When supplier ethical policies matter to a buyer (Or don't): The moderating role of switching cost

Abstract

Drawing on signaling theory, we suggest that a supplier's ethical policies influence the buyer's trust in the supplier, which, in turn, generates commitment to that supplier. We draw on side-bet theory to suggest that switching costs moderate these relationships and also determine when supplier ethical policies factor into the buyer's decision to commit to a supplier. We empirically test our model with survey data from 158 purchasing managers within three manufacturing industries. Results confirm the connection between ethical policies and commitment, but suggest that a supplier's ethical policies matter less when switching suppliers is perceived as too costly.