Risky Suppliers or Risky Supply Chains? An Empirical Analysis of Sub-Tier Supply Network Structure on Firm Performance in the High-Tech Sector

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dc.contributor.author Wang, Yixin (Iris)
dc.contributor.author Li, Jun
dc.contributor.author Anupindi, Ravi
dc.date.accessioned 2016-01-06T15:24:21Z
dc.date.available 2016-01-06T15:24:21Z
dc.date.issued 2015-12
dc.identifier 1297 en_US
dc.identifier.uri http://hdl.handle.net/2027.42/116385
dc.description.abstract Past research in supply chain risk management has focused on the interactions between buyers and their immediate suppliers and/or assumed independence of risks imposed by these suppliers. However, supply network structure may induce inter-dependency of risks due, for example, to overlapping sub-tier suppliers. This paper empirically studies the prevalence of overlapping sub-tier suppliers and their impact on financial performance for firms in the high-tech sector. Using firm-level supplier-customer relationship data, we find that on average 20 (2.3) percent of tier-2 suppliers are shared by at least two (five) tier-1 suppliers. We also find that the risk, measured as stock return volatility, of the focal tier-0 firm is positively associated with common tier-2 supplier risk, and the association is stronger for suppliers with a higher degree of tier-2 commonality. To disentangle the impact of risky supply network structure from risky tier-2 suppliers, we define two network metrics, viz., diamond ratio and cosine commonality score. We find that a one standard deviation increase in each of these metric leads to an increase in standard deviation of 0.58 and 0.41 respectively in tier-0 firm's risk. Our results reveal substantial unmanaged supply chain risks due to overlapping sub-tier suppliers, and highlight the need for firms to increase visibility into their extended supply network. en_US
dc.subject Supply Chain Risk Management en_US
dc.subject Supply Network Structure en_US
dc.subject Empirical Research en_US
dc.subject.classification Management and Organizations en_US
dc.title Risky Suppliers or Risky Supply Chains? An Empirical Analysis of Sub-Tier Supply Network Structure on Firm Performance in the High-Tech Sector en_US
dc.type Working Paper en_US
dc.subject.hlbsecondlevel Business (General) en_US
dc.subject.hlbsecondlevel Management en_US
dc.subject.hlbtoplevel Business
dc.contributor.affiliationum Ross School of Business en_US
dc.contributor.affiliationumcampus Ann Arbor
dc.description.bitstreamurl http://deepblue.lib.umich.edu/bitstream/2027.42/116385/1/1297_Wang.pdf
dc.owningcollname Business, Stephen M. Ross School of - Working Papers Series
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