The effects of codes of ethics on the supply chain: A comparison of LEs and SMEs.

Abstract

This paper focuses on comparing the experiences of Large Enterprises (LEs) and Small and Medium Enterprises (SMEs) in the U.S. to determine whether codes of ethics have (a) created ethical environments that lead to good behaviors, (b) been shared with members of the supply chain, and (c) impacted behaviors of members of the supply chain. The research utilized survey methodology. We used ANOVA and Factor Analysis as the tools for analyzing the data in the study. Results showed that most LEs and SMEs have formal codes of ethics, communicate their codes to employees, and provide training on these codes. However, the beneficial impact of ethics codes is more pronounced when codes are formally communicated to others and when management and employees are perceived as committed to responsible behaviors. More LEs share codes with members of their supply chains than do SMEs. However, sharing one's code of ethics has limited impacts on the behaviors of either vendor or customer employees. The extant research on the effectiveness of ethics codes has concentrated on experiences of LEs and has not been conclusive. Research addressing the experiences of SMEs is severely limited and primarily relates to European firms. These are critical shortcomings because: (a) the majority of firms in the U.S. and Europe are SMEs, and (b) the characteristics, structures, and operations of SMEs are different from those of large firms, thus making extrapolation to SMEs inappropriate. Our research is original because it addresses these two issues specifically in the context of the supply chain function.

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