SUPPLY CHAIN DISRUPTIONS: IMPACT ON COMPETITOR FIRMS AND THE INFLUENCE OF SUPPLY CHAIN COMPLEXITY ON DISRUPTION LIKELIHOOD AND RECOVERY TIME

Abstract

The two essays of this dissertation focus on supply chain disruptions, with first essay studying the impact of supply chain disruptions on the disrupted firm competitors and the second essay, examining the impact of supply chain complexity on the manufacturing plant’s recovery time from disruption.

In Essay 1 of my dissertation, I investigate the horizontal spillover effects of supply chain disruptions to the disrupted firm’s competitors, anecdotal evidence for the relationship between bystander competitor firms’ financial performance and supply chain disruptions (SCDs) of a focal firm is equivocal. Past studies on this relationship have revealed mixed findings. I consider two potential sources of this ambiguity by examining a multitude of SCDs over a 13-year period (2003–2015). I examine the vertical interdependence among competitor firms, along with the visibilities of the disrupted firm, the undisrupted competitor firm, and the SCD event. I investigate the stock market reaction to bystander competitor firms after a focal firm SCD announcement. In addition, I measure operational performance of the bystander competitor firm measured through return on assets (ROA) in the period following a focal firm’s SCD announcement. I find that both performance measures show that bystander competitor firms are positively impacted when their competitor experiences an SCD. I also find that both measures are less positive when there is vertical interdependence between the competitors. These insights help firms to better assess the complexities of their supply chains as well as the connectivity to their competitors as sources of disruption risks. I also find that the stock market reaction is more positive when the event is visible, which suggests that high coverage of a disruptive event should signal a shifting momentum toward the undisrupted competitors. Finally, I find that the operational performance is less positive for very visible undisrupted competitor firms.

The Essay 2 of my dissertation examines how supply chain complexity, an important structural characteristic of a supply chain structure, can impact a firm’s supply chain resiliency to a disruption. Many firms continue to struggle to proactively manage the potential sources of supply chain complexity associated with the sourcing, manufacturing, and logistics activities needed to meet customer demand. The purpose of this study, then, is to first, examine the impact of the uncertain environment of the focal site on the likelihood of a site experiencing a disruption. Specifically, I study the peer-to-peer learning from the environment in which the focal site is located. Then, I explore how structural characteristics of the focal site can affect its proactive strategies to avoid disruption along with reactive strategies that aid the site in its recovery process after the disruption. Because firms are increasingly exposed to multiple dimensions of complexity in their supply chain, I theorize on how internal and external structural characteristics impact the likelihood of disruption along with the recovery time if the site goes down due to disruption. Indeed, some firms may have a stronger ability to manage the complexity and risk present at their plant locations compared to the abilities of other firms to manage their complexity. Likewise, I closely look into the role of business continuity management (BCM) plans in the recovery process after disruption. In doing so, I examine the role of strategic, operational, and supplier orientation of BCM plans on the recovery time of the focal site.