Value Chain Responsibility: A Farewell to Arm's Length

Abstract

The trend toward increased levels of business interconnectedness in the value chain has clouded the issue of responsibility for business practices. Firms have historically denied responsibility for many questionable practices by suggesting that such acts were committed somewhere else in the value chain and that, because they are separated by an arm's length transaction, they are not responsible. Emerging evidence suggests that in light of the interconnected and networked business environment, the arm's length defense is growing less effective. We discuss the practical realities that firms are facing in the highly networked environment and offer examples of each.

Keywords: Outsourcing, stakeholder, ethics, value chain

JEL Classification: M19