Unearthing the Lower-tier Suppliers: Evidence from Conflict Minerals Disclosure

Project: Research

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A growing trend in global sourcing has created a complex network of supply chains. As a result, firms need to efficiently manage their relationships with as well as acquire information about not only their direct suppliers, but also low-tier, indirect suppliers (i.e., the suppliers of their suppliers). Although anecdotal and academic evidence suggest that indirect suppliers may significantly influence the focal buying firm (Choi & Linton, 2011; Rowley, 1997), few firms collect or provide information about their low-tier suppliers. In this proposed study, I focus on disclosure mandates that require firms to disclose information about their low-tier suppliers and examine the economic consequences of such disclosure. Specifically, I examine whether and how conflict minerals disclosure – an exogenous shock to firm’s supply chain disclosure – affects firm’s supply chain performance. Conflict minerals, the natural resources that are traded to finance armed conflicts, feed a range of global supply chains. Therefore, governments have discussed the mineral resources’ contribution to funding the conflict and the need to sever the link. To thatend, the U.S. Congress enacted “conflict minerals provision” to require companies to trace the source of conflict minerals used along its supply chain and publicly disclose the suppliers at all tiers that provide conflict minerals. I argue that the conflict mineralsdisclosure induces managers to collect more information about the firm’s supply chain, especially about the low-tier suppliers. Such deeper level of understanding can help managers better understand potential supply risks and supply chain investments opportunities that managers would not discover otherwise. Therefore, I examine whether conflict mineral disclosure, by improving multi-tier supply chain visibility, can induce supply chain to be more resilient to supply chain disruptions. Specifically, I examine whether there is less decrease in shipment volume around supply chain disruption for firms that identified low-tier suppliers in conflict minerals report. This study has several contributions. While the existing literature on supply chain disclosure tend to focus on direct suppliers, I examine the impact of supply chain disclosure regarding lower tier suppliers, which are particularly relevant in light of theincreasingly complex supply chain. This study also contributes to the literature on the real effects of mandatory CSR disclosure. Finally, my study should be of interest to regulators as it adds to the growing evidence of the benefits of CSR disclosure.  


Project number9048254
Grant typeECS
Effective start/end date1/08/22 → …