The Governance of Labor Standards in Australian and German Garment Supply Chains

[We’re pleased to welcome authors Dr. Elke Schuessler of the Institute of Organization Science at the Johannes Kepler University Linz, Dr. Stephen J. Frenkel of the University of New South Wales, and Dr. Chris F. Wright of the University of Sydney Business School.  They recently published an article in the ILR Review entitledFocusing Events and Changes in the Governance of Labor Standards in Australian and German Garment Supply Chains,” which is currently free to read for a limited time. Below, Dr. Frenkel reflects on the inspiration for conducting this research:]

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What motivated you to pursue this research

Globalization is a feature of the world economy. This is illustrated most sharply by the outsourcing of production to factories in developing countries. The resulting global supply chains raise questions about the pay and conditions of workers whose labour contributes to the final product. Absent adequate law enforcement and continuous pressure by large often multinational retail and marketing firms to reduce costs, factories and workers are subject to a ‘race to the bottom’ in what are commonly referred to as ‘labour standards.’ On the other hand, many lead firms are intent on avoiding reputational damage associated with worker exploitation, so they have become standards’ regulators, taking responsibility for ensuring that their suppliers abide by a code of labour standards’ conduct. Our research investigates similarities and differences in lead firm regulation policies with a view to advancing theory and offering insights into how the cost reduction v regulation puzzle might be resolved.

Were there any specific external events—political, social, or economic—that influenced your decision to pursue this research?

Our research has been strongly influenced by the Rana Plaza disaster of April 2013 when the collapse of a building in Dhaka, Bangladesh left 1,130 mainly female garment workers dead and over 2,000 injured. This incident highlighted regulatory failure in the Bangladesh garment export industry which has become a major supplier to lead firms in advanced Western countries. As a result, a new set of institutions were established by lead firms, global and local unions and international agencies to promote and regulate building and worker safety in the industry. This development provided an opportunity to examine the impact of these institutional changes on lead firm and suppliers’ attitudes and behaviour regarding regulation of worker safety and labour standards more generally.

In what ways is your research innovative, and how do you think it will impact the field?

There is no systematic publicly available knowledge regarding lead firms’ responses to Rana Plaza and ensuing institutional changes. We explore why some lead firms joined the Accord a collective agreement, signaling a preference for high safety standards and a commitment to sharing decision-making with unions while other firms responded in less demanding ways. The lead firms we examine are drawn from comparative samples of Australian and German companies which enables analysis of firm type, country of origin norms, the role of stakeholders, and host country institutions in explaining our findings. Our study has prompted a broader project currently underway that links lead firms in Australia, Germany, Sweden and the UK with garment factories and workers in Bangladesh (see http://www.garmentgov.de.) We are tracing the impact of lead firm policies and institutional influences on factory labour standards, including how these are perceived by management and workers respectively. Our comprehensive approach emphasizing the importance of a ‘focusing event’ and the regulatory influence of resulting institutions on factory management and workers, is likely to make a major contribution to the theory and practice of global garment supply chain governance.

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How Do Small Businesses in Developing Countries Participate in Social Irresponsibility?

10127264163_3280e1b6e0_z[We’re pleased to welcome Vivek Soundararajan of Birmingham Business School. Vivek recently published an article in Business & Society entitled “Small Business and Social Irresponsibility in Developing Countries: Working Conditions and ‘Evasion’ Institutional Work” with co-authors Laura J. Spence and Chris Rees of University of London.]

This article is an outcome of my ongoing research about working conditions in developing country supplier facilities. My fieldwork observations in small knitwear exporting facilities located in Tirupur, India shook numerous assumptions drawn largely from a developed country perspective that we usually work with when dealing with small businesses. This prompted me to write this article along with my co-authors Prof. Laura J. Spence and Prof. Chris Rees. A prevailing notion among scholars BAS Coverand policy makers about developing country small suppliers of developed country buyers is that they are resource dependent, powerless and passive. Indeed, small suppliers are resource dependent and may hesitate to retaliate against multinational corporations’ requirements or other institutional demands related to working conditions. But, they do not simply agree with everything or abandon the relationship. They discreetly bypass various institutional demands by engaging in numerous irresponsible business practices which we refer to as ‘evasion work’ – a form of institutional work. In this article, we illustrate numerous ways in which they engage in ‘evasion work’ and the conditions that enable them to engage in such work. We believe that our study highlights the need for a more critical research on the organization of working conditions in small businesses that are part of global supply chains. Our study also adds to the ongoing conversation about the agency of resource-dependent and powerless actors. In terms of practical implications, we emphasize the need for sustainability initiatives tailored to meet the capabilities and characteristics of suppliers in developing countries.

The abstract for the paper:

Small businesses in developing countries, as part of global supply chains, are sometimes assumed to respond in a straightforward manner to institutional demands for improved working conditions. This article problematizes this perspective. Drawing upon extensive qualitative data from Tirupur’s knitwear export industry in India, we highlight owner-managers’ agency in avoiding or circumventing these demands. The small businesses here actively engage in irresponsible business practices and “evasion” institutional work to disrupt institutional demands in three ways: undermining assumptions and values, dissociating consequences, and accumulating autonomy and political strength. This “evasion” work is supported by three conditions: void (in labor welfare mechanisms), distance (from institutional monitors), and contradictions(between value systems). Through detailed empirical findings, the article contributes to research on both small business social responsibility and institutional work.

You can read “Small Business and Social Irresponsibility in Developing Countries: Working Conditions and ‘Evasion’ Institutional Work” from Business & Society free for the next two weeks by clicking here. Want to know about all of the latest research from Business & Society? Click here to sign up for e-alerts!

*Bazar image attributed to michael_swan (CC)

Vivek Soundararajan (PhD, Royal Holloway, University of London) is a research fellow at Birmingham Business School, University of Birmingham, United Kingdom and a visiting lecturer at Royal Holloway University of London. His research interests include corporate responsibility, multistakeholder initiatives, labor and environmental standards, sustainable global supply chains, small business responsibility, and emerging country contexts. He has obtained various grants, honors and awards for excellence in research, including two prestigious awards for his doctoral dissertation, namely, “Best Dissertation Award, Social Issues in Management (SIM) Division, the Academy of Management, USA” and “Honourable Mention, Thomas A. Kochan & Stephen R. Sleigh Best Dissertation Competition, Labor and Employment Relations Association (LERA), USA.”

Laura J. Spence (PhD, Brunel University/Buckinghamshire College) is professor of business ethics in the School of Management at Royal Holloway, University of London. Her research includes a wide range of critical approaches to understanding corporate social responsibility and business ethics. In particular, she is known for her work on small- and medium-sized enterprises and the emerging concept of small business social responsibility. Her articles have been published in Accounting, Organizations and Society; Business Ethics Quarterly; California Management Review; and Organization Studies.

Chris Rees (PhD, University of Warwick) is professor of employment relations in the School of Management at Royal Holloway, University of London. His research interests include the sociology of work, employee voice, and transnational and European labor regulation. His work has appeared in journals such as European Journal of Industrial Relations, Human Resource Management Journal, Transfer: European Review of Labour and Research, and Public Management Review.