Behavioural Economics in Business Networks: A Sustainability Compliance and Innovation Case

Abstract This paper examines how behavioural economics mechanisms shape compliance and innovation in business-to-business (B2B) networks. In a case study of Alpha Pharma, a leading pharmaceutical firm adapting to the Corporate Sustainability Due Diligence Directive (CS3D) and EU Regulation on the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) framework, the study investigates how regulatory pressures interact with inter-organisational collaboration and network interdependencies. The findings show that compliance processes are not driven by linear optimisation but emerge from bounded rationality, heuristics, reciprocity, and trust. By integrating behavioural economics with the network interaction approach, the paper develops new hypotheses on how micro-level decision behaviours aggregate into network-level adaptations that underpin sustainable innovation. The study contributes to behavioural economic and IMP (industrial marketing and purchasing) literature by demonstrating how cognitive biases and social norms influence resource mobilisation and collective decision-making in B2B settings. Practical implications include guidance for managers in addressing biases and fostering trust-based collaboration, and for policymakers in designing compliance mechanisms that account for bounded rationality and heterogeneous supplier capacities.