Trade-Control Compliance in SMEs: Do Decision-Makers and Supply Chain Position Make a Difference?

Abstract

In recent years, trade-control laws and regulations such as embargoes and sanctions have gained importance. However, there is limited empirical research on the ways in which small- and medium-sized enterprises (SMEs) respond to such coercive economic measures. Building on the literature on organizational responses to external demands and behavioral ethics, this study addresses this issue to better understand how external pressures and managerial decision-making are associated with the scope of trade-control compliance programs. Based on a sample of 289 SMEs, the findings show that the organizational responses of SMEs reflect proportionate adjustments to regulatory pressures but only if decision-makers are well informed and aware of the prevailing rules and regulations. Conversely, uninformed decision-making leads to a disproportionate response resulting in an inadequately reduced scope of the compliance program. In addition, the results indicate that SMEs that are highly integrated into supply chains are susceptible to passing-the-buck behavior.

Supply Chain Risk Management in Young and Mature SMEs

“…The complicated scope of ever-changing regulatory initiatives is difficult to follow, let alone comply with, for SMEs. In this sense, fully developed compliance programs are necessary to keep minimising regulatory risk within SC (Hauser 2021). Moreover, several authors report positive impacts of compliance initiatives.…”

“…By contrast, when considering the practices of compliance with regulations in SMEs, the situation might often be characterized by a lack of preparedness for changes introduced by new regulations as well as non-compliance with current regulations (Hauser 2021). The adoption of a systematic compliance approach is costly and time-consuming (Park et al 2016), particularly with the limited resources at the disposal of most SMEs (Hillary 2004;Audia and Greve 2006).…”