Understanding the Emergence of Supply Chain Governance Institutions in Liberal Market Economies and Coordinated Market Economies

Pronounced differences between national CSR environments persist, but explanations based on varieties of capitalism (Matten and Moon 2008) or activism (Bair and Palpacuer 2012) encounter awkward problems with outliers. Fransen (2013) attributes this to poor specification of the mechanisms explaining divergences, partly resulting from over-aggregation. He advocates focusing on specific aspects of CSR using more detailed data. Responding to this call, we analyse supply chain governance institutions that originated in the UK and Germany. Both institutions present paradoxes, poorly fitting the “explicit” versus “implicit” CSR typology (Matten and Moon 2008). For example, Bair and Palpacuer (2012) argue coordinated European economies tend to have labour-inclusive multistakeholder initiatives (MSIs). But the UK – a liberal market economy with adversarial industrial relations – houses a significant labour-inclusive MSI, the Ethical Trading Initiative (ETI). Meanwhile, in Germany – a coordinated market economy with well-developed social dialogue – the Business Social Compliance Initiative (BSCI), a unitarist organisation with a credibility deficit among unions and NGOs (Bair and Palpacuer 2012; Egels-Zandén and Wahlqvist 2007), emerged as a dominant European CSR institution. Accordingly, Gjølberg (2009) argues that the “social dialogue” (“corporatist”) argument cannot be sustained, with countries strong on corporatism, such as Germany, being weak on CSR. Fransen (2013) conjectures that weaker campaigning pressure for multi-stakeholder governance on global solidarity issues in Germany may be the “flipside” of a stronger corporatist tradition of bargaining about domestic issues (see also Kinderman, 2008) and calls for more research to understand such surprising patterns. Drawing on interviews and documentary material, we compare emergence of two dominant supply chain private regulatory institutions, the ETI and BSCI. We show how the formation of these organizations has path dependent impacts on the further development of the CSR environment through an analysis of content of firms’ lobbying in relation to CSR and regulation, which differs markedly between members of the two organisations.