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Corporate customers are an important stakeholder in global supply chains. We employ several unique international databases to test whether socially responsible corporate customers can infuse similar socially responsible business behavior in suppliers. Our findings suggest a unilateral effect on CSR only from customers to suppliers, an evidence further supported by exogenous variation in customers’ close-call CSR proposals and by product scandals. Customers exert influence on suppliers’ CSR through positive assortative matching and their decision making process. Enhanced collaborative CSR efforts help improve operational efficiency and firm valuation of both customers and suppliers but increase only the customers’ future sales growth.

Published in

Journal of Financial Economics (JFE)

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