Int. J.

Production Economics 241 (2021) 108275

Contents lists available at ScienceDirect

International Journal of Production Economics

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

Corporate social and environmental irresponsibilities in supply chains,

contamination, and damage of intangible resources: A
behavioural approach
Mauro Fracarolli Nunes a, *, Camila Lee Park b, Hyunju Shin c
a
EDC Paris Business School, 74/80 Rue Roque de Fillol, 92800, Puteaux, France
b
EDC Paris Business School, France
c
Georgia Southern University, USA

A R T I C L E I N F O A B S T R A C T

Keywords: Corporate social irresponsibility (CSI) and corporate environmental irresponsibility (CEI) are associated with a
Sustainable supply chain management range of immoral business-related conducts (e.g., modern slavery, child labour, deforestation, soil contamina­
Behavioural operations tion). Building on previous research showing that CSI and CEI hold the potential to negatively impact the market
Supply chain contamination
value of supply chain partners (i.e. supply chain contamination), we examine the effects of CSI and CEI on
Intangible resources
Resource-based view
companies’ intangible resources (i.e. corporate trust, corporate image, attitude toward the firm, and word-of-
Shared resources view mouth (WOM) intention). Through the application of two scenario-based experiments and using a multi-tier
behavioural approach, we explore how CSI and CEI practiced by a supply chain partner in the earlier posi­
tions of a supply chain affect the perception of buyers in the subsequent stages. In addition, we investigate the
impact of CSI and CEI in the way the company that engaged in corporate irresponsibilities is perceived by supply
chain partners across the chain. Our results reinforce the importance of organizations’ efforts to guarantee that
homogenous social and environmental standards are observed by all their partners, as a supply chain seems to be
only as sustainable as its least sustainable tier. Beyond that, our empirical evidence allows for new applications of
the Resource-Based View (RBV) in supply chain contexts, along with the initial development of the Shared
Resources View (SRV).

1. Introduction
The consolidation of social media in the last decades (e.g., Twitter,
Facebook, LinkedIn, Instagram) has brought firms’ activities to the
centre of public debate (Kietzmann et al., 2011; Chu and Chen 2019;
Sodhi and Tang 2019). As consumers interact and share their views
(Dimitriu and Guesalaga 2017), companies’ misconducts are openly
discussed (Davies and Olmedo-Cifuentes 2016), with
sustainability-related issues often triggering harsh reactions (Starbird
et al., 2015; Vaast et al., 2017). Cases of modern slavery, deforestation,
and environmental deception, for example, typically channel negative
attention, not only damaging firms’ market value (Fracarolli Nunes
2018, 2019), but also compromising the perception of stakeholders in
the long run (Siano et al., 2017). That seems to be the case in some of the
most pressing corporate scandals, including the disclosure of extremely
poor working conditions at Foxconn in 2012 (Clarke and Boersma
2017), the Rana Plaza collapse in Bangladesh in 2013 (Jacobs and Sin­
ghal 2017), and the Volkswagen Dieselgate in 2015 (Aggeri and Saussois
2017; Jacobs and Singhal 2020), among others.
The understanding that companies’ misdoings must acutely damage
their esteem calls for a more comprehensive examination. Scholars have
long defended the meeting of stakeholders’ needs as a condition for
value creation. Freeman et al. (2007), for example, propose what they
call a ‘stakeholder capitalism’ as an alternative to the traditional nar­
ratives of free market economies (e.g., the assumption of competition,
the limitation of resources, and a winner-take-all mindset). Accordingly,
the development of more generous business relationships would be
inevitable as, beyond not favouring ethical analysis, conventional cap­
italism would focus on value capture rather than value creation. Freu­
denreich et al. (2020), in turn, argue that the idea of value creation itself
must be reframed, moving from firms’ unidirectional flow towards
customers to new business models in which stakeholders would be both

* Corresponding author.
E-mail addresses: m.fracarollinunes@gmail.com (M. Fracarolli Nunes), camilapark@gmail.com (C. Lee Park), hshin@georgiasouthern.edu (H. Shin).

https://doi.org/10.1016/j.ijpe.2021.108275
Received 31 December 2020; Received in revised form 6 August 2021; Accepted 17 August 2021
Available online 20 August 2021
0925-5273/© 2021 Elsevier B.V. All rights reserved.
M. Fracarolli Nunes et al.
beneficiaries and co-creators of value. While the quest to satisfy distinct
groups of stakeholders is often seen as unrealistic (Jensen 2010) and the
incorporation of social ends by companies may be considered an
expression of a “pure and unadulterated socialism” (Friedman 1970),
failures in that direction seem to be increasingly threatening to the way
firms are perceived.
In this regard, the notion of Corporate Social Irresponsibility (CSI)
emerges, comprehending a range of immoral business-related conducts.
Associated with actions that involve “a gain to one party at the expense
of the total system” (Armstrong 1977, p. 185), CSI refers to companies’
socially condemnable initiatives, ranging from the unfair treatment of
suppliers and employees (Murphy and Schlegelmilch 2013) to child la­
bour (Kölbel et al., 2017). On the other hand, Corporate Environmental
Irresponsibility (CEI) is associated with moral transgressions related to
the environment, including oil spills (Xie et al., 2015), air pollution
(Jiménez-Parra et al., 2018), and the excessive use of fertilizers and
pesticides (Zhu et al., 2018).
Along with the ethical issues associated with irresponsible conduct,
companies must consider the risk that these matters may pose to their
performance, or even to the continuity of their operations. Yet, while
studies have linked CSI and CEI to reputational damage to the firms
practicing them (e.g., Lin et al., 2016; Kölbel et al., 2017), the investi­
gation of related dynamics in supply chains is still nascent. It is not clear,
for example, which dimensions of firms’ intangible resources are likely
to be impaired. With firms being also held responsible for the operations
of their suppliers and customers (Bowen et al., 2001; Atasu and Sub­
ramanian 2012), the study of the collateral effects of unsustainable
operations in supply chain contexts becomes urgent (Sodhi and Tang
2019). At the same time, knowledge about the factors that motivate and
explain supply chain managers’ decisions is still fragile. Given the
relevance of human relations in these contexts (Reinecke et al., 2018), a
more accurate comprehension of the effects of CSI and CEI on the per­
ceptions of purchasing professionals along the supply chain shall be
crucial.
The objectives of the study are twofold. First, using a behavioural
approach, we conducted two scenario-based experiments to compare the
impacts of both CSI and CEI carried out by the earlier stages of a food
supply chain (i.e. tier 1 – sugar cane producer) on the evaluation of
purchasing professionals in three subsequent tiers (i.e. tier 2 – sugar
producer, tier 3 – chocolate producer, and tier 4 – retail chain), and to
analyse how consumers (i.e. tier 5) respond to such situations. Building
on previous findings that CSI and CEI indeed hold the potential to
negatively impact supply chain partners (Fracarolli Nunes 2018, 2019;
Hoffmann et al., 2020), we examine the propagation of such issues
across downstream supply chain partners, testing the extent to which
such effects may be attenuated as they move further away from the
source. Second, we test whether the extent of perceptions toward the
source company would vary along the chain. In a scenario-based
experiment with a total sample of 502 individual participants across
two studies, we examine four elements of companies’ intangible re­
sources (i.e. corporate trust, corporate image, attitude toward the firm,
and word-of-mouth (WOM) intention) as outcome variables.
By investigating important factors that might influence the decision-
making process of purchasing professionals, this study contributes to the
literature on behavioural operations in supply chains. More specifically,
the analysis of the impact of CSI and CEI across a multi-tier chain adds to
the investigation of behavioural aspects in sustainable supply chain
management. Likewise, examining the effects of CSI and CEI on distinct
supply chain partners offers new insights to the literature on supply
chain contamination and the inertial effect. From a theoretical
perspective, the findings support new applications of the Resource-
Based View (RBV) in supply chain contexts, extending the locus of sus­
tainable competitive advantage and setting the basis for the develop­
ment of a Shared Resources View (SRV). Lastly, the consideration of
intangible resources as performance outcomes usually ignored by the
field adjoin to the integration of supply chain management to other
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International Journal of Production Economics 241 (2021) 108275
related disciplines such as organizational psychology and industrial
marketing.
This paper is organized as follows: section 2 proposes a contextual­
ized and integrated literature review on socially and environmentally
irresponsible practices in supply chains, the strategic value of corporate
social and environmental responsibilities, the interfaces between
behavioural operations and sustainable supply chain management, and
the concepts of supply chain contamination and intangible resources. In
section 3, the hypotheses are developed, followed by a description of the
methods applied for studies 1 and 2 in section 4, a general discussion in
section 5, the conclusion of the investigation in section 6, and limitations
and future research directions in section 7.
2. Literature review
2.1. CSI and CEI in supply chains
Broadly, the concept of Corporate Social Responsibility (CSR) refers
to the obligations and duties of companies towards society (Schwartz
and Saiia 2012). Building on the notion that firms’ objectives must not
be restricted to generating profits for investors (Kolstad 2007), the
concept proposes that the needs of all stakeholders must be equally
taken into account in the conduct of businesses (Brown and Foster
2013). This understanding would have a direct impact on the treatment
of several conflicts arising from companies’ drive to indiscriminately
maximize their financial results. This extends from their excessive use of
bargaining power in negotiation with partners (Crook and Combs 2007)
to the substitution of workforce by machines and robots (Manyika et al.,
2017). While the (un)fairness of the former has been largely addressed
in the literature (e.g., Bridoux and Stoelhorst 2014; Adhikari and Bisi
2020), the social consequences of the latter remain cloudy (Brynjolfsson
and Mitchell 2017). The solution for these and other social imbalances
would reside precisely in the consideration of the interests of all parties
potentially affected by corporate activities.
Gathering these and other prescriptions, the Stakeholder Theory
(Freeman 1984) has served as one of the main theoretical bases for the
building of arguably equitable relationships between business and so­
ciety (Phillips 1997). Within an ethical perspective, its propositions
regarding companies’ objectives would be particularly relevant, with
the questioning of profit orientation being among its key features (Cragg
2002; Berman et al., 1999). Criticism to these views, however, abound as
the alternatives proposed by the stakeholder approaches seem to be in
conflict with mainstream economic thought (e.g., agency theory,
firm-as-contract theory, neo-classical economic theory) (Cragg 2002).
On that regard, Jensen (2010, p.32) argues that “two hundred years of
work in economics and finance implies that, in the absence of exter­
nalities and monopoly, social welfare is maximized when each firm in an
economy aims to maximize its total market value”. As pointed out by
Phillips et al. (2003) though, the Stakeholder Theory would not be
inconsistent with companies’ pursuit of value maximization per se, but
rather, with their search to maximize shareholder wealth or stock prices
all alone.
Despite the numerous objections and skepticism around its applica­
bility or usefulness, the Stakeholder Theory has been largely employed
in the accommodation of social issues in Management literature. In this
sense, a company would be considered socially responsible in case all
those with whom it maintains an interface benefit from the value it
generates while not being harmed by its activities. This includes con­
sumers, employees, local communities, suppliers, as well as any other
group capable to either affect or be affected by the operations of the firm
(Key 1999). Reflexively, the idea of Corporate Social Irresponsibility
(CSI) encompasses any situation in which companies fail to meet these
objectives (Lange and Washburn 2012).
While both CSR and CSI have been generally associated with the
organizational behaviour of single firms, these issues have been pro­
gressively addressed in the study of sustainable supply chain
M. Fracarolli Nunes et al.
management (Sauer and Seuring 2018; Seuring and Müller 2008; Ste­
kelorum 2020). Among other reasons, that would be due to the large
number of social issues observed in these arrangements. Beyond
extending across geographically and culturally distinct regions (Gupta
and Gupta 2019; Lawson et al., 2019), supply chains are often complex
because of the high level of specialization of each partner (Nair and
Reed-Tsochas 2019). In many cases this translates into difficulties in
monitoring the activities of each individual actor, which can put the
sustainability of entire chains at risk (Zhu and Lai 2019).
With the establishment of cost and time-based competition (Chris­
topher 2016), strategic outsourcing (Quinn and Hilmer 1994; Pournader
et al., 2019) has developed as an important business model in the recent
decades. The transfer of manufacturing processes to low-labour cost
zones allowed companies to radically reduce their operating costs,
ensuring not only greater competitiveness, but also their own survival
(Peck 2017). In addition to the physical transfer of industrial activities,
strategic outsourcing has usually implied a reduction in companies’
scope, with functions previously carried out internally being reassigned
to suppliers (Tsay et al., 2018). Along with these bright sides, however,
this business model is also associated with a number of negative social
matters of which examples include modern slavery (Crane et al., 2018),
child labour (Zutshi et al., 2009), and the provision of poor working
conditions for employees (Flanagan 2006).
Similarly, Corporate Environmental Responsibility (CER) encom­
passes firms’ liabilities to the natural environment (Li et al., 2020),
specifically the need to minimize impacts on fauna and flora while
ensuring that future generations shall enjoy natural resources as much as
the present one (DesJardins 1998). Within this view, an organization
would be considered environmentally irresponsible when it fails to do
so, either on purpose or due to incompetence (Lin et al., 2016). Several
practices fall into this classification, with the most evident being oil
spills (Yusuf et al., 2013), environmental issues from mining activities
(Kusi-Sarpong et al., 2016), and the excessive use of pesticides in food
production (Trienekens and Zuurbier 2008).
As in the case of CSI, CEI also appears to be a common issue within
supply chain contexts. Once more, the extreme segmentation of indus­
trial activities (i.e. strategic outsourcing) coupled with growing de­
mands for cheap products seems to favor the occurrence of CEI in global
value chains. The food and beverage industry, for example, has been
subject to important environmental scandals involving multinational
companies and the unsustainable practices of their suppliers. Back in
2008, environmentalist group Greenpeace pointed out to Unilever as
being responsible for the destruction of tropical forests in southern Asia
(Ormsby 2008). Accordingly, the palm oil used by the company was
issued from areas where the original jungle had been cleared. Similar
charges were made against Nestlé (Ionescu-Somers and Enders 2012)
and Procter & Gamble (Davidson 2014) some years later. As illustrated
by these cases, CEI in supply chains represents an important risk to the
reputation of companies not directly involved in the faults.
2.2. Strategic CSR and CER
From a strategic viewpoint, both CSR and CER have been recognized
as potential sources of sustainable competitive advantage (e.g., Pålsson
and Kovács 2014; Saeidi et al., 2015). In this direction, Porter and Van
der Linde (1995) argue that the eventual trade-offs between economic
and environmental goals may be overcome through innovation, with
superior performance being achieved as companies manage to shift
constraints. The lean manufacturing approach itself seems to be
consistent with this idea, proposing increased operational efficiency
through a more rational (i.e. minimized) consumption of inputs (Yang
et al., 2011). When it comes to CSR, Porter and Kramer (2006) discuss
the importance of each company selecting a social objective that is
aligned with its overall strategy. The authors, however, call attention to
the need to integrate companies’ objectives to those of the society, as the
pursuit of one at the expense of the other may undermine the long-term
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International Journal of Production Economics 241 (2021) 108275
prosperity of both. The concept of shared value has emerged as an
attempt to reconcile these possibly conflicting goals.
Although assorted perspectives acknowledge the strategic potential
of social and environmental initiatives, the developments of the
Resources-Based View (RBV) (Wernerfelt 1984; Rumelt 1984; Barney
1991) seem to be particularly accommodating to this understanding (De
Bakker and Nijhof 2002). Accordingly, back in the mid-1990s, Hart
(1995) had already proposed a Natural Resource-Based View (NRBV) of
the firm, arguing that abnormal performance could be reached in face of
a firm’s relationship to its natural environment. Litz (1996) advanced a
Resource-Based View of the socially responsible firm, while Sharma and
Vredenburg (1998) identified stakeholder integration as a relevant
capability for environmental responsiveness.
In discussing the contribution of both RBV and NRBV to the devel­
opment of sustainable supply chain management (SSCM), Touboulic and
Walker (2015) highlight the identification of strategic
sustainability-related resources (i.e. those capable of contributing to
social, environmental and economic performances in supply chains) as a
typical challenge. They also point out the importance of both inter- and
intra-organizational resources as means to stimulate the engagement of
suppliers with SSCM practices. By suggesting that competitive advan­
tage may be achieved through unique sustainability-related compe­
tencies within supply chains, the RBV integrates the literature on SSCM
with the strategic management debate, aligning it with overall business
performance goals. For Gold et al. (2010, p. 230), SSCM would be “a
catalyst of generating valuable inter-organizational resources and thus
possible sustained inter-firm competitive advantage through collabora­
tion on environmental and social issues.”
Applying the assumptions of the RBV and coherent with these views,
scholars have investigated different combinations of (1) intangible inter-
organizational resources (e.g., trust, relational capital), (2) sustainabil­
ity performance, and (3) competitive advantage in supply chains. Shibin
et al. (2020), for example, show that supply chain connectivity and
supply chain information sharing have a significant influence on envi­
ronmental performance, while Karaosman et al. (2020) stress the rela­
tively low levels of transparency, traceability, supplier audits, and
supplier engagement to sustainability in luxury fashion supply chains
(despite evidence of solid trading relationships between supply chain
partners). Among other measures, the authors suggest the further
development of technical and relational resources across supply net­
works as a way towards more sustainable practices. Likewise, in
analyzing the influence of behavioural aspects on the implementation of
sustainable supply chain governance (SSCG), Belhadi et al. (2021) argue
that behavioural uncertainty may lead to contractual and relational
SSCG, with interactions of relational experience and interpersonal trust
possibly influencing decisions in that matter. Still, through the exami­
nation of the effect of the interplay between the duration of
buyer-supplier relationship and suppliers’ sustainability performance
upon supplier selection decisions, Zhan et al. (2021) claim that not only
do managers take suppliers’ sustainability performance into account,
but also that long-term relationships tend to cause interaction effects
between a manager’s preference for any specific sustainability dimen­
sion (i.e. social, environmental, economic) and a supplier’s sustain­
ability performance upon evaluation and selection processes.
Still, the perception that social and environmental performance are
associated with organizational capabilities has become increasingly
popular. Lee et al. (2013, p. 1718), for instance, propose the idea of CSR
capability as “an organizations’ knowledge, skills, and processes relating
to the planning, implementation and evaluation of CSR activity”. Within
this approach, Torugsa et al. (2013) show that distinct capabilities may
play different roles in proactive CSR (i.e. responsible practices beyond
regulatory requirements and voluntarily adopted by firms). Along with
shared vision and strategic proactivity, stakeholder management would
be a relevant antecedent in that regard. Building on a dynamic capability
perspective, Stekelorum et al. (2018) examine the extension of CSR
practices by small- and medium-sized enterprises (SMEs) into their
M. Fracarolli Nunes et al.
multi-tier supply chains, arguing that SMEs employ different capabilities
in these processes, depending on whether they are dealing with first- or
second tier-suppliers.
From a CER perspective, Wong (2013) classifies environmental sus­
tainability as a central organizational capability which simultaneously
promote the protection of natural resources and businesses. Hir­
unyawipada and Xiong (2018) show that the impact of corporate envi­
ronmental commitment on firm value is moderated by operations
capability. In line with that, Gong et al. (2019) investigate the devel­
opment of sustainability capabilities within firms and their extension to
supply chains, as sustainability performance in supply chains would be
mediated by firms’ own sustainability capabilities. De Bakker and Nijhof
(2002) extend the capability-based approach to responsible manage­
ment across supply chains, with the responsible behaviour of a company
being directly dependent on the actions of its suppliers and customers.
As pointed out by the authors, a responsible chain management would
only be possible through cooperation and interaction between these
different parties. Wong (2013, p. 114) adds that “environmental man­
agement no longer relies solely on an individual firm’s efforts, but on its
supply chain partners as well”.
These developments evidence the relevance of the RBV as an
important theoretical basis for SCM and SSCM studies. In particular,
arguments pointing to intangible inter-organizational resources and
sustainability-related capabilities as potential sources of competitive
advantage have supported the understanding that SSCM is not only
limited to the pursuit of alternative organizational objectives (e.g., so­
cial and environmental developments) but also compatible with a firm’s
traditional goals (e.g., profit maximization). Beyond allowing for a more
structured comprehension of the outcomes and benefits of sustainable
practices within supply chains, this clarification is critical in their own
implementation, as it may contribute to the pacification of possibly
conflicting interests such as those of investors/managers on one side and
civil societies on the other. The specific contributions of the present
study to this path are further addressed in the section dedicated to the
general discussion later in the text.
2.3. Behavioural operations and sustainable supply chain management
As a discipline, Operations Management (OM) has traditionally
focused on the maximization of operational efficiency (e.g., Kwon and
Lee 2019; Halawa et al., 2020). This has often meant an asymmetric
attention to the mechanization of procedures, with human aspects
usually being overlooked (Chopra et al., 2004). While this trend is still
dominant in contemporary studies, it seems to have accompanied the
field since its initial contributions. Within his Scientific Management
approach, Taylor’s (1911) search to determine the “one best way” would
be illustrative of this issue. The atomization of tasks, for instance, was
intended to keep them as simple as possible, minimizing the need for
special skills on the part of employees (Kelly 2016). In other words, the
repeated and constant execution ‘dehumanized’ operators, bringing
their behaviour closer to that of machines. This paradigm dominated the
assembly lines until the appearance of radically different approaches
that placed employees at the centre of production processes (e.g., Lean
Management) (Cadden et al., 2020).
Loch and Wu (2007, p. 2) note that interest in behavioural operations
would be rooted in “a long observed gap in OM”. Accordingly, “people
issues” were not properly treated by the literature, with authors having
“danced around them” for decades. Since around the 2000s, however,
the emergence of structured areas of study as well as methods promising
to treat these questions boosted researchers’ interest in the theme. Gino
and Pisano (2008), for example, define behavioural operations as a
sub-field dedicated to the investigation of the attributes of behaviours
and cognition that might affect operating systems. Katsikopoulos and
Gigerenzer (2013), in turn, construe it as the examination of managers’
decision-making processes, while Croson et al. (2013) propose behav­
ioural operations as the investigation of possibly non-hyper-rational
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International Journal of Production Economics 241 (2021) 108275
actors within operational contexts. Coherently, for Fahimnia et al.
(2019), behavioural studies would be those centred on deviations from
rational key-performance optimization.
Regardless of variations, these definitions all seem to stress the fact
that human beings do not always seek to maximize their performance.
With people being subject to their emotions and moods, a permanent
rational conduct seems unlikely (Zeelenberg et al., 2008). In this sense,
the study of behavioural operations may be seen as an attempt to
circumscribe the factors that may lead managers, employees, buyers,
and suppliers to deviate from organizational objectives, thus impairing
the achievement of the desired operational performance. Nevertheless,
given the complexity and even the randomness of human functioning,
behavioural approaches do not always attain this goal. Not by chance,
the replacement of people with robots and machines seems to be an
increasingly privileged alternative for large firms (Klumpp 2018),
especially when they renew or build new production lines. Among the
advantages of this process are the reduction of errors and employees’
injuries, the extension of productive hours, and the elimination of labour
liabilities (Neumann et al., 2002). On the other hand, issues related to
the accumulation of tacit knowledge, creativity, and innovation may be
hindered by this choice (Satchell 2018).
In discussing the differences between human and machine-led op­
erations, Fracarolli Nunes and Lee Park (2020) classify the latter as
un-behavioural, mainly due to the absence of human characteristics in
machines, particularly those that prevent the maximization of perfor­
mance. That includes the lack of ego-protection strategies which might
compromise human capacity to learn and share information. Despite
presenting a series of advantages in terms of operational efficiency, the
replacement of employees by machines seems to be limited to functional
activities, meaning it cannot be extended to those that demand a greater
degree of interaction, imagination, originality, or improvisation. With
many of the typical supply chain management activities requiring
intense personal contact (e.g., information sharing, negotiation) (Kim
and Chai 2017; Kaufmann et al., 2018b), behavioural approaches in
these contexts should not be undervalued. When it comes to the
implementation of sustainable supply chain management, the need for
collaboration among partners may potentialize this question (Allaoui
et al., 2019).
We argue that, within supply chain contexts, the study of behav­
ioural operations must include the perceptions caused by the actions,
decisions, and omissions of buyers and suppliers. In this sense, the
assessment of CSI and CEI perpetrated by a supply chain partner shall be
seen as an important factor in decision-making processes. The combi­
nation of these issues and their dependence on stakeholders’ assessment
reinforce the need to evaluate them through behavioural approaches. In
the present study, this seems to be even more relevant, as different actors
occupy different positions in the supply chain. Therefore, we discuss
how negative perceptions in that regard may translate into damage to
firms’ intangible resources.
2.4. Supply chain contamination and intangible resources
Negative events – understood as any occurrence that might harm
companies’ performance – have received great attention from Manage­
ment scholars, with the investigation of their financial impacts being of
particular interest (MacKinlay 1997). Based on the premises of the
Efficient Market Hypothesis (Fama et al., 1969; Fama 1970; Jensen
1978), the effects that issues such as industrial disasters and product
recalls may have on the market value of companies have been widely
examined. Capelle-Blancard and Laguna (2010), for example, demon­
strate that explosions in refineries and chemical plants cause, on
average, a 1.3% stock price damage. Likewise, Chen et al. (2009) noted
an expected 0.59% loss upon product-harm crises.
Yet, studies have shown that the outcomes of negative events are not
limited to the companies originating them, with supply chain partners
often absorbing part of the harms. In exploring the effects of supply
M. Fracarolli Nunes et al.
chain disruptions, Hendricks and Singhal (2003, 2005) demonstrate that
operational problems incurred in an upstream partner may negatively
affect other companies in the string. In addition, Fracarolli Nunes (2018)
shows that events involving environmental disasters, operational fail­
ure, corporate fraud, and corruption negatively impacted the market
value of supply chain partners, naming the process as supply chain
contamination, defined as
“the dissemination of negative events through supply chains, nega­
tively affecting not only the market value of customers and suppliers
(possibly also that of customers of customers and suppliers of sup­
pliers and so on), as well as potentially other dimensions such as
corporate reputations, for instance”. (p. 581)
Regarding the mechanics of this process, Fracarolli Nunes and Lee
Park (2016) suggest that it is similar to the waves created by a rock
thrown into water (i.e. inertial effect). In addition to spreading from the
point of impact, these waves lose speed as they move away towards the
periphery. When applied to supply chains, the metaphor proposes that
partners will absorb the impact of a negative event, with this impact
being progressively smaller as they (i.e. supply chain partners) get more
distant from the company which originally engaged in the corporate
irresponsibilities. As condemnations shall not be restricted to the com­
panies directly involved, CSI and CEI committed by a firm may come to
negatively affect the reputational capital of other entities in its supply
chain network (Gereffi and Lee 2016; Petersen and Lemke 2015; Sodhi
and Tang 2019) even if the extent to which each firm is affected would
differ based on the distance from the directly involved company. In fact,
it is possible that other classes of intangible resources (i.e. the set of
perceptions that stakeholders have in relation to companies) may come
to be equally affected. This may include dimensions such as corporate
trust, corporate image, attitude toward the firm, and WOM intention.
Within the reasoning of the RBV, resources represent anything that
belongs to or must be used by the company (Rumelt 1984; Wernerfelt
1984; Peteraf 1993). Based on criteria such as the value they may create,
their rarity, their inimitability, and the relative difficulty to substitute
them, resources are classified into strategic and non-strategic (Barney
1991). Strategic resources are those capable of granting firms sustain­
able competitive advantage. Given the characteristics of intangible re­
sources, they may be argued to fall into this category. For Van Der
Merwe and Puth (2014, p. 19) corporate trust represents “a subjective
attitude, belief and optimistic expectation by a stakeholder or group of
stakeholders that their dependence on the for-profit organisation will
not be abused, which influences their decisions and allows them to
support the organisation”. Corporate image, in turn, is defined as “the
mental picture of the company held by its audiences—what comes to
mind when one sees or hears the corporate name or sees its logo” (Gray
and Balmer 1998, p. 696). For the purpose of the study, attitude towards
the firm is understood as the set of inclinations and actions that a
stakeholder may have in relation to a given company. Lately, the
concept of WOM stands as all “informal communications between pri­
vate parties concerning evaluations of goods and services rather than
formal complaints to firms and personnel” (Anderson 1998, p. 6).
The discussion of the topics above allows for the identification of
some gaps in the literature, which the present study seeks to help ful­
filling. Regarding the debate on the objectives of companies (i.e. profit
orientation vs. social welfare), we investigate the extent to which firms’
incapacity to meet the needs and desires of different groups of stake­
holders – other than customers and investors – represent a significant
source of value destruction. While this is an arguably typical concern in
studies focused on stakeholder approaches, our main contribution in
that direction rests in the examination of damage beyond the firm that is
directly responsible for the social or environmental failure (i.e. supply
chain partners). Likewise, the examination of the effects of such issues
on the intangible resources of companies that are not directly respon­
sible adds to the literature on supply chain contamination, as it
5
International Journal of Production Economics 241 (2021) 108275
consistently concentrates on the measurement of market value varia­
tion. In turn, considering companies occupying different positions in the
supply chain permits a more detailed test of the inertial effect. Around
the RBV, the study may be seen as an evaluation of some of its premises.
In particular, the idea that companies have control over their resources
is challenged. These and other contributions are addressed in detail in
the general discussion section.
3. Hypotheses development
In view of the relevance of CSR and CER aspects in the conduction of
businesses, it may be assumed that they are linked to the appreciation
that stakeholders have for companies. In the same way, failures in that
regard seem to be associated with damage to firms’ esteem among their
publics. CSI and CEI then appear to be potential causes of the impair­
ment of companies’ intangible resources. The prospect that failures
originating in a company do not remain limited to it suggests that supply
chain partners may partially absorb eventual damage (i.e. supply chain
contamination). When the mechanisms of this process is considered (i.e.
the inertial effect) (Fracarolli Nunes and Lee Park, 2016), it may be
argued that the intensity of this damage decreases as the company
examined is more distant from the company with the source of the issue.
Fig. 1 illustrates the mechanics of supply chain contamination through
the inertial effect. Consistent with the analogy of the waves caused by a
stone that hits the water, the intensity of the colours in each stage of the
supply chain denotes the progressively diminishing strength of such
impact. In the context of the study, this means decreasing damage to
partners’ intangible resources in the perception of subsequent players (i.
e. buyers) as they move away from the firm at the origin of CSI or CEI.
Altogether, these factors allow for the elaboration of our first group
of hypotheses:
H1a. The more distant a supply chain partner is from the CSI / CEI
origin, the weaker the damage to its corporate trust in the perspective of
buyers.
H1b. The more distant a supply chain partner is from the CSI / CEI
origin, the weaker the damage to its corporate image in the perspective
of buyers.
H1c. The more distant a supply chain partner is from the CSI / CEI
origin, the weaker the damage to the attitude toward it from buyers.
H1d. The more distant a supply chain partner is from the CSI / CEI
origin, the weaker the damage on buyers’ WOM intention.
Integrating the possibilities raised in H1a, H1b, H1c and H1d and
considering the joint analysis of the four constructs studies as a proxy of
the intangible resources of a company, an overarching hypothesis (H1)
is proposed:
H1. The more distant a supply chain partner is from the CSI / CEI
origin, the weaker the damage of its intangible resources in the
perspective of buyers.
While companies more distant from the CSI/CEI source may suffer
less harm to their intangible resources, the way the source company is
perceived by its different supply chain partners is not likely to change as
the distance between them increases. Among other reasons, it is possible
that the eventual uniformity of judgments is based on the perception
that both CSI and CEI represent important sources of reputational risks
for all members of the chain. As discussed, companies not directly
involved in such issues have been held responsible, having their images
associated with condemnable practices (e.g., modern slavery, defores­
tation). In addition to the immediate damage to the way they are
perceived by their stakeholders, these companies may have their
intangible resources permanently harmed. In this sense, it is possible
that the awareness that problems linked to sustainability failures can
affect all members of a supply chain leads them to perceive the company
M. Fracarolli Nunes et al.
Fig. 1. Supply chain contamination through the inertial effect.
responsible for these issues in an equally negative manner. Fig. 2 depicts
this possibility, presenting a potential uniformity of perceptions of all
supply chain partners in relation to the firm that is the source of CSI or
CEI. In contrast with Fig. 1, the intensity of colours does not change as
they depart from the origin of the irresponsible actions.
Combining these possibilities with the ones previously considered,
the second group of hypotheses tests the degradation of damage to
intangible resources as the supply chain partners are further away from
the source company:
H2a. The distance of a supply chain partner from the CSI / CEI origin
does not interfere with the damage on a supply chain partners’ corporate
trust perception on the irresponsible company.
H2b. The distance of a supply chain partner from the CSI / CEI origin
does not interfere with the damage on a supply chain partners’ corporate
image perception on the irresponsible company.
H2c. The distance of a supply chain partner from the CSI / CEI origin
does not interfere with the damage on a supply chain partners’ attitude
toward the irresponsible company.
H2d. The distance of a supply chain partner from the CSI / CEI origin
does not interfere with the damage on a supply chain partners’ WOM
about the irresponsible company.
Similarly, we aggregate the possibilities raised in H2a, H2b, H2c and
H2d in a main hypothesis (H2):
H2. The distance of a supply chain partner from the CSI / CEI origin
does not interfere with the damage on a supply chain partners’
perception on the intangible resources of the irresponsible company.
4. Study 1
4.1. Study design and participants
The primary objective of Study 1 is to compare the effect of corporate
irresponsibilities (CSI and CEI) on supply chain partners at varying
levels within the network of the supply chain in terms of corporate trust,
corporate image, attitude toward the firm, and WOM intention. It is
expected that the more distant the company is from another supply
Fig. 2. Uniformity of Perceptions throughout the supply chain.
6
International Journal of Production Economics 241 (2021) 108275
chain partner which is accused of committing the corporate irresponsi­
bility (CSI and CEI), the less negative the impacts that are inflicted upon
the companies’ intangible resources.
This study utilized a scenario-based experiment set in a chocolate
confectionery industry, whose supply chains involve a multitude of
processes and partners, such as producing raw materials (e.g., cocoa
beans, sugar cane, dairy), pre-processing, manufacturing, distribution
and retail, and consumption (Miah et al., 2018). A total of 302 U.S. re­
spondents (53.3% male, Mage = 36.5 years) drawn from Prolific Aca­
demic (www.prolific.ac) were randomly assigned to a 3 × 2
between-subject design. The first factor involved three middle-tier
supply chain partners (Company B in tier 2 (a sugar manufacturer) vs.
Company C in tier 3 (a chocolate manufacturer) vs. Company D in tier 4
(a supermarket)) between Company A in tier 1 (a sugar cane supplier)
and final consumers in tier 5 on a supply chain continuum. The second
factor was the two types of corporate irresponsibility (social (CSI) vs.
environmental (CEI)).
4.2. Procedure and stimuli
Each participant received a scenario description and an online
questionnaire via Qualtrics. Participants were first told that they would
read a story about a company which is a part of a supply chain for
making chocolates. From the farmers that produce sugar cane to the
final consumers, this supply chain was described as being composed of 5
tiers: a sugar cane supplier (tier 1), a sugar manufacturer (tier 2), a
chocolate manufacturer (tier 3), a supermarket (tier 4), and final con­
sumers (tier 5). Each participant was then instructed to imagine that he
or she is a purchasing manager at a company belonging to one of the
three middle tiers of supply chain (tier level: Company B in tier 2 (a
sugar manufacturer) vs. Company C in tier 3 (a chocolate manufacturer)
vs. Company D in tier 4 (a supermarket)).
The participants were further informed that their company has been
purchasing from a company belonging to the preceding tier in the supply
chain. In turn, that company purchases from another company
belonging to the preceding tier in the supply chain. For instance, re­
spondents subjected to Company D in the tier 4 condition read the
following description: “Company D is a supermarket chain. To sell
chocolates, Company D buys chocolates from chocolate manufacturer C
M. Fracarolli Nunes et al.
that buys sugar from sugar manufacturer B, and sugar manufacturer B
buys sugar cane from sugar cane supplier A. As a purchasing manager for
Company D, you have been purchasing chocolates from Company C.”
Then, each respondent read one of the two scenarios about corporate
irresponsibility Company A (the sugar cane supplier in tier 1) is accused
of (type of corporate irresponsibility: social (CSI) vs. environmental
(CEI)). In the CSI condition, Company A was described as “providing
workers with extremely poor working conditions”. Further description
added that “employees were forced to work for 14 h a day and were not
allowed to leave the farm. Beyond that, wages were significantly below
the minimum established by the law, making the situation synonymous
to modern slavery.” In the CEI condition, Company A was described as
“causing extreme damage to the environment”. Further description
included that “the repetitive use of pesticides in sugar cane plantations
led to groundwater contamination. Beyond that, the chemicals in the
pesticides have caused significant deaths of sea creatures, and more than
4 decades will be required to offset the environmental damage caused.”
See the Appendix for details.
Participants rated the scenarios to be realistic (M = 5.77), believable
(M = 5.78), and likely (M = 5.61), well above the scale midpoint (4; p’s
= 0.00). The measures checking corporate irresponsibility included
three items adopted from Walsh and Beatty (2007) such as “Company A
seems to treat its people well” (r) for the CSI condition and “Company A
seems to care about the environment” (r) for the CEI condition. The
results of the survey demonstrated that the perception of corporate
irresponsibility in the respective conditions is high (MCSI = 6.59 and
MCEI = 6.49), well above the scale midpoint (4; p’s = 0.00). There was no
significant mean difference in the levels of the perceptions of corporate
irresponsibility between the CSI and CEI conditions (F (1, 300) = 0.65,
ns). Moreover, results for perceived severity of the reported accusations
of CSI and CEI made against Company A, composed of three items (e.g.,
“not at all serious”/“serious”) adopted from Maxham and Netemeyer
(2002), showed that there is no significant mean difference (MCSI = 6.54
vs. MCEI = 6.51, F (1, 300) = 0.12, ns). These results confirm the validity
of the corporate irresponsibility manipulations.
4.3. Measures
After reading one of the six scenarios, respondents answered ques­
tions on 3 items each about corporate trust (Morgan and Hunt 1994; α =
0.95), corporate image (Walsh and Beatty 2007; α = 0.95), attitude
toward the firm (Hagtvedt 2011; α = 0.98), and WOM intention (Max­
ham and Netemeyer 2002, α = 0.96) toward the company belonging to
the preceding tier in the supply chain. Answers were reported on a
7-point Likert scale (1 = “strongly disagree” to 7 = “strongly agree”).
Prior to testing the hypotheses, a confirmatory factor analysis (CFA)
was conducted on the measures to demonstrate convergent and
discriminant validity. This analysis revealed satisfactory levels of
convergent validity among the measures, as indicated through an ex­
amination of factor loadings (all above 0.92) and composite reliabilities
(all above 0.95). The correlations between variables were lower than the
square root of average variance explained (AVE) of each construct (See
Table 1), indicating discriminant validity. The overall fit of the mea­
surement models was good (χ2/df = 3.44, RMSEA = 0.09, SRMR = 0.02,
Table 1
Descriptive statistics and construct correlations for Study 1.
Variables M SD 1 2 3 4
1. Corporate trust 3.06 1.62 (0.94)
2. Corporate image 2.94 1.65 0.91a (0.93)
3. Attitude toward the firm 2.89 1.1 0.89a 0.90a (0.97)
4. WOM intention 2.83 1.68 0.85a 0.88a 0.88a
N = 302.
Note: Square root of the AVE is on the diagonal.
a a
Correlation is significant at the 0.01 level (2-tailed).
International Journal of Production Economics 241 (2021) 108275
CFI = 0.98, NNFI = 0.97, IFI = 0.98). All standardized factor loadings
were significant (p < 0.05), and the AVE for all measures was above 0.87
(Fornell and Larcker 1981). See Table 2 for details.
4.4. Data analysis and results
A two-way ANOVA with the tier level and the type of corporate
irresponsibility as independent variables (IVs) and corporate trust,
corporate image, attitude toward the firm, and WOM intention as the
respective dependent variables (DVs) revealed a main effect of the tier
level on corporate trust (MCompany_B = 1.90 vs. MCompany_C = 3.34 vs.
MCompany_D = 4.19; F (2, 296) = 76.23, p = 0.00), corporate image
(MCompany_B = 1.77 vs. MCompany_C = 3.01 vs. MCompany_D = 4.05; F (2,
296) = 71.17, p = 0.00), attitude toward the firm (MCompany_B = 1.82 vs.
MCompany_C = 2.90 vs. MCompany_D = 3.97; F (2, 296) = 54.29, p = 0.00),
and WOM intention (MCompany_B = 1.87 vs. MCompany_C = 2.83 vs.
MCompany_D = 3.82; F (2, 296) = 43.71, p = 0.00). The Bonferroni post-
hoc comparisons further indicated significant differences in all vari­
ables at the 0.001 level, such that the means were lower for tier 2
(Company B) than for tier 3 (Company C) and for tier 3 (Company C)
than for tier 4 (Company D). There was no other main effect nor inter­
action on each DV. This means that the effect of the tier level on each DV
holds, regardless of whether the company engaged in CSI or CEI.
Furthermore, mediation analysis using PROCESS Model 4 (Hayes,
2017) with the tier level as the IV, corporate image, attitude toward the
firm, and WOM intention as the respective DVs, and corporate trust as
the mediator revealed mediation. Results from the bootstrap estimation
with 5000 resamples revealed a significant indirect effect of the tier level
on each DV with corporate trust as a respective mediator, as reflected in
0 being excluded in the confidence interval (corporate image, β = 1.02,
95% CI = 0.86, 1.18; attitude toward the firm, β = 1.07, 95% CI = 0.91,
1.23; and WOM intention, β = 1.03, 95% CI = 0.87, 1.20). For corporate
image, as the direct effect of tier level remains significant (p < 0.05) in
the model, partial mediation was observed. On the other hand, for
attitude toward the firm and WOM intention, as the direct effect of the
tier level on each DV becomes insignificant in the model, full mediation
was observed.
4.5. Discussion of findings
The Study 1 results showed that the more distant the supply chain
partners are in the supply chain from the company which is accused of
committing the corporate irresponsibility, the less negative the percep­
tions and behavioural intentions of the purchasing managers are toward
the company belonging to the preceding tier. More specifically, the
levels of corporate image, attitude toward the firm, and WOM intention
displayed by the purchasing managers toward the supply chain partner
located closely to Company A were lower than those toward the supply
chain partner located remotely from Company A. This is due to the
decreased level of corporate trust, showing the supply chain contami­
nation effect.
Despite this, it is unclear whether the perceptions and behavioural
intentions of the purchasing managers of the supply chain partners in
the middle tiers would differ toward Company A (the sugar cane
Table 2
Descriptive statistics and construct correlations for Study 2.
Variables M SD 1 2 3 4
1. Corporate trust 2.01 1.19 (0.89)
2. Corporate image 1.89 1.16 0.84a (0.90)
3. Attitude toward the firm 1.85 1.34 0.85a 0.87a (0.97)
(0.95) 4. WOM intention 1.93 1.23 0.84a 0.85a 0.88a (0.92)
N = 302.
Note: Square root of the AVE is on the diagonal.
Correlation is significant at the 0.01 level (2-tailed).
7
M. Fracarolli Nunes et al. International Journal of Production Economics 241 (2021) 108275

supplier in tier 1) that engaged in corporate irresponsibility. It is ex­ Table 3

pected that the perceptions and behavioural intentions of the purchasing Items and reliabilities (study 1/study 2).
managers toward Company A that committed corporate irresponsibility Scale/items Standardized Cronbach’sα Composite AVEa
will not differ, regardless of where supply chain partners are located loadings reliability
along the tiers of the supply chain. Corporate trust ( 0.95/0.91 0.96/0.91 0.88/
Morgan and Hunt 0.78
5. Study 2 1994)
I trust Company X. 0.92/0.92
I have great 0.97/0.97
5.1. Study design and participants confidence in
Company X.
Study 2 was designed as an extension of Study 1, to compare the Company X can be 0.92/0.75
perceptions of the purchasing managers in the three middle-tier supply relied upon.
Corporate image ( 0.95/0.93 0.95/0.93 0.87/
chain partners (Company B in tier 2 (a sugar manufacturer) vs. Company
Walsh and Beatty 0.82
C in tier 3 (a chocolate manufacturer) vs. Company D in tier 4 (a su­ 2007)
permarket)) toward Company A in tier 1 (a sugar cane supplier) that I have a good 0.92/0.90
committed corporate irresponsibility in two types of corporate irre­ impression of
sponsibility (social (CSI) vs. environmental (CEI)) conditions, which Company X.
In my opinion, 0.95/0.92
yielded a 3 × 2 between-subject design. The manipulations for the tier Company X has a
level and the type of corporate irresponsibility in Study 2 remained good image in the
identical to those in Study 1. However, unlike Study 1, respondents in industry.
Study 2 were instructed to measure their perceptions toward Company A I believe that Company 0.92/0.89
X has a better image
(as opposed to toward the company belonging to the preceding tier in
than its competitor.
the supply chain in Study 1). Attitude toward the 0.98/0.98 0.98/0.98 0.94/
Because the perceptions of the purchasing manager of Company B in firm (Hagtvedt 0.94
tier 2 (a sugar manufacturer) toward Company A in tier 1 (a sugar cane 2011)
supplier) have been already measured in Study 1 (102 responses), a total Unfavorable – 0.96/0.97
Favorable
of 200 additional U.S. respondents (50.5% male, Mage = 37.4 years) Negative – Positive 0.97/0.97
were drawn from Prolific Academic (www.prolific.ac), comprising a Bad – Good 0.98/0.97
total of 302 participants (52.3% male, Mage = 37.2 years) for the analysis WOM intention ( 0.96/0.94 0.96/0.94 0.90/
of Study 2. Maxham and 0.84
Netemeyer 2002)
As in Study 1, realism checks demonstrated that the manipulations
I’m likely to say good 0.92/0.83
were realistic (M = 5.72), believable (M = 5.79), and likely (M = 5.54), things about
well above the scale midpoint (4; p’s = 0.00). To verify that the Company X.
manipulation of the corporate irresponsibility is effective, respondents I would recommend 0.97/0.96
were asked to report their perceptions of corporate irresponsibility, Company X to my
colleagues in the
using the same items as in Study 1. The ANOVA result shows that per­
industry.
ceptions of corporate irresponsibility in their respective conditions is If my colleagues were 0.95/0.96
high (MCSI = 6.68 and MCEI = 6.54), well above the scale midpoint (4; looking for a new
p’s = 0.00). There was no significant mean difference in the levels of the company of this
type, I would tell
perceptions of corporate irresponsibility between the CSI and CEI con­
them to try
ditions (F (1, 300) = 1.55, ns). Moreover, results for perceived severity of Company X.
the reported accusations of CSI and CEI made against Company A, using
the same items as in Study 1, showed that there is no significant mean Note.
a
AVE = average variance extracted.
difference (MCSI = 6.46 vs. MCEI = 6.58, F (1, 300) = 2.19, ns). These
findings indicate that the manipulations of corporate social irresponsi­
bility were successful. irresponsibility as IVs and corporate trust, corporate image, attitude,
and WOM intention as the respective DVs revealed no main effect of the
5.2. Measures tier level on corporate trust (MCompany_B = 1.90 vs. MCompany_C = 2.13 vs.
MCompany_D = 1.98; F (2, 296) = 1.00, ns), corporate image (MCompany_B =
The same measures as in Study 1 were used for corporate trust (α = 1.77 vs. MCompany_C = 2.01 vs. MCompany_D = 1.89 F (2, 296) = 1.11, ns),
0.91), corporate image (α = 0.93), attitude toward the firm (α = 0.98), attitude (MCompany_B = 1.82 vs. MCompany_C = 1.91 vs. MCompany_D = 1.82;
and WOM intention (α = 0.94) toward Company A in tier 1 (a sugar cane F (2, 296) = 0.15, ns), and WOM intention (MCompany_B = 1.87 vs.
supplier). The results from a CFA revealed satisfactory levels of MCompany_C = 2.01 vs. MCompany_D = 1.92; F (2, 296) = 0.34, ns). No other
convergent validity among the measures, as seen in factor loadings (all main effect nor interaction was found.
above 0.83) and composite reliabilities (all above 0.91). The correla­
tions between variables were lower than the square root of AVE of each 5.4. Discussion of findings
construct, indicating discriminant validity (See Table 3). The overall fit
of the measurement models was acceptable (χ2/df = 2.11, RMSEA = The results of Study 2 extend the findings of Study 1 by providing
0.15, SRMR = 0.02, CFI = 0.96, NNFI = 0.95, IFI = 0.96). All stan­ additional insights. Unlike the Study 1 results, there was no effect of the
dardized factor loadings were significant (p < 0.05), and the AVE for all tier level on the perceptions of the supplier (Company A) in tier 1 that
measures was above 0.78 (Fornell and Larcker 1981). See Table 3 for engaged in corporate irresponsibility among the purchasing managers of
details. the supply chain partners regardless of the tiers in the supply chain.
Furthermore, consistent with the Study 1 finding, there was no effect of
5.3. Data analysis and results the type of corporate irresponsibility, meaning that the effects found in
Study 2 remains strong despite the types of the corporate irresponsi­
A two-way ANOVA with the tier level and the type of corporate bilities. These findings have several implications for theory and practice.

8
M. Fracarolli Nunes et al.
6. General discussion
Our findings can be summarized according to Table 4 below:
The empirical demonstration that CSI and CEI impact the perceptions
of supply chain partners contributes to both management theory and
practice. Regarding the former, the results call for an extension of the
RBV to configurations other than the single firm, with evidence that
intangible resources may be shared among supply chain partners – even
by distant ones – allowing for new understandings of the locus of sus­
tained competitive advantage. In that regard, the Relational View (Dyer
and Singh, 1998) advances the idea that strategic resources would not be
limited by organizational borders, as sustained competitive advantage
could also be sourced from interfirm resources and routines (i.e.
relation-specific assets, knowledge-sharing routines, complementary
resources/capabilities, and effective governance). Despite its progress in
the ‘geography’ of the RBV (i.e. the locus of sustained competitive
advantage), the focal point of the Relational View remains limited to
buyer-supplier dyads. In this sense, it would fail to provide an appro­
priate reasoning for more complex formations such as triads, tetrads,
pentads, hexads, or multi-tier supply chains in general.
By empirically demonstrating that (1) distinct supply chain partners
may have their intangible resources impacted by practices originating
from other companies (i.e. supply chain contamination) and, thus, that
(2) intangible resources are, to some extent, shared among supply chain
partners, we extend the typical locus of sustained competitive advantage
from the limits of single firms’ organizational borders (RBV) and buyer-
supplier relationships (Relational View) to multi-tier supply chains.
Among other entailments, this subsidizes the idea that intangible re­
sources do not belong solely to single firms, nor are they limited to
interfirm relationships (i.e. buyer-supplier dyads). Instead, they can
spread throughout whole supply chains (i.e. from the ultimate supplier
to the ultimate buyer). This includes the organizational limits of all in­
dividual partners, their interfirm relationships with immediate buyers
and suppliers (tier 1), and their indirect interfirm connections with
buyers of buyers, suppliers of suppliers, and so on (tier 2, tier 3, tier 4,
tier 5, etc).
This contribution allows for the extension of the premises of RBV to
supply chain contexts, adding to the development of a theory unique to
Table 4
Overview of the findings.
Hypotheses Results
H1a Corporate trust presented weaker scores as supply
chain partners were farther from the irresponsible
company
H1b Corporate image presented weaker scores as supply
chain partners were farther from the irresponsible
company
H1c Attitude toward the firm presented weaker scores as
supply chain partners were farther from the
irresponsible company
H1d WOM presented weaker scores as supply chain
partners were farther from the irresponsible
company
H2a No differences were found in corporate trust levels
from supply chain partners at different positions
from the irresponsible company
H2b No differences were found in corporate image levels
from supply chain partners at different positions
from the irresponsible company
H2c No differences were found in attitude toward the
firm levels from supply chain partners at different
positions from the irresponsible company
H2d No differences were found in WOM levels from
supply chain partners at different positions from the
irresponsible company
International Journal of Production Economics 241 (2021) 108275
the supply chain domain. Just as the NRBV (Hart, 1995) equated sus­
tainability issues to the theoretical frames of the RBV, our findings plant
the seeds for what we call the Shared Resources View (SRV). Although
significant theoretical construction is still necessary for the development
of the proposed SRV, the reasoning based on our empirical evidence
permits the delimitation of the main features of this new perspective on
the nature of resources in supply chain contexts. Table 5 below sum­
marizes the main overlaps and contrasts among the original RBV, the
Relational View, and the proposed SRV.
As shown in Table 5, the SRV does not deny the previous contribu­
tions of the RBV, nor those of the Relational View, but it complements
both perspectives, applying their premises to the investigation of sus­
tained competitive advantage within supply chains. Given the discus­
sion above, the potential of individual supply chain partners to affect the
way their partners are perceived (e.g., corporate trust, corporate image,
attitude towards the firm, WOM intention) must be recognized. This
reinforces the perception that, within supply chain contexts, safe­
guarding intangible resources is the result of a collective and, ideally,
coordinated effort. Analogously, the results indicate that the way com­
panies are perceived depends not only on their ability to serve the in­
terests of a specific group of stakeholders – typically customers or
shareholders –, but also on their capacity to cause no harm to any group.
Beyond corroborating the importance of both CSR and CER, these
findings offer additional understanding of the risks associated with
irresponsible management (i.e. CSI and CEI).
In this sense, our study supports the notion of an extended producer
responsibility (Bowen et al., 2001), showing that firms may be held
accountable for sustainability issues even when they are not directly
involved. In assessing the extended effects of corporate misconduct in
supply chains, we also contribute to the literature on supply chain
contamination (Fracarolli Nunes 2018), a subject that, despite its rele­
vance, needs further empirical validation. The confirmation of hypoth­
eses H1a, H1b, H1c, and H1d – and, by consequence, of the overarching
hypothesis H1 – empirically supports the existence of the inertial effect
(Fracarolli Nunes and Lee Park, 2016) as a valid theoretical construction
to address the dissemination of negative events and practices in supply
chains. In particular, the finding that damage is attenuated as partners
are more distant from the source of the problem endorses the analogy of
the waves caused by a stone that hits the water. The loss of impact power
observed in our investigation is consistent with the decrease in the
mechanical energy that is realized as the waves move away from the
point of shock.
Confirmation
Beyond offering evidence supporting the conceptualization of the
Confirmed inertial effect, the outcomes of the study also support practical contri­
butions issued from it. When it comes to supply chain management
procedures and routines, the proper recognition of the threats associated
Confirmed
with the dissemination of negative events and practices may help
managers avoid or minimize damage to the intangible resources in their
custody. Supplier selection processes, for instance, may become more
Confirmed
rigorous, with criteria other than dependability, speed, and cost effi­
ciency gaining relevance in a firm’s choice of a new partner. In this
sense, the social and environmental maturity of the options available
Confirmed
must be further considered, as they shall decrease the chances of
negative consequences from CSI and CEI. This may include more
Confirmed
Table 5
Overlaps and contrasts – RBV, relational view, and SRV.
Confirmed
RBV Relational View SRV
Locus of Within Within Within organizational
Confirmed competitive organizational organizational borders + Buyer-
advantage borders borders + Buyer- supplier dyads +
supplier dyads Triads, tetrads,
pentads, hexads, etc …
Confirmed
Unit of Single firms Interfirm Supply chains
Analysis relationships
9
M. Fracarolli Nunes et al.
rigorous contractual terms that push suppliers to improve their sus­
tainability standards, and, perhaps, to claim the whole responsibility for
their failures in that regard. The efficacy of these measures against the
pernicious outcomes of the inertial effect, however, remain to be tested,
once, as our results suggest, intangible resources may be shared among
supply chain partners, and thus be nearly immediately damaged.
If, on the one hand, more stringent supplier selection processes have
the potential to prevent inertial effects, they may also have a negative
impact on transaction costs, as the imposition of safeguards may impair
the economic efficiency of exchanges (Coase 1937). Similarly, stricter
auditing of the operations of supply chain partners – another way to
inhibit irresponsible practices from happening in a systematic way –
should take a toll in terms of operational efficiency, harming both the
direct cost of operational activities, and the time that may be necessary
for their execution. When jointly considered, these variables make the
work of administrators even more complex, as they may decide what is
the ideal balance between risk and return that they are willing to
assume.
By describing the mechanics of supply chain contamination, our
findings also contribute to the integration of the inertial effect into SCM
theory. As previously discussed, the proposed SRV argues that intangible
resources are, to some extent, shared among all supply chain partners.
While the exact measure that is shared remains unclear, the demon­
stration that the clout of negative events dissipates indicates that
intangible resources are progressively less shared, with the distance
between tiers (i.e. the source of the problem and the one absorbing the
impact) being a possible explanation for this phenomenon. It may be
expected, for example, that the portion of intangible resources that a
focal company shares with tier 1 is bigger than that shared with tier 2.
Similarly, the portion of intangible resources shared between a focal
company and tier 2 must be bigger than that shared with tier 3, and so
on. In this sense, at the same time that the analogy of waves moving
away from the point of impact supports the idea that intangible re­
sources may be commonly owned by different supply chain partners, its
empirical demonstration adds to the understanding of the nature of this
sharing.
In addition to these direct contributions to the theoretical develop­
ment of the subject, results dialogue with the related literature on
basically five distinct but interrelated fronts. First, they reinforce the
perception that reputational risks must be seriously considered in supply
chain contexts. Our evidence complements previous efforts focused on
the detection of supply chain contamination through variation in market
value, particularly past findings pointing to reputational damage as a
partial explanation for the fluctuations measured (e.g., Fracarolli Nunes
2018). At the same time, our study contradicts earlier research that
denies or minimizes the importance of reputational risks in supply
chains (e.g., Jacobs and Sighal 2017). In particular, our findings suggest
that potential reputational damage must not be discredited as a relevant
factor upon structural supply chain decisions (e.g., strategic
outsourcing).
Second, our results help clarify the reputational risks assumed by
distinct actors in the supply chain. In that regard, this study comple­
ments past research on the effects of negative events and practices in
more than one tier (e.g., Jacobs and Singhal 2020), adding to the
broadening of such analyses, and extending them beyond the measure­
ment of market value variations. Third, our research also expands the
literature on sustainable supply chain management, exploring issues
which are not traditionally approached in the field. In this set, we add
elements that may be of value to the investigation of supplier selection
processes, mainly around partners’ willingness or capacity to adopt
sustainable management (e.g., Awasthi et al., 2018; Alikhani et al.,
2019).
Fourth, the confirmation of H2a, H2b, H2c, and H2d and, by
consequence, of the overarching hypothesis H2, adds to the literature on
industrial marketing management, notably to the production centred on
the dynamics of intangible resources in business-to-business relations (e.
10
International Journal of Production Economics 241 (2021) 108275
g., Kaufmann et al., 2018a; Franklin and Marshall 2019) Our inquiry
must be useful as it does not concentrate on the building of these ele­
ments, but rather, on potential threats. Finally, our investigation con­
tributes to the literature on supply chain relationship management, as
the administration of intangible resources seems to be more challenging
than previously admitted (e.g., Amoako-Gyampah et al., 2019; Collier
and Sarkis 2021). These inputs open avenues for future research, as
discussed below.
From a practical viewpoint, results demonstrate that further de­
velopments related to the comprehension and management of new
forms of risk in supply chain contexts are necessary. At the same time
this study strengthens the interfaces with consumer behaviour, for
instance, our findings suggest that companies’ investment in the pro­
mulgation of sustainable practices across their supply chains is justifi­
able. Along with the minimization of negative social and environmental
impacts, attention to supply chain partners’ practices may be crucial for
the preservation of companies’ esteem among their stakeholders. Apart
from corroborating the idea that the risk of supply chain contamination
deserves greater attention, our results reinforce the relevance of initia­
tives that seek to minimize the damage caused in these situations. It is
possible, for instance, that the use of crisis management strategies (e.g.,
denial, excuse, justification, apology, scapegoat) come to protect com­
panies’ reputational assets (Coombs 2006) and intangible resources of
supply chain partners in general. Yet, our results do not reflect any of
these approaches, with this possibility representing important oppor­
tunities for researchers dedicated to the topic. These and other prospects
are addressed next.
7. Conclusion
The present study investigates the potential of CSI and CEI to
disseminate within supply chain contexts. Through the application of
two scenario-based experiments, we examined the extent to which
irresponsible corporate actions committed by suppliers impair four el­
ements of downstream partners’ intangible resources (i.e. corporate
trust, corporate image, attitude toward the firm, and WOM intention).
As our results suggest, CSI and CEI can negatively affect companies that
are not directly responsible for such conduct. Beyond reinforcing the
validity of previous findings that advocate joint responsibility within
supply chain contexts (i.e. extended producer responsibility, Bowen
et al., 2001, supply chain contamination, Fracarolli Nunes 2018), our
study opens a dialogue around the applicability of the Resource-Based
View in supply chain contexts. In this sense, the demonstration that
CSI and CEI shall spread beyond organizational borders adds to the
study of new forms of supply chain risks, particularly those related to the
dissemination of unethical conduct by supply chain partners. The study
also highlights the need for a reconsideration of the locus attributed to
sustained competitive advantage, as intangible resources do not seem to
be restricted by organizational borders or inter-firm relationships. These
perceptions demand the extension of the premises of the RBV, rein­
forcing the necessity of a revision of its concept, especially when used in
supply chain contexts. As discussed, the proposed SRV aims to fulfil this
gap.
Although ratifying the relevance of both CSR and CER and of the
risks associated with failures in that regard (i.e. CSI and CEI), results of
this study cannot be interpreted as an empirical validation of the
Stakeholder Theory, nor do they imply that models based on a stake­
holder perspective are more applicable or adequate than traditional for-
profit schemes. One must consider what seems to be a current sensitivity
to social and environmental issues in Western societies nowadays, what
may reflect a specific historical moment that may not reproduce in the
future. As discussed throughout the manuscript, the sympathy for
ideological thoughts that oppose market economies may support
stakeholder approaches, with the apparent growing acceptance of
Marxist ideas in the last decades possibly explaining this scenario (at
least partially). Yet, as societal values are, to some extent, volatile, it is
M. Fracarolli Nunes et al.
possible that classic liberal and conservative ideas come to recover some
of their prestige. In this case, corporate objectives that favor the gen­
eration of value for investors and consumers may reclaim their main­
stream position. Given the possibility of a “return of the pendulum”, a
more cautious evaluation of social, historical, and political contexts
becomes critical.
8. Limitations and future research directions
Specific to the literature on sustainable supply chain management,
our results reinforce the relevance of companies’ efforts to guarantee
that similar social and environmental standards are observed by all their
partners, as it seems that a supply chain shall be perceived as being only
as sustainable as its least sustainable tier. Beyond its intrinsic contri­
butions, the investigation offers several opportunities for prospective
developments. Aiming to accelerate the improvements, a series of
possible avenues for future research are discussed below, which may
offer valuable inputs in light of the evidence and the discussions pre­
sented here.
For example, our study is centred on a typical case of the food in­
dustry, limiting the generalization of the findings. Future research
should ideally explore the inertial effect and the potential of supply
chain contamination in other supply chain contexts and compare the
results in order to gain a further understanding of the specificities of
each industry, as well as of what is common and thus, generalizable.
Some possible settings for such studies include cases of modern slavery
and poor working conditions regularly revealed in the fast fashion in­
dustry (e.g., Busby 2020), the social and environmental impacts caused
by mining (Sengupta 2018) and oil companies (Kessler et al., 2017), as
well as cases of fraud in the automotive industry (e.g., Volkswagen
Dieselgate) (Siano et al., 2017). Scholars must also concentrate on less
popular topics such as the collateral effects of agricultural subsidy pol­
icies (e.g., crop choices) (Yu and Sumner 2018), or the ethical issues
orbiting the development of new drugs (e.g., the funding of research and
development programmes (Oprea et al., 2009), or animal testing (Che­
luvappa et al., 2017)). The assessment of these and other situations may
significantly add to the building of a clearer understanding of the issues
treated here.
In addition, our study focuses on the influence of the supply chain
contamination effect on four elements of intangible resources (i.e.
corporate trust, corporate image, attitude towards the firm, and WOM
intention) as outcome variables, meaning that an extension to other
dimensions shall be a direct contribution to the matters approached
here. Furthermore, the current study conceptualized the incident of CSI
and CEI as a single event and operationalized it in the scenario-based
experiments accordingly. However, it is likely that the various itera­
tions of CSI and/or CEI can further aggravate the perceptions of buyers.
Therefore, future research should examine the extent to which the
perceptions of buyers are more negatively influenced by iterative events
of CSI or CEI compared to a single event of CSI or CEI, and whether or
not combined occurrences of CSI and CEI are more detrimental to the
firm than repetitive occurrences of CSI or CEI.
From a broader perspective, researchers on sustainable supply chain
management should seek to refine the understanding of how different
supply chain tiers absorb the impact of CSI and CEI in supply chains.
Appendix. Scenario stimulus materials for Studies 1 and 2
Baseline scenario
You will read a story about a company which is part of a supply chain in making chocolates. From the farmers that produce sugar cane to the final
consumers, this supply chain is composed of 5 tiers:
(Tier 1) sugar cane supplier
11
International Journal of Production Economics 241 (2021) 108275
Even if our evidence corroborates the understanding that the mechanics
of supply chain contamination support the premises of the inertial effect,
there is still need to evolve in the dimensioning of individual impacts, as
well as in the measurement of the speed with which they disseminate. In
the search for equating the level of complexity of the study, its empirical
feasibility, and the depth of the analysis desired, we opted to focus on
the distance between supply chain partners as a main criterion
explaining the power of supply chain contamination. Although results
highlight the relevance of this aspect, the inclusion of other elements
may significantly enrich the understanding of these mechanics. Inves­
tigating the inertial effect in different types of supply chain structure, for
example, must be also of considerable value, and considering the char­
acteristics of the source firm and the type of relationships kept along the
chain must also add to the understanding of this subject.
As highlighted above, the proposed SRV is still in its earliest stages,
with the theoretical discussion presented here needing significant
refinement. Although based on empirical evidence, our contributions –
particularly those arguing for an extension of the locus of sustained
competitive advantage – should be further tested in practice. The same
holds true for future theoretical debates that should either reaffirm or
contest the logical validity of the assumptions defended here. It must be
noted, however, that the SRV may not be suitable to treat all sorts of
resources, being potentially more adequate to address intangible ones.
Indeed, it is possible that the non-physical nature of intangible resources
contributes to their volatility and spreadability across the supply chain
partners. Unlike a machine or a manufacturing plant, for example, it
seems that the clear delineation of the limits of intangible resources is
more difficult, or even impossible. In this sense, further theoretical
development is necessary so that tangible resources can be incorporated
into the reasoning.
Still, the development of a well-established theory among Strategic
Management scholars in the context of supply chain management may
significantly profit from the debate between authors from both disci­
plines. The development of frameworks linking the RBV and SRV is
particularly welcome. The theoretical contribution of the inertial effect
in building the SRV must be equally validated. Future researchers should
concentrate on measuring the extent to which intangible resources are
shared by supply chain partners and determining if the distance between
partners indeed explains the progressively smaller portion of sharing
suggested by our results.
Finally, future research must advance the understanding of com­
panies’ responses to supply chain contamination, with the investigation
of the power of traditional crisis management strategies (e.g., denial,
excuse, justification, apology, scapegoat; Coombs 2006) to treat the
issue standing as a potentially promising path. These and other in­
vestigations may significantly support the progress of the literature on
supply chain contamination, as well as to the study of supply chain
management more generally. Likewise, scholarly research on crisis
management strategies, intangible resources, and sustainable manage­
ment must greatly benefit from these next steps.
Declaration of competing interest
The Authors declare that there is no conflict of interest.
M. Fracarolli Nunes et al. International Journal of Production Economics 241 (2021) 108275

(Tier 2) a sugar manufacturer

(Tier 3) a chocolate manufacturer
(Tier 4) a supermarket
(Tier 5) final consumers

Tier level manipulations

1. Company B in tier 2 (a sugar manufacturer)

Imagine that you work for a sugar manufacturer Company B (Tier 2) as a purchasing manager whose job includes selecting sugar cane suppliers
(Tier 1) for your company.
Company B is a sugar manufacturer that buys sugar cane from Company A, the sugar cane supplier. As a purchasing manager for Company B, you
have been purchasing sugar canes from Company A.

2. Company C in tier 3 (a chocolate manufacturer)

Imagine that you work for a chocolate manufacturer Company C (Tier 3) as a purchasing manager whose job includes selecting sugar manufacturer
suppliers (Tier 2) for your company.
Company C is a chocolate manufacturer that buys sugar from Company B, the sugar manufacturer, which is known to buy sugar cane from
Company A, the sugar cane supplier. As a purchasing manager for Company C, you have been purchasing sugar from Company B.

3. Company D in tier 4 (a supermarket)

Imagine that you work for a supermarket chain Company D (Tier 4) as a purchasing manager whose job includes selecting chocolate manufacturer
suppliers (Tier 3) for your company.
Company D is a supermarket chain. To sell chocolates, Company D buys chocolates from chocolate manufacturer C that buys sugar from sugar
manufacturer B, and sugar manufacturer B buys sugar cane from sugar cane supplier A. As a purchasing manager for Company D, you have been
purchasing chocolates from Company C.

Corporate irresponsibility manipulations

1. Social (CSI)
Based on an investigation conducted by the local authorities, Company A (sugar cane supplier) was accused of providing workers with extremely
poor working. The report states that employees were forced to work for 14 h a day and were not allowed to leave the farm. Beyond that, wages were
significantly below the minimum established by the law, making the situation synonymous to modern slavery.

2. Environmental (CEI)
Based on an investigation conducted by the local authorities, Company A (sugar cane supplier) was accused of causing extreme damage to the
environment. The report states that the repetitive use of pesticides in sugar cane plantations led to groundwater contamination. Beyond that, the
chemicals in the pesticides have caused significant deaths of sea creatures, and more than 4 decades will be required to offset the environmental
damage caused.

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