Major Customer Network and Modern Slavery Incidents

ABSTRACT

This study explores the impact of major customer network structure on the risk of modern slavery incidents. By focusing on the downstream segment of the supply chain, the study aims to clarify how relational dynamics with major customers shape a supplier's exposure to labor‐related ethical violations. Using a panel data set of 1943 U.S. public firms from 2007 to 2022, the study examines the relationship between two customer network attributes, mutual dependence and customer interconnection, and modern slavery incidents. Modern slavery incidents are proxied by publicly reported labor‐related incidents that fall into categories classified as forms of modern slavery. The empirical results show that mutual dependence between suppliers and customers increases the likelihood of modern slavery incidents, whereas greater interconnection among customers reduces this risk. These findings reflect two underlying mechanisms: customers' dependence on suppliers can weaken their incentives to impose stringent sustainability requirements, while greater interconnection among customers facilitates information sharing and reputational pressures that strengthen monitoring. This study provides new evidence on how the structure of customer‐side supply chain networks shapes firms' exposure to severe labor abuses.