When Ignorance Is Not Bliss: An Empirical Analysis of Subtier Supply Network Structure on Firm Risk

• 成果类型: Article
• 署名作者: Wang, Yixin (Iris); Li, Jun; Wu, Di (Andrew); Anupindi, Ravi
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign; University of Michigan System; University of Michigan
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.3645
• 发表日期: 2021
• 页码: 2029-2048
• 关键词: supply chain risk management; supply network structure; subtier supply network

摘要

Using a multitier mapping of supply-chain relationships constructed from granular global, firm-to-firm supplier-customer linkages data, we quantify the degree of financial risk propagation from the supply network beyond firms' direct supply-chain connections and isolate structural network properties serving as significant moderators of risk propagation. We first document a baseline fact: a significant proportion of tier-2 suppliers are shared by tier-1 suppliers. We then construct two simple metrics to capture the degree of tier-2 sharing and disentangle its effect from tier-2 suppliers' own risks. We show that the focal firms' risk levels are significantly related to the proportion of shared tier-2 suppliers in their supply network, and the effect becomes monotonically stronger as their tier-2 suppliers become more highly shared. Finally, we uncover causal relationships behind these associations using a new source of exogenous, idiosyncratic risk events in an event study setting. We show that, as tier-2 suppliers are impacted by these events, focal firms experience negative abnormal returns, the magnitude of which is significantly larger when the impacted tier-2 suppliers are more heavily shared. Overall, our study uncovers the subtier network structure as an important risk source for the focal firm, with the degree of tier-2 sharing as the main moderator. Our results also provide the microfoundation for a common structure in idiosyncratic risks and suggest the importance of incorporating the effect of subtier supply network structure in the portfolio-optimization process.