Jenna & Calvin R. Guest Professor in Business Administration at the Mays Business School,
Eppright University Professorship in Undergraduate Teaching Excellence, and
Director of the Supply Chain Consortium,
Texas A&M University
Co-Editor in Chief
Decision Sciences Journal
Date : June 24 (Thur), 2021
Zoom link: https://hku.zoom.us/j/93965533071 Zoom meeting ID: 939 6553 3071
Supply Management & Ethical Decision Making: Behavioral Experiments
Supply managers and executives are under direct pressure to perform. Top management and external constituents expect supply management to reduce spend in order to bolster profitability. Thus, they may institute a compensation structure that motivates supply managers and executives to contain spend. To exacerbate the situation, supply managers and executives may get tempted to stray from ethical behavior due to the large amount of money they handle and due to lucrative but often unethical actions by sales personnel. This research uses a lab experiment approach to examine whether the reward structure (i.e., beneficiary - Mazar et al. 2008; Umphress et al. 2010; Gino et al. 2013, and timing – O’Donoghue & Rabin 2000; Strathman et al., 1994; Loewenstein & Prelec, 1992) and other salient factors (such as context, motivation, and personal characteristics) have an effect on ethical behavior. Specifically, we posit that the beneficiary of a bonus (the individual who undertakes the decision, or the group/organization), the timing (in the near future - next paycheck, or in about a year – at the anniversary of contract), and the safety of the product (low, or high probability of failure that can result in injury or even death) may impact ethical behavior. The participants included thousands of subjects from the US, China, and Italy that completed the lab assignment on two different administrations, spread one week apart.
During the first administration, the subjects assumed the role of a Director of Supply Management of a supplier of the automotive industry who issued a Request for Quotations (RFQs) to purchase transmission cases. One of the bidding suppliers attempted to gain advantage by soliciting information about the competitor bids from the director. Prior to the presentation of the scenario, the subjects read the ethical standards issued by the Institute for Supply Management and were administered a quiz in order to assure that they fully understood that sharing bid information would be an unethical choice. During the second administration, the subjects had to respond to the solicitation; they could simply reply that they cannot share the information, they could share the information and note the lowest bid, or they could relate any reasonable price below the actual lowest bid. Results suggest that 47% of the subjects acted ethically and did not share the lowest bid information with the supplier. About 19% of the subjects shared the correct lowest bid information while almost 34% of the subjects reported bid information which was below the lowest bid and thus were deceitful. More detailed results will be discussed regarding this experiment.
A longitudinal experiment relying on responses from more than 500 individuals will also be discussed. In essence, individuals were subjected to ethical dilemmas in supply management over 10 episodes spread over 10 weeks. This latter experiment reveals the dynamic nature of subject behavior, which is characterized by a rather switching behavior. We employ an empirically-driven modeling approach and develop a Bayesian model that incorporates the dynamic decision-making process explicitly. Based on a sample of 301 participants, our results suggest that individuals indeed exhibit ethical dynamics when making decisions in a supply chain management context. Exposure to ethics education is shown to be conducive in improving consistency in ethical supply chain decisions. However, we show that the effects of ethics education on ethical dynamics are asymmetric as it is more effective in inducing moral cleansing than in discouraging moral licensing. Other factors such as gender and income may also be asymmetrically associated with moral consistency relative to moral balancing. We then conduct a second exploratory study using a set of another 233 participants to demonstrate the robustness of our findings across samples. More importantly, we use an extended model to shed light on how the effects of ethics education may change over time. We discuss the managerial implications of these results in terms of promoting not only ethical but also consistent behaviors in supply chain management.
Xenophon Koufteros is a full Professor of Supply Chain Management at the Mays Business School, Texas A & M University where he also holds the Jenna & Calvin R. Guest Professorship in Business and the Eppright University Professorship in Undergraduate Teaching Excellence. He also serves as the Director of the Supply Chain Consortium at the Mays Business School. Prof. Koufteros has published over 55 articles in refereed journals including Decision Sciences Journal, Journal of Operations Management, Production and Operations Management, Journal of Supply Chain Management, Structural Equations Modeling, IEEE Transactions on Engineering Management, International Journal of Production Research, International Journal of Operations & Production Management, and International Journal of Production Economics amongst others. Dr. Koufteros is currently serving as a co-editor-in-Chief of Decision Sciences Journal. Prof. Koufteros also served as Associate Editor of Decision Sciences Journal, Journal of Operations Management, Journal of Supply Chain Management, and Journal of Business Logistics. He received multiple times the Best Associate Editor Award for the Journal of Operations Management and for the Journal of Supply Chain Management, and the Best Empirical Paper Award for Decision Sciences Journal. He is also a member of the editorial board for Production & Operations Management, Structural Equation Modeling: An Interdisciplinary Journal and Educational & Psychological Measurement. He currently conducts research in sourcing decisions when ethical considerations are invoked. His recent studies are behavioral in nature and involve an experimental methodology. His prior work addressed integration issues in the realm of supply chain management with a product development and innovation focus. One of his manuscripts in this area is the second most downloaded (16,685 times) paper ever for the Decision Sciences Journal and it is the 15th most cited paper ever for the journal over a 50 year span. In 2012 he was ranked as one of the World’s Top Innovation Management Scholars, in “Perspective: Ranking of the World’s Top Innovation Management Scholars and Universities,” (based on unadjusted # of authors counts of papers in top 8 Management & Marketing journals) J PROD INNOV MANAG 2012; 29(2):319–331.
Prof. Koufteros teaches courses across all levels and he received numerous teaching awards including the Distinguished Achievement Award – Teaching, at the University level, and at the Mays Business School - Texas A&M University, Association of Former Students. In 2018, he was designated as Poets & Quants’ Top 50 Undergraduate Business Professors, a global recognition. In 2019, he received the Wickham Skinner Teaching Award from the POM Society for Teaching Innovation. In 2020, we was awarded the Eppright University Professorship in Undergraduate Teaching Excellence. He also received several awards for his service to the profession and students, such as the Distinguished Achievement Award – Individual Student Relationships, at the University level, Association of Former Students, Texas A & M University.