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Summary Our article uses the theory of transaction cost economics as a conceptual basis for examining the contracting mechanisms by which firms in the computer industry structure programs to encourage their suppliers to improve their environmental management systems and/or the environmental quality of their products. We explore the economic transactions hazards associated with asking suppliers to invest in the specialized technologies required to improve environmental performance of products and management practices and the relational contracting mechanisms computer industry firms are using to protect themselves against these hazards. We also describe the importance the managers we interviewed attributed to various transactions hazards and their perceptions of how well their firms were coping with them. We conclude by discussing questions for future research. By using TCE to frame our analysis of how computer manufacturers are structuring their relationships with their suppliers in the environmental area, we hope to show how social science theory can be used to enrich and increase the practicality of the work done by engineers and others in the mainstream areas of the industrial ecology field.

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Summary Our article uses a new institutional economics (NIE) framework to explore the role of voluntary industry standards in the development and implementation of environmental supplier‐management programs in the computer industry. We examine two different voluntary standards, one for the management of design for environment (DfE) in the semiconductor fabrication equipment sector and the other for assessing the implementation and use of environmental management systems throughout the computer industry supply chain. We compare and contrast the two standards to explain why the former was widely adopted and has helped integrate DfE into buyer‐supplier relations among adopters, whereas the latter failed to gain acceptance. In line with NIE logic, both standards aimed to lower transaction and customization costs by setting “rules of the game” for interfirm transactions that would help simplify and routinize novel environmental supply‐chain programs and activities. Their differential success can be elucidated in terms of how well each met the NIE criteria for remediableness and legitimacy. We conclude that voluntary standards have the potential to play an important role in promoting DfE in industrial supply chains. We further conclude that NIE provides a conceptual framework of great value to industrial ecologists who analyze how industry standards and other institutions help firms move toward more sustainable supply‐chain management practices.