The effect of a geographically dispersed supply base on downside risk: Developing and testing the N-shaped theory

Harri Lorentz*, Juuso Töyli, Tomi Solakivi, Lauri Ojala

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Globalisation, and its resultant complexity, has been called the most significant factor in the increase of supply chain risk. In this paper, we investigate the effects of supply base complexity that result from geographic dispersion and how that affects supply chain risk. Informed by several theories, an N-shaped theory for the relationship is hypothesised. A regression analysis that uses survey data from manufacturing firms operating in Finland is utilised to test the hypothesis. Contrary to our hypothesis, we find support for an inverse U-shaped association of supply base complexity due to geographic dispersion and the negative effects of supply risk. The possible causes of the result and how it can be reconciled with the N-shaped theory are discussed. Supply managers are advised to avoid international complexity creeping into supply and to engage in cross-functional discussion about the implications of supply base dispersion. (C) 2015 Elsevier Ltd. All rights reserved.

Original languageEnglish
Pages (from-to)872-882
Number of pages11
JournalInternational Business Review
Volume25
Issue number4
DOIs
Publication statusPublished - Aug 2016
MoE publication typeA1 Journal article-refereed

Keywords

  • Internationalisation of supply
  • Global sourcing
  • Geographic dispersion
  • Complexity
  • Supply risk
  • Survey
  • INTERNATIONAL DIVERSIFICATION
  • CHAIN PERFORMANCE
  • FIRM PERFORMANCE
  • TRADE-OFFS
  • COST
  • COMPLEXITY
  • NETWORKS
  • INTEGRATION
  • MANAGEMENT
  • INNOVATION

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