Signaling Fair Practices: Supply Chain Transparency and Consumer Responses to Fair Wage and Labor Disclosures

Abstract

As consumer concern about labor conditions in global supply chains grows, firms face increasing pressure to disclose fair wage and labor-related information. Yet, transparency can be risky because it may expose unfavorable supplier practices and cause reputational harm. Drawing on signaling theory, we examine how fair wage and labor-related supply chain transparency (SCT) influences consumer word-of-mouth (WOM), particularly when disclosures contain both positive and negative information. Across two vignette-based experiments in an online shopping context, we test whether distributive justice and trustworthiness explain consumer responses to SCT and leverage these mechanisms to further explain responses to mixed-valence SCT disclosures. Study 1 shows that a uniformly positive SCT disclosure, relative to nondisclosure, increases WOM through both distributive justice and trustworthiness. Study 2 examines a mixed-valence disclosure combining positive and negative information. Although mixed-valence disclosures lower distributive justice perceptions, they increase trustworthiness relative to nondisclosure, yielding a positive total effect on WOM. Together, the findings show that SCT functions as a costly and credible signal: even when transparency reveals negative wage and labor information, mixed-valence disclosure can strengthen trustworthiness enough to enhance consumer advocacy.