Does Lean Improve Labor Standards? Management and Social Performance in the Nike Supply Chain

Social compliance programs employed by MNEs face significant challenges in enforcing labor standards across global supply chains. This study examines whether buyers can improve social performance by introducing modern management systems to their suppliers. We analyze an intervention by Nike Inc. to promote the adoption of lean manufacturing in apparel suppliers across eleven developing countries since 2008. Using difference-in-differences estimates from a panel of over 300 factories, we find that lean adoption produced a 15 percentage point reduction in failing labor compliance grades, which are associated with wage and work hours violations. However, we find no effect of the lean program on health, safety, and environmental compliance. This pattern is consistent with the hypothesis that modern manufacturing systems improve labor standards primarily through changes in the relationship between labor and management, rather than increased managerial technical competence.