How Does Supply Network Structure Influence Firms’ Financial Performance During Disruption?

Abstract

Listen

Translate article

In a post pandemic world, supply chain mapping has become a key concern for almost any supply chain operation. A single focal supply chain network might have hundreds of suppliers including those that supply both goods and services. These increase exponentially as one traces the network downstream. Using a pair of networks from the auto industry (Ford and General Motors) as a basis for the analysis, we apply a data mining technique to filter for significant supply chain relationships in each of these networks over the period spanning 2018–2022. We then examine the structural metrics for each of these networks and compare these measures with applicable financial measures to elucidate how supply chain network structure affects financial performance. Our regression analyses reveal that supplier network structures significantly affect customers’ market value. Specifically, Tobin’s Q is negatively related to the number of suppliers they source from and the importance of the customer (e.g., Ford) to its suppliers, but it is positively associated with the tightness of supplier customer connection and the density of the network.