This study examines how MNE buyers' purchasing practices and suppliers' domestic labor regulations influence emerging economy-based suppliers' social performance in global value chains. Using an instrumental variables approach, we analyze a sample of 2,236 emerging economy suppliers between 2008 and 2012 to estimate the causal association between buyers' power, suppliers' home country labor regulations, and suppliers' compliance with buyers designated social and labor standards. Results reveal supplier compliance with buyer-designated social standards is positively affected by larger buyer order volumes and more stringent local labor regulations, especially for larger factories. However, in countries with weaker labor regulations, buyers have limited power to compel compliance due to inadequate institutional support. While confirming buyer-driven governance as a driver of compliance, findings highlight how unsupportive home country institutions critically undermine compliance efforts. This study highlights the intertwined effects of global purchasing practices and local institutional dynamics on supplier social performance. Our findings offer insights into the need for more context-conscious, collaborative approaches to advance socially sustainable global value chain governance.
