The new regulator in town

The effect of Walmart’s sustainability mandate on supplier shareholder value

K.J.P. Gielens, Inge Geyskens, Barbara Deleersnyder, Max Nohe

Research output: Contribution to journalArticleScientificpeer-review

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.
Original languageEnglish
Pages (from-to)124-141
JournalJournal of Marketing
Volume82
Issue number2
DOIs
Publication statusPublished - Mar 2018

Fingerprint

Mandate
Shareholder value
Sustainability
Suppliers
Appropriation
Retailers
Marketing
Brand equity
Abnormal returns
Profit
Countervailing power
Supply chain
Costs

Keywords

  • retailing
  • power-dependence
  • sustainability
  • Walmart
  • financial event study

Cite this

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title = "The new regulator in town: The effect of Walmart’s sustainability mandate on supplier shareholder value",
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.",
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The new regulator in town : The effect of Walmart’s sustainability mandate on supplier shareholder value. / Gielens, K.J.P.; Geyskens, Inge; Deleersnyder, Barbara; Nohe, Max.

In: Journal of Marketing, Vol. 82, No. 2, 03.2018, p. 124-141.

Research output: Contribution to journalArticleScientificpeer-review

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