When supply-chain disruptions matter
By: William Schmidt, Ananth Raman
Contributors: Raman, Ananth; Harvard Business School
Edition: Revised edition
Series: Working paper / Harvard Business School -- 13-006; Working paper (Harvard Business School) -- 13-006
Publisher: Harvard Business School
Published: 2013
Place of publication: Boston]
Language: eng
Number of pages: 34
Description: Supply-chain disruptions have a material effect on company value, but this impact can vary considerably. Thus, it is important for managers and investors to recognize the types of disruptions and the organizational factors that lead to the worst outcomes. Prior research remains unsettled as to whether improvements to firm operational efficiency aggravate or alleviate the impact of disruptions. Improved operational efficiency may leave firms more exposed when a disruption occurs, or it may improve firms' agility and allow them to respond more effectively to a disruption. We hypothesize that the impact of improved operational efficiency depends on whether the disruption is due to factors that are internal versus external to the firm and its supply chain. We use a sample of over 500 disruptions collected from company press releases and find empirical evidence that a higher rate of improvement in operating performance aggravates the impact of internal disruptions but not external disruptions. By taking advantage of an exogenous policy shock regarding corporate disclosure rules, we also find that managers show systematic bias in the disruptions they choose to announce, and we control for this effect in our model specifications.
Notes: "July 2012. (Revised January 2013.)"-- Publisher's website.

Includes bibliographical references (pages 26-28).