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The Impact of Supply Chains on Firm-Level Productivity

Published: 19 October 2017

Authors: Juan Serpa and Harish S. Krishnan

Publication: Management Science, Vol. 64, No. 2, February 2018

Abstract:

Firms in a vertical relationship are likely to affect each other’s productivity. Exactly how does productivity spill over across this type of relationship (i.e., through which mechanisms)? Additionally, how does the relative importance of these mechanisms depend on the structure of the supply chain?

To answer these questions, we decompose the channels of upstream productivity spillovers—from customers to suppliers—by developing a structural econometric model on a sample of approximately 22,500 supply chain dyads.

We find that the “endogenous channel” (i.e., the effect of the customer’s own productivity on the supplier’s productivity) is by far the most important source of spillovers. This is especially true if (i) the supplier has a concentrated customer base, (ii) the supplier and the customer have similar operational characteristics, and (iii) the relationship has medium maturity.

In the converse scenarios, we find, it is more important to have a partner with a portfolio of favorable “contextual” characteristics (high inventory turnover, financial liquidity, and asset turnover) than to have a productive partner.

Read full article: Management Science


Desautels 22

In recognition of research excellence as it relates to publications in top-tier management journals, our Faculty has compiled a list of high quality, peer-reviewed management journals, which is referred to as the Desautels 22.

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