Does social media elevate supply chain importance? An empirical examination of supply chain glitches, Twitter reactions, and stock market returns

Abstract

Abstract We build upon supply chain management and social media research by exploring the Twitter response to supply chain glitches and how this response may moderate the relationship between supply chain glitches and stock market returns. We analyze data on 213 supply chain glitches for 150 firms across 5 years and over 2 billion tweets on publicly traded firms. Leveraging event study methodology, we find support for our hypotheses. Using both volume and sentiment of tweets, we observe significant reactions on Twitter after supply chain glitches; tweet volume increases and tweets become more negative. We also find that Twitter reactions after a glitch accentuate the relationship between supply chain glitches and stock market returns, demonstrating how social media may elevate the prominence of supply chain problems. To address concerns associated with simultaneity bias, we demonstrate that pre‐stock‐market‐open Twitter activity preempts post‐stock‐market‐open returns. Finally, we conduct post hoc analyses that explore how firms can leverage Twitter to counteract the negative stock market consequences of Twitter, and how firm proximity to the end customer may influence how tweets moderate the stock market reaction to glitches.