A Double-Edged Sword of Strong Ties: The Case of a Korean MNC and its Labor Auditing*

Abstract

This study introduces one Korean multinational corporation and its labor audit process to offer a deeper understanding of a lead firm's supplier audit on the ground. Specifically, we examine how the close relationship between a buyer company and its suppliers— particularly in the context of partnered foreign expansion—positively and negatively affects its labor audit process, focusing primarily on audit style, coverage, and outcomes. While building on the recent consensus that buyers' auditing is more likely to benefit from a longterm, capacity-building approach rather than a short-term, policing one, we suggest that this relationship is more complex than the current literature assumes. Examining one Korean MNC's supplier labor audit, we found that their close, sticky relationship functions as a double-edged sword. On the one hand, this labor audit—which is comprehensive across all labor-related areas—has significantly contributed to improving suppliers' labor standards through long-term, close interaction. This audit also helped its suppliers reshuffle their HR and labor relations practices. This finding is generally consistent with the positive view of the long-term, capacity-building model in existing literature. However, our findings also demonstrate that this close and sticky relationship can prevent buyer firms from imposing penalties and renders contract termination even more difficult. We also found that, due to their interconnectedness, any problem related to buyer factories can directly cause corresponding problems in supplier factories. In short, by introducing a specific Korean case, this study seeks to advance and enrich the current discussion of corporatebased supplier labor auditing.