Codes to coordinate supply chains: SMEs' experiences with SA8000

Contracts and trust are mechanisms to coordinate processes in supply chains. However, contracts are incomplete and trust takes time to develop. The aim of this paper is to show how Social Accountability 8000 (SA8000) can help to manage supply chains (in particular small and medium‐sized companies as its partners) by solving the problem of incomplete contracts as well as replacing trust in new partnerships, especially with respect to intangible performance indicators.

Supply chain management (with an emphasis on coordination) and corporate social responsibility (with an emphasis on codes, especially SA8000) are briefly described, based on a literature review. These descriptions led to three research propositions. In the second part, four cases describe the practice of SA8000. The richness of the cases provides both literal and theoretical replication. Finally, the theoretical and empirical results are compared, with specific regard to the research propositions.

Codes facilitate coordination between immediate partners in a supply chain, especially when the most powerful one enforces the code. However, indirect coordination with second‐ or third‐tier partners is hardly influenced. Chain directors can impose SA8000 certification in the supply chain and the latter can benefit from reduced information asymmetry. Transaction costs are reduced without a loss in flexibility.

The three propositions introduced are supported. Further research could further strengthen the validity of the propositions or show the need for refinements in them. The results show managers that certification can facilitate coordination of intangible aspects of performance to reduce information asymmetry with at least no negative results.

Firms that use SA8000 should take more advantage of it because it reduces information asymmetry and transaction costs, not only between direct partners but also further up‐ and downstream in the chain. Chain directors can use codes to complement incomplete contracts. Third‐party monitoring should be strengthened, especially with respect to second‐ and third‐tier partners.

The originality of the paper is in the analysis of the position of the second‐ and third‐tier participants in the chain, questioning whether codes like SA8000 are a sufficient instrument to make them real partners in the chain. SA8000 increases traceability of proper processes by customers and partners in the chain, which facilitates the coordination and the management of the chain.