. 41). Similarly, ethical issues in the business ethics literature havebeen operationalized as unethical practices, and this has also been true in the case of ethical issues inbuyer-supplier relationships. Most recently, Carter (2000a) finds that ethical issues encountered bypurchasing managers consist of two distinct dimensions: deceitful practices and subtle practices. Scaleitems from this earlier study were used in assessing ethics, and model ethics along these two dimen-sions. The scale items used to measure organizational culture are based on the people-orientationdimension of Chatman and Jehn’s (1994) organizational culture scales. The government regulationand customer scales are derived from the work of Carter and Carter (1998).

The remaining scales for this study were developed based on the procedures recommended byChurchill (1979). Here scale development evolved, and content and substantive validity wereassessed, through interviews with purchasing managers (Carter and Jennings 2002), a comprehen-sive literature review, and a pretest of the survey instrument using eight purchasing managers and fiveacademics in the field of supply chain management (Churchill 1979; DeVellis 1991; Dunn, Seaker,and Waller 1994; Heeler and Ray 1972). Scale items that were ambiguous to pretest participants weremodified or deleted based on their comments.

Next, a pilot test was conducted with a group of over 50 purchasing managers. After the purchasing managers completed the surveys, the study’s model was presented to the managers andopen discussion of the model and constructs to further assess content and substantive validity followed.Reliability was calculated using the data from the pilot test. Where necessary, scale items weredeleted or reworded and questions added as necessary to increase scale reliability.

The Sample

The final survey was sent to a random sample of the purchasing organizations of 1,000 U.S. firmsin consumer products manufacturing industries. The consumer products arena was chosen based oncase study and anecdotal findings that suggest that purchasing and supply chain managers in theseindustries may be more attuned to PSR issues (Emmelhainz and Adams 1999; Kopicki et al. 1993).The interviews with purchasing managers, along with the open discussion of the survey instru-ment and model following the pilot test, revealed that the activities encompassed within the model arewithin the domain of purchasing personnel at both the supervisory and top (e.g., executive) man-agement levels.

The survey was addressed to purchasing personnel at the supervisor or higher level who weremembers of the Institute for Supply Management (ISM), and whose organizations’primary SIC codeswere 20 (Food and Kindred Spirits), 23 (Apparel and Other Finished Products Made from Fabrics andSimilar Materials), 28 (Drugs, Soaps, Perfumes, Cosmetics, and other Toilet Preparations), 36(Household Appliances, Household Audio and Video Equipment), and 39 (Jewelry, Silverware,Plated Ware, Dolls, Toys, Games, and Sporting and Athletic Gear). In order to ensure that these orga-nizations were primarily consumer products manufacturers, a question was included in the surveywhich asked respondents to indicate the approximate percent of their firms’ sales that resulted


from consumer products manufacturing. Respondents who indicated that less than 50% of their firms’ sales resulted from consumer products manufacturing were not included in the study’sresponse or analyses.

RESULTS

A total of 201 usable surveys were received. Another 66 surveys were returned and not applic-able because the respondent was no longer with the company, no longer employed in the purchasingfunction, or because the firm did not derive the majority of its sales from consumer products manu-facturing. This resulted in an effective response rate of 21.5%.

Over 80% of the firms responding to the survey had revenues in excess of $50 million, with 46%of the firms having revenues greater than $500 million. These data suggest that respondents primarilyrepresent medium- to large-size firms, based on the range of revenues found in the S&P Midcap 400 and S&P 500 Indices. The percentage of respondents, by industry, is as follows: SIC 20 (33%),SIC 23 (22%), SIC 28 (12%), SIC 36 (17%), and SIC 39 (16%). Eight percent of the respondents heldpositions of Vice President; 23% of respondents were at the Director level; respondents with the titleof Manager represented 63% of respondents; and the remaining 6% of respondents held supervisorypositions.

Non-response Bias

As an initial test for non-response bias, the answers of early versus late respondents to the survey were compared (Armstrong and Overton 1977; Lambert and Harrington 1990). A natural breakpoint occurred between the first and second response waves of the survey, and a multivariate t-test was computed using the key study variables in order to determine whether significant differences exist between the early and late respondents. The results suggest that early respondentsdo not display statistically significant differences from late respondents (p = .4159).

As an additional test for non-response bias, 20 non-respondents were randomly chosen from thesample (Lohr 1999). These non-respondents were sent an abbreviated form of the questionnaire viapriority mail, and follow-up phone calls were made to ensure that all 20 of the selected non-respondents to the original questionnaire completed and returned the abbreviated survey. A secondmultivariate t-test was computed, comparing the responses to the full-length questionnaire to thoseof the abbreviated questionnaire. No significant differences were found between respondents and non-respondents (p = .6863).

Key Informant Issue

Two explicit measures were taken to ensure that the survey respondents were in fact knowl-edgeable (Campbell 1955) and appropriate (key) informants. First, results from the interviews,pretest, and pilot test suggested that purchasing personnel at the supervisor level or higher were qual-


ified to answer the survey’s questions (John and Reve 1982). Second, the survey instrument includedquestions assessing the informant’s involvement in PSR.

Kumar, Stern, and Anderson (1993) and Phillips (1981, 1982) advocate the use of broad,global measures of an informant’s competency, such as length of time employed with an organizationor length of time involved in the interorganizational relationship, to evaluate the competency of infor-mants in interorganizational research. Two such questions were asked to assess a respondent’sinvolvement in PSR: 1) the number of years the respondent has been involved with the purchasingfunction’s socially responsible initiatives, and 2) the degree of involvement on a 1-7 Likert scale, where1 = only somewhat involved and 7 = very involved. Two informants indicated they were only“somewhat involved” in socially responsible initiatives for one year or less. Given the short time frameand limited involvement of these informants, they were eliminated from further analyses.

Social Desirability Bias

Social desirability bias occurs in survey research when respondents inaccurately answer ques-tions to conform to social norms or the expectations of the researcher, in order to portray themselvesin a more favorable light. In order to solicit candid responses about their level of involvement in PSRactivities, respondents were asked to answer these questions in terms of the activities of the purchasingdepartment in general, rather than the actions of the individual. It has been shown that this type of“other-based” questioning is more effective in lowering social desirability bias than the major com-peting method, the randomized response technique (Armacost et al. 1991; Rudelius and Buchholz1979). In addition to taking this precautionary measure, an abbreviated version of the Crowne-Marlowe Social Desirability Scale was included in the survey to measure social desirability bias(Crowne and Marlowe 1960). No significant relationship was found between the social desirabilityscale and PSR activities.

Analyses

Confirmatory factor analysis (CFA) was first used to assess the measurement model of the PSRconstruct at the first-order factor level (Anderson and Gerbing 1988). Subsequently, a second-orderCFA was used to test Hypotheses 1a-1f (Research Question 1). The next subsection describes theassessment and development of the PSR scale. The PSR scale was then aggregated and measured asa first-order construct in assessing the overall measurement model of constructs displayed in Figure2 (Bagozzi and Heatherton 1994; Matsuno and Mentzer 2000). The assessment of the overall mea-surement model is then described in a successive subsection. The inferential relationships among theconstructs displayed in Figure 2 (Research Question 2) were then tested through the use of structuralequation modeling, the results of which are presented in the last subsection of our analyses. Here, thetwo-step procedure recommended by Anderson and Gerbing (1988) was followed and the mea-surement model was modified so that it reflected the causal relationships displayed in Figure 2. All statistical analyses were performed using the CALIS procedure in SAS (SAS Version 8.01).


The PSR scale

The six hypothesized dimensions of PSR (the environment, diversity, human rights, philanthropy,safety, and the two reverse-coded dimensions of ethics – deceitful and subtle practices) were first subjected to a first-order CFA. Scale items that did not reliably or validly represent a constructwere eliminated from further analyses, based on low factor loadings or high normalized residual values (Anderson and Gerbing 1988; Bagozzi and Yi 1988). The final reliability values and scale itemsused to measure the posited dimensions of PSR are displayed in the Appendix.

The results from the first-order CFA of the hypothesized dimensions of PSR are presented inTable 1, along with the correlations among the latent constructs. The �2/degrees of freedom ratio,Bentler’s (1989) comparative fit index (CFI), Bentler and Bonnett’s (1980) non-normed fit index(NNFI), and the root mean square error of approximation (RMSEA) (Steigler 1990) were used toassess model fit. An appropriate fit between the model and the data is indicated by values of the�2/degrees of freedom ratio below 3.00 (Bollen and Long 1993), values above 0.90 on the CFI and NNFI (Bentler 1989; Bentler and Bonnett 1980), and a value of 0.08 or less for the RMSEA(Browne and Cudeck 1993). All values fell within these limits, indicating an acceptable fit.

TABLE 1

FIT STATISTICS FOR THE MEASUREMENT MODELOF THE HYPOTHESIZED DIMENSIONS OF PSR

Value Recommended Value

�2 (degrees of freedom) 206.785 (149) n/a�2/degrees of freedom 1.388 < = 3.00Bentler’s CFI 0.967 > = 0.90Bentler and Bonnett’s NNFI 0.958 > = 0.90RMSEA 0.045 < = 0.08

Correlations Among First-Order Factors

Construct 1 2 3 4 5 6 7

1. The Environment 1.02. Diversity .49*** 1.03. Human Rights .64***a .35*** 1.04. Philanthropy .43*** .44*** .44*** 1.05. Safety .63***b .20* .74***c .33*** 1.06. Ethics – Deceitful Practices .04 .12 .13 .12 .01 1.07. Ethics – Subtle Practices .22* .26** .25** .10 .17* .54***d 1.0

*p < .05 a�2difference = 340.11, 1 degree of freedom (p < .0001)**p < .005 b�2difference = 247.38, 1 degree of freedom (p < .0001)

***p < .0001 c�2difference = 235.15, 1 degree of freedom (p < .0001)d�2difference = 281.71, 1 degree of freedom (p < .0001)

Note: To avoid alpha inflation in analyzing discriminant validity, the Bonferroni method of multiple comparisonswas incorporated to calculate the overall significance level of the �2difference tests (Flynn et al. 1990).


All factor loadings had t-values greater than 8.24 (p < 0.0001), suggesting that convergent valid-ity exists for the indicators (Gerbing and Anderson 1988). Fornell and Larcker’s (1981) composite reliability measure was used to assess scale reliability. All scales demonstrated acceptable levels ofreliability, with composite reliabilities well in excess of the minimum 0.60 level recommended forexploratory research (Churchill 1979; Flynn et al. 1990; Van de Ven and Ferry 1978).

Discriminant validity was assessed by performing one-at-a-time �2 difference tests, wherecross-construct correlations were large (Bollen 1989). Similarly, the 95% confidence interval was usedto assure that the correlation plus two standard errors did not exceed 1.00 (Anderson and Gerbing1988). Four cross-construct correlations were greater than 0.50. For each of these four cross-constructcorrelations, the �2 value was significantly improved for the unconstrained versus constrainedmodel (p < 0.0001), and no confidence interval exceeded 1.00. These results suggest that discrimi-nant validity exists for the measurement model of the posited PSR dimensions.

Together, the results support the overall reliability and validity of the scale items used to mea-sure the hypothesized dimensions of PSR.

Next, the dimensions were subjected to a second-order CFA. As displayed in column 2 ofFigure 3, the �2/degrees of freedom ratio is 1.933, and the values of the CFI, NNFI, and RMSEA are0.910, 0.900, and 0.070, respectively. The t-values associated with the path loadings are significantat the 0.0001 level for the environment (t = 9.18), diversity (t = 6.01), human rights (t = 11.89), philanthropy (t = 7.38), and safety (t = 10.19) dimensions of PSR, suggesting that these areas aredimensions of the broader PSR construct, providing support for Hypotheses 1a-1e. The t-values forboth of the ethics dimensions are insignificant (t < 1.96, p > .05), indicating that ethical issues do notload on the higher-order PSR construct, and providing support for Hypothesis 1fAlternative.


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Next, the second-order CFA was run with the five significant dimensions of PSR but without thetwo ethics constructs displayed in Figure 3. The CFI and NNFI values in column 3 are 0.946 and 0.936,respectively, suggesting a better fitting model. This was confirmed through a chi-square differencetest, where the second-order CFA without the ethics dimensions resulted in a significantly better fit(�2 difference = 183.63, 93 df, p < 0.0001).

To test the overall measurement model and hypotheses displayed in Figure 2, the PSR scale wasmeasured using a manifest indicator for each of its five dimensions (i.e., the environment, diversity,human rights, philanthropy, and safety). This was accomplished by summing the measurementitems for the five dimensions at the first-order construct level. This aggregation is warranted giventhat the validity of the second-order PSR scale with all 14 measurement items had been establishedand because the aggregation allows the increase in the ratio of observations to degrees-of-freedom, and thus increase the degrees-of-freedom used to estimate the path coefficients between the antecedents in Figure 2 and PSR (Bagozzi and Heatherton 1994; Matsuno and Mentzer 2000). Theanalyses of the overall measurement model and the structural model are discussed next.

Overall measurement model

The results from the overall measurement model of the latent constructs are displayed in Table2, along with the correlations among the latent constructs. The �2/degrees of freedom ratio is 1.564,and the CFI, NNFI, and RMSEA values are 0.959, 0.951, and 0.056, respectively. All factor loadingsare highly significant (p < 0.0001), with the smallest t-value equal to 5.521, suggesting convergentvalidity. Again, discriminant validity was assessed where we found large cross-construct correlations.Three cross-construct correlations were greater than 0.50. For each of these cross-construct correlations, the �2 value was significantly better for the unconstrained model (p < 0.0001), and no confidence interval exceeded 1.00. These results suggest an appropriate fit between the dataand the measurement model, and as a result, the measurement model was next modified to reflect the structural model posited by Hypotheses 2 through 8.


TABLE 2

FIT STATISTICS FOR THE OVERALL MEASUREMENT MODEL

Value Recommended Value

�2 (degrees of freedom) 361.222 (231) n/a�2/degrees of freedom 1.564 < = 3.00Bentler’s CFI 0.959 > = 0.90Bentler and Bonnett’s NNFI 0.951 > = 0.90RMSEA 0.056 < = 0.08

Correlations Among the Structural Model’s Latent Constructs

Construct 1 2 3 4 5 6 7

1. PSR 1.02. People-Oriented .39*** 1.0

Organizational Culture3. Employee Initiatives .53***a .25** 1.04. Top Management Leadership .53***b .34*** .52***c 1.05. Individual Values of .32*** .20** .47*** .30*** 1.0

Purchasing Employees6. Government Regulation .25** .02 .33*** .43*** .08 1.07. Customer Pressures .41*** .13 .50***d .32*** .10 .39*** 1.0

*p < .05 a�2difference = 458.79, 1 degree of freedom (p < .0001)**p < .005 b�2difference = 501.45, 1 degree of freedom (p < .0001)

***p < .0001 c�2difference = 467.22, 1 degree of freedom (p < .0001)d�2difference = 656.02, 1 degree of freedom (p < .0001)

Note: To avoid alpha inflation in analyzing discriminant validity, the Bonferroni method of multiple comparisonswas incorporated to calculate the overall significance level of the �2difference tests (Flynn et al. 1990).

Structural model

The results from our assessment of the full structural model are displayed in Figure 4. The�2/degrees of freedom ratio (1.838), and the CFI (0.931), NNFI (0.919), and RMSEA (0.069) valuesall support the fit between the structural model and the data, particularly given the large number of con-structs and indicators (Gerbing and Anderson 1992). Again, all factor loadings are significant at the0.0001 level, with the smallest t-value equal to 5.575. Together, these results suggest an appropriatefit between the structural model and the data.


FIGURE 4

DRIVERS OF PSR

Fit Statistics for Second-Order CFA Value Recommended Value

Chi-Square (degrees of Freedom) 472.473 (257) n/aChi-Square/degrees of Freedom Ratio 1.838 < = 3.00Bentler’s CFI 0.931 > = 0.90Bentler and Bonnett’s NNFI 0.919 > = 0.90RMSEA 0.069 < = 0.08

Note: Ovals represent latent constructs measured by multiple indicators. Dashed lines indicate no significant relationship.

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The results from hypotheses testing are also displayed in Figure 4, where solid lines representsignificant relationships (p < 0.05) between constructs and dotted lines indicate the lack of a rela-tionship. Hypotheses 2 (p < 0.005), 3 (p < 0.05), 5 (p < 0.005), and 8 (p < 0.05) were supported, sug-gesting that a people-oriented organizational culture, top management leadership, employeeinitiatives, and customer pressures are significantly and directly related to PSR. Hypothesis 7Alternative

was supported, and hypothesis 6a was rejected, indicating that no direct relationship exists betweenPSR and individual employee values and government regulation. Finally, Hypotheses 4 (p < 0.001)and 6b (p < 0.0001) were supported, suggesting that top management leadership is significantly relatedto a people-oriented organizational culture, and that individual values of purchasing employeesare significantly related to employee initiatives.

DISCUSSION

Research Question 1: What Are the Dimensions of PSR?

This is the first research to develop and empirically test a holistic measure of PSR. The results indicate that activities surrounding the areas of diversity, the environment, safety, human rights, and philanthropy in purchasing management, which have been studied separately in thepast, are in fact related and fall under the rubric of PSR. The conceptual results of our measurementmodel development suggest that researchers should acknowledge the interrelatedness of the dimen-sions of PSR within a broader framework of social responsibility. For academicians, this implies the need to consider particular dimensions of PSR within this broader scope. While it is not meant toimply that academics abandon individual fields of study such as environmental purchasing or sourc-ing from MWBE suppliers, researchers should consider relevant findings from these related streamsof research when reviewing extant literature and developing hypotheses and theoretical modelsregarding the antecedents and consequences of standalone dimensions of PSR.

While the reverse coded subtle practices dimension of unethical practices is significantly and positively correlated with several of the other hypothesized dimensions of PSR, as noted in Table 1,neither of the first-order unethical practices factors loaded significantly on the second-order, PSR factor. Therefore the results provide support for H1fAlternative, and thus Carroll’s hierarchical framework, and suggest that purchasing managers have made clear practical distinctions between their perceived ethical obligations and their obligations in the area of PSR.

The outcomes displayed in Figure 3 hold important managerial implications. The confirmationof a higher-order PSR construct suggests that managers should oversee these programs in a similarfashion. For example, these findings suggest that organizations that currently demonstrate and pro-mote their activities in one area of PSR should also give strategic consideration to the manage-ment and promotion of other areas within PSR. Conversely, firms that fail in one dimension ofPSR (for example, sourcing from suppliers that use sweatshop labor or purchasing materials and pack-aging that is not environmentally friendly) may harm their overall reputation regarding socialresponsibility.


From the standpoint of organizational learning, the commonalities that exist among the five dimensions of PSR should be leveraged to maximize the accrual and dissemination of knowledge.Purchasing managers should build upon their experience in one area of PSR, such as the drivers to andinitiation of environmental purchasing activities, when making decisions regarding the implemen-tation of other PSR programs, such as developing safety procedures surrounding sourcing decisionsand the incoming movement of inventory. Similarly, the identification of the antecedents in Figure4 that are significantly related to PSR can aid managers in allocating scarce resources and attentiontoward those drivers that are most effective. These drivers are considered in the next section with thediscussion of empirical results from testing the model in Figure 4.

Research Question 2: What Are the Drivers of PSR?

An organizational culture helps to guide everyday working relationships and influences howemployees act and behave within the organization. A people-oriented culture, which espouses valuessuch as fairness and the desire to be a good corporate citizen, leads to significantly greater levels ofPSR. Top management leadership and support has long been extolled as a key driver of organizationalchange and the implementation of new programs and activities, and our findings suggest that top man-agement leadership does indeed have a direct effect on whether purchasing managers implement PSR.However, top management leadership was also found to have a significant mediated effect on PSR,through a people-oriented organizational culture.

While some authors have argued that organizational culture cannot easily be changed, thecurrent findings support the counter viewpoint espoused by other researchers. Top management lead-ership significantly affects PSR by shaping an organizational culture that both facilitates and encour-ages such characteristics as embracing the desire to be a good corporate citizen, being fair, andbeing supportive. Thus, the findings suggest that while top management can influence PSR by ini-tiating, requiring, and supporting PSR programs, corporate leaders can also strongly impact PSR byinfluencing organizational culture through their own examples; these managers influence PSR by notonly “talking the talk” but also by “walking the walk.” These examples help to shape a people-orientedorganizational culture, which in turn positively influences PSR. Thus organizational culture plays acrucial role by mediating the effects of top management leadership on PSR. For example, at Patag-onia company, a manufacturer of climbing equipment and outdoor clothing that is well known for itsenvironmental and human rights activities, the founder and CEO wrote an essay advocating anapproach to more environmentally friendly climbing that involved the use of less, rather than more,of the outdoor equipment sold by the manufacturer (Patagonia 2003a). This, and other examples setby top management at Patagonia have helped to establish a people-oriented culture within the com-pany (Patagonia 2003b).

No direct relationship occurs between PSR and the extent to which employees have individualvalues that are compatible with socially responsible actions. Instead, a mediating relationship exists,where individual values have a significant and positive influence on employee initiatives, which inturn positively affect PSR. The fact that no direct relationship exists between employee values and PSR


suggests that PSR programs can be established regardless of employee values. However, employeevalues play a pivotal role when employees decide to initiate actions on their own, or when employ-ees are chosen to develop or manage a PSR effort.

The empirical results of the current research also support Drumwright’s (1994, p. 1) casestudy findings, which suggest that the individual actions of managers are “rooted in a commitmentbased on a complex and often difficult process of moral reasoning.” In terms of managerial decision-making, these findings suggest that when selecting an employee or manager to spearhead a PSR ini-tiative, purchasing executives should identify individuals whose value systems are personallyaligned with the PSR activity.

Government regulation was not found to be a significant driver of PSR. This finding matchesthose of some prior research projects from the standalone areas of PSR, including environmental pur-chasing and MBE sourcing. This may be due to the fact that the process of developing sociallyresponsible regulation in the U.S. has historically involved adversarial relationships between gov-ernment and industry and has, for example in the case of environmental regulation, often employedend-of-pipe solutions to pollution prevention. Further, government regulation might even act as a bar-rier to the implementation of certain socially responsible activities, particularly if the regulation is nottailored to specific industries (Dean and Brown 1995).

The finding of no significant relationship between government regulation and PSR also hasbroader societal implications, in that governmental agencies within the U.S. may want to model theprocess of developing environmental, and broader social responsibility regulations in other countries,such as Germany (e.g., Porter and van der Linde 1995). These results also suggest that societycommunicates its expectations for PSR to the firm through demands of external stakeholders includ-ing downstream members of the supply chain, a sentiment that was recently and somewhat similarlyvoiced by Alan Greenspan (Ip 2002).

This finding should in no way be interpreted as downplaying the importance and role of government regulation in the CSR arena, as such regulation may well create a very necessary hurdle,or minimum level of compliance. Thus, regulation may be a very effective driver of the legal com-ponent of Carroll’s (1979) conceptualization of CSR, rather than the discretionary component.However at the discretionary level, where many of the PSR activities might vary the most, regulationdoes not appear to be an effective driver within the multivariate context of the other antecedent variables examined in our research.

The significant relationship between customers and PSR emphasizes the importance of coor-dination between upstream and downstream logistics managers within the firm, specifically withregards to PSR. Firms must respond to customer requests and desires regarding their sociallyresponsible initiatives. The positive relationship between customer pressures and PSR also indicatesthat purchasing managers are cognizant of these external pressures, and emphasizes the need for pur-chasing managers to closely coordinate with marketing and distribution managers (Webster 1992) who also sit at the firm’s periphery and are in closest contact with downstream members of the


supply chain. The activities encompassed within PSR, which involve packaging issues, new productdesign, materials management, and warehousing, further support the assertion that purchasingmanagers must interface with other logistics managers in these areas in order to accomplish PSR ini-tiatives. At the same time, purchasing managers must coordinate with and manage suppliers, toensure that their organization purchases socially responsible inputs, has a diverse supply base, and that suppliers are in turn managing their own organization and second tier suppliers in a socially responsible manner.

In summary, the model and results displayed in Figure 4 should help managers to understand thekey drivers for alignment between purchasing executives and corporate, top management executivesin the complex but important strategic area of social responsibility. Top management leadership affectsorganizational culture and PSR; purchasing executives can influence PSR by hiring and selectingemployees with corresponding individual value systems to manage PSR initiatives; and managementmust be aware of external pressures from customers regarding PSR activities.

LIMITATIONS AND DIRECTIONS FOR FUTURE RESEARCH

Although this is the first study to define and empirically examine the dimensions of PSR, it isimportant to consider the findings within the study’s limitations, many of which are fertile groundsfor future research. First, the sample frame was limited to members of ISM in consumer products organizations, thus potentially affecting the generalizability of results. Further empirical analyses acrosspurchasing managers from outside of ISM, and in other industries, are necessary. It is possible, forexample, that the finding of a strong influence of customers on PSR may be more germane to the con-sumer products industries than to manufacturing industries as a whole. Additionally, the currentresearch did not sample with replacement for the 66 surveys that were returned and were not applic-able. While there is no reason to believe that any sort of systematic bias might exist here, this isnonetheless a potential limitation of our research.

Second, the findings regarding an insignificant relationship between firm size and PSR are sim-ilar to those of Klassen and Angell (1998), who found only a marginally significant relationshipbetween firm size and the level of environmental ambition (p < .10). Further, the current study’s respon-dents tended to be much larger than those in Murphy, Smith, and Daily’s (1992) research. Thus thelack of a significant relationship between firm size and PSR in our study could be due to the fact thatour sample contained mostly medium- to large-sized firms in which infrastructural economies of scaleassociated with the management of PSR programs may exist, and which may experience greaterscrutiny by customers (Klassen and Angell 1998; Ullmann 1985). Future research might investigatewhether such infrastructural economies of scale do indeed exist by examining a broader sample ofsmall-, medium-, and large-sized organizations.

Third, the nature of both the PSR and CSR constructs may seem to introduce an inherent rela-tivism in their exercise. That is, what standards does a firm employ when the expectations regardingCSR differ across countries, and perhaps even within areas in those countries? In the current


research, managers were allowed to define PSR and the activities that comprise PSR. In so doing, thegoal was to develop a grounded operationalization of PSR, consistent with practice in the U.S. Thescales and the model should be generalizable within the U.S., given that the scale developmentutilized geographically dispersed managers from across the U.S., as did the survey data collectionefforts.

From the standpoint of future international research, rather than posing the cross-culturaldilemma as one in which a firm must choose between differing standards, one resolution is the use ofthe grid-group-model of cultural theory (GGM) (Mars and Frosdick 1997) or the Theory of CulturalComplexity (TOCC) (Douglas 1975, 1985, 1986a, 1986b; Douglas and Wildavsky 1982) which beginwith the notion of the common traits of cultures. These models take the approach that cultural dif-ferences are not a residual category but rather begin with the analysis of common values, basicassumptions, and shared behaviors and beliefs. Thus, an analysis, for example, of the use of greasepayments does not begin with whether the culture embraces such payments, but with the values of thecountry expressed in statutory or other legal form. Culture may reflect practice, but not necessarilyvalues or attitudes. The universal application of CSR constructs, therefore, is not as constrained as thetraditional culture barriers discussion suggests. Rather, both CSR and PSR undertake a “meta”approach to global operations and PSR standards.

Above and beyond the limitations of this study, future research might empirically investigate theefficacy of the process by which regulations relating to social responsibility are developed in the U.S.,and compare this process to countries such as Germany, which appear to have a more proactive andindustry-friendly process of developing such regulations. Additional empirical research is needed toextend these results of the current study to a broader spectrum of firms and to other functionalareas involved in the management of the supply chain. A related issue concerns our use of a cross-sectional design. Stronger causal inferences could have been drawn through the use of longitudinalstudies, and this is another area in need of further research.

Finally, an area not examined in this research is that of liability and the threat of legal action.Future research in the realm of PSR might investigate how liability can act as a driver of theseactivities. Additional empirical research is also needed to examine the barriers to PSR, where abetter understanding of how purchasing managers overcome the inevitable barriers encountered whenimplementing PSR activities should help purchasing personnel to more effectively initiate andmaintain these programs. Similarly, empirical research is needed to investigate the consequences ofPSR. Research issues could include an examination of how PSR might affect supplier performance,cross-functional relationships within the firm, and ultimately an organization’s bottom line.


NOTES

Alexander, Gordon J. and Rogene A. Buchholz (1978), “Corporate Social Responsibility and StockMarket Performance,” Academy of Management Journal, Vol. 21, No. 3, pp. 479-486.

Anderson, James and David W. Gerbing (1988), “Structural Equation Modeling in Practice: A Review and Recommended Two-Step Approach,” Psychological Bulletin, Vol. 103, No. 3, pp. 411-423.

Armacost, Robert L., Jamshid C. Hosseini, Sara A. Morris, and Kathleen A. Rehbein (1991), “AnEmpirical Comparison of Direct Questioning, Scenario, and Randomized Response Methods forObtaining Sensitive Business Information,” Decision Sciences, Vol. 22, No. 5, pp. 1073-1090.

Armstrong, J. Scott and Terry S. Overton (1977), “Estimating Nonresponse Bias in Mail Surveys,”Journal of Marketing Research, Vol. 14, No. 3, pp. 396-402.

Autry, Chad W. and Patricia J. Daugherty (2003), “Warehouse Operations Employees: LinkingPerson-Organization Fit, Job Satisfaction, and Coping Responses,” Journal of Business Logistics, Vol. 24, No. 1, pp. 171-197.

Bagozzi, Richard P. and Todd F. Heatherton (1994), “A General Approach to Representing Multifaceted Personality Constructs: Application to State Self-Esteem,” Structural Equation Modeling, Vol. 1, No. 1, pp. 35-67.

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ABOUT THE AUTHORS

Craig R. Carter is Assistant Professor of Supply Chain Management at the College of BusinessAdministration, University of Nevada. He received his Ph.D. from Arizona State University. His primary research stream focuses on the socially responsible management of the supply chain. A sec-ond and often intersecting area of research examines issues relating to international supply chain man-agement. Dr. Carter’s work has appeared in Decision Sciences, Journal of Business Logistics,Journal of Supply Chain Management, Transportation Journal, Journal of Operations Management,Transportation Research E, and others.

Marianne M. Jennings is Professor of Legal and Ethical Studies at Arizona State University’sW.P. Carey School of Business. She served as Director of the Joan and David Lincoln Center forApplied Ethics from 1995-1999, conducted more than 200 workshops and seminars in the areas ofbusiness and professional ethics, and has authored several books and published over 100 articles inacademic, trade, and professional journals. She also serves on the editorial review boards of the Journal of Quality Management and Corporate Finance Review.


APPENDIX

QUESTIONNAIRE SCALE ITEMS

Construct StandardizedReliabilityb Factor Loadinga

Socially Responsible Purchasing0.84

The Environmentc (.74)Diversityc (.52)Human Rightsc (.85)Philanthropyc (.66)Safetyc (.80)

The Environmenth

0.86

Currently, our purchasing function: d

… uses a life-cycle analysis to evaluate the environmental friendliness (.70)of products and packaging

… participates in the design of products for disassembly (.71)… asks suppliers to commit to waste reduction goals (.81)… participates in the design of products for recycling or reuse (.85)… reduces packaging material (“E5”) (.60)… purchases recycled packaging (Deleted: large standardized residual with E5)… purchases packaging that is of lighter weight (Deleted: large standardized

residual with E5)

Diversity0.82

Currently, our purchasing function:d

… purchases from minority/women-owned business enterprise (MWBE) suppliers (.85)… has a formal MWBE supplier purchase program (.82)

Human Rights0.86


… visits suppliers’ plants to ensure that they are not using sweatshop labor (.85)... ensures that suppliers comply with child labor laws (.91)… asks suppliers to pay a “living wage” greater than a country’s or region’s (.69)

minimum wage

Philanthropy0.75


… volunteers at local charities (.82)… donates to philanthropic organizations (.72)… helps to increase the performance of suppliers in the local community

(Deleted: large standardized residuals with Human Rights scale items)


APPENDIX (CONT.)



Safety0.73


… ensures that suppliers’ locations are operated in a safe manner (.89)… ensures the safe, incoming movement of product to our facilities (.62)

Ethics – Deceitful Practicesi

0.89

Currently, our purchasing function:d,f

… invents (makes up) a second source of supply to gain competitive (.79)advantage (“DP1”)

… exaggerates the seriousness of a problem to gain concessions (.93)… purposefully misleads a salesperson in a negotiation (.83)… uses obscure contract terms to gain an advantage over suppliers

(Deleted: large standardized residuals with DP1)

Ethics – Subtle Practicesi

0.80

Currently, our purchasing function:d, f

… accepts meals from a supplier even if it is not possible to reciprocate (.63)… shares information about suppliers with their competitors (.90)… shows favoritism when selecting suppliers (.71)

Top Management Leadership0.89

My department’s involvement in socially responsible purchasing has been motivated by:d, g

… the examples top management provides (.85)… requirements made by senior management (.86)… top-down initiatives (.86)

Customer Pressuresh

0.90


… social programs that our customers have in place (.85)… customers who seek socially responsible suppliers (.86)… increased awareness of social issues among our customers (.89)


APPENDIX (CONT.)



Employee Initiatives0.85


… employee initiatives (.85)… championing efforts by individual employees (.87)

Government Regulationh

0.85


… current government legislation (.85)… the threat of future government legislation (.94)… targeted actions by activist groups (.60)

Individual Values of Purchasing Employees0.95

My department’s involvement in socially responsible purchasing has been motivated by d, g

… the morals of individual employees (.79)… the personal desires of employees to do what is right (.91)… a personal sense of obligation among employees (.98)… the underlying values of employees (.97)

People-Oriented Organizational Culture j

0.94

Next, we would like to briefly explore the extent to which the following characteristics are part of your organization’s culture:e

… being people oriented (.88)… fairness (.88)… being supportive (.92)… the desire to be a good corporate citizen (.89)a Standardized factor loadings of scale items measuring latent constructs are given in parentheses.b Composite reliability.c This item is a summated composite of the scale items shown below under the related construct.d These items were measured on a 7-point Likert scale where 1 = no extent whatsoever and 7 = very great extent.e These items were measured on a 7-point Likert scale where 1 = most uncharacteristic of my organization’s

culture and 7 = most characteristic of my organization’s culture.f These items were reverse coded.g Respondents were told that socially responsible purchasing includes a broad array of activities, including

several of those listed among the first eight constructs of this Appendix.h Based on Carter and Carter (1998)i Based on Carter (2000a)j Based on Chatman and Jehn (1994)


Documents

THE ROLE OF PURCHASING IN CORPORATE SOCIAL RESPONSIBILITY: A STRUCTURAL EQUATION ANALYSIS