Abstract

Equity owners are often blamed for the unsustainable behaviors of other supply chain members. Recent events show that focal firms may face reputational and financial damages when such misconducts are exposed. However, controlling sub-suppliers can be challenging due to the high supply chain complexity, lack of contractual relation, and the large distance between the supply chain members. Focal firms adopt different governance strategies to improve sustainability performance, but it is unclear how the behavioral and contextual contingencies affect the sustainability performance of sub-suppliers. To explore this issue, the current study employs agent-based modeling and uses agency theory as an interpretive lens. The results shed light on how sustainability performance of sub-suppliers is impacted by (1) risk-aversion of supply chain members, (2) the cost of monitoring and the cost of undertaking sustainability practices, (3) varying information asymmetry between the focal buyer, intermediary supplier, and focal supplier, (4) stakeholder pressure, (5) and supply chain power.