Introducing a Theory of Policy Embeddedness in Supply Chains

Keywords: Environmental issues, sustainability, embeddedness, governance, certification
Abstract Type: Paper Abstract

Abstract

Certification schemes have emerged as a policy tool for incentivizing sustainable production practices. Some evidence suggests certification and other quality conventions foster embeddedness, or stable relationships, between supply chain actors. Yet, notably little research exists on what fosters supply chain embeddedness over time and space and how it can be quantitatively measured. The ability to measure the degree to which actors form spatiotemporally stable relationships is important for policy and governance. We address these gaps by introducing and quantitatively assessing policy embeddedness, the ways in which the stability of firm relations and territoriality in a trade network are shaped by supply chain policies, using a technique from graph theory. We use transaction-level customs data to measure not only embeddedness, but also the influence of environmental certification among exporters and importers of palm oil from Guatemala between 2011-2020. Results indicate certification indeed fosters more stable trade network relationships between actors. This provides evidence that conventions established through certification do shape supply chain input-output structure which has implications for environmental policy and governance. We present a conceptual model to explain how certification interfaces with supply chain input-output structure, governance, and territoriality to alter firm embeddedness and overall trade network organization. Our measurement of embeddedness using network analysis should be of broad interest to those scholars working on the structural, geographical, and governance configurations of supply chains, commodity flows, and global production networks.