Columbia International Affairs Online: Working Papers

CIAO DATE: 01/2014

Does Lean Capability Building Improve Labor Standards? Evidence from the Nike Supply Chain

Greg Distelhorst, Jens Hainmueller, Richard M. Locke

October 2013

Watson Institute for International Studies, Brown University


This paper offers the first empirical analysis of the introduction of lean manufacturing as a “capability building” strategy for improving labor standards in global supply chains. Buyer interventions to improve supplier management systems have been proposed to augment existing, and widely deemed insufficient, private regulation of labor standards, but these claims have yet to be systematically investigated. We examine Nike Inc.’s multiyear effort to promote lean manufacturing and its associated high-performance work systems in its apparel supply base across eleven developing countries. Adoption of lean manufacturing techniques produces a 15 percentage point reduction in serious labor violations, an effect that is robust to alternative specifications and an examination of pre-trends in the treatment group. Our finding contradicts previous suggestions that pressing suppliers to adopt process improvements has deleterious effects on labor conditions and highlights the importance of relational contracting and commitment-oriented approaches to improving labor standards in the developing world.