Does Lean Improve Labor Standards? Management and Social Performance in the Nike Supply Chain

Does Lean Improve Labor Standards? Management and Social Performance in the Nike Supply Chain

By Greg Distelhorst, Jens Hainmueller, Richard M. Locke
August 29,2015Working Paper No. 3465

This study tests the hypothesis that lean manufacturing improves the social performance of manufacturers in emerging markets. We analyze an intervention by Nike Inc. to promote the adoption of lean manufacturing in its apparel supply chain across eleven developing countries. Using difference-in-differences estimates from a panel of over three hundred factories, we find that lean adoption was associated with a 15 percentage point reduction in noncompliance with labor standards that primarily reflect factory wage and work hour practices. However, we find a null effect on factory health and safety standards. This pattern is consistent with a causal mechanism that links lean to improved social performance through changes in labor relations, rather than improved management systems. These findings offer evidence that capability-building interventions may reduce social harm in global supply chains.