The role of supply chain diversification in mitigating the negative effects of supply chain disruptions in COVID-19

Q Wang, HD Zhou, XD Zhao

Research output: Contribution to journalJournal

5 Citations (Web of Science)

Abstract

Purpose: This study examines the firm-level financial consequences caused by supply chain disruptions during COVID-19 and explores how firms' supply chain diversification strategies, including diversified suppliers, customers and products, moderate the negative effect on firm performance. Design/methodology/approach: Based on data drawn from 222 publicly traded firms in China, the authors use event study methodology to estimate the effects of supply chain disruptions on the financial performance of affected firms. Regression analyses are conducted to examine the moderating effects of supply chain diversification. Findings: Firms affected by supply chain disruptions during COVID-19 experienced a significant decline in shareholder value in two weeks and a subsequent decrease in operating performance in one year. Diversified suppliers, customers and products act as shock absorbers to alleviate the negative effects. Further regression shows a substitution effect between customer and product diversification. Cross-industry comparisons reveal that service firms experienced more loss than manufacturing firms. Customer diversification mitigates the adverse effects of supply chain disruptions for both manufacturing and service firms. Supplier diversification exerts a noteworthy role in manufacturing firms, while product diversification is beneficial for service firms. Originality/value: The study provides empirical evidence on the magnitude of financial consequences of supply chain disruptions during COVID-19 in both the short term and long term and enriches the current understanding of how to build resilience from the supply chain diversification perspective.
Original languageEnglish
Pages (from-to)99-132
Number of pages34
JournalInternational Journal of Operations & Production Management
Volume44
Issue number1
Early online date27 Apr 2023
DOIs
Publication statusPublished - 2023

Keywords

  • COVID-19
  • Customer diversification
  • Event study
  • Product diversification
  • Supplier diversification
  • Supply chain disruption

Indexed by

  • ABDC-A
  • SSCI

Fingerprint

Dive into the research topics of 'The role of supply chain diversification in mitigating the negative effects of supply chain disruptions in COVID-19'. Together they form a unique fingerprint.

Cite this