The new regulator in town: The effect of Walmart’s sustainability mandate on supplier shareholder value
Gielens,Katrijn Geyskens,Inge Deleersnyder,Barbara Nohe,Max
Gielens,Katrijn
Geyskens,Inge
Deleersnyder,Barbara
Nohe,Max
Abstract
Suppliers are increasingly forced by dominant retailers to clean up their supply chains. While these retailers argue that their sustainability mandates may translate into profits for suppliers, many suppliers are cynical about these mandates because the onus to undertake the required investments is on them while potential gains may be usurped by the mandating retailer. We examine whether supplier fears are justified by studying the impact of Walmart's sustainability mandate on its suppliers' (short-term) shareholder value. Although about two-thirds of suppliers are indeed financially harmed, approximately one-third benefits. To delve deeper into this variation, we relate suppliers' short-term abnormal returns to Walmart's appropriation power and explore whether and to what extent a supplier's referent and expert power sources, derived from its marketing and operational characteristics, respectively, can counteract Walmart's appropriation attempts. We find that the supplier's marketing characteristics (its environmental reputation, brand equity, and advertising) provide it with the countervailing power needed to resist Walmart's appropriation attempts. In contrast, cost efficient suppliers and suppliers that invest heavily in R&D have a more difficult time to withstand Walmart's squeeze attempts.
Description
Date
2018-03
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Journal ISSN
Volume Title
Publisher
Research Projects
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Journal Issue
Keywords
retailing, power-dependence, sustainability, Walmart, financial event study
Citation
Gielens, K, Geyskens, I, Deleersnyder, B & Nohe, M 2018, 'The new regulator in town : The effect of Walmart’s sustainability mandate on supplier shareholder value', Journal of Marketing, vol. 82, no. 2, pp. 124-141. https://doi.org/10.1509/jm.16.0276