Navigating through geopolitical risk: the role of supply chain concentration

Abstract

Purpose This study aims to investigate the impact of geopolitical risk (GPR) on supply chain concentration (SCC) and the roles of operational capabilities and resources in this relationship. Design/methodology/approach Secondary longitudinal data from multiple sources is collected and combined to test for a direct impact of GPR on SCC. We further examine the moderating effects of firms’ operational capabilities and resources (i.e. firm resilience, operational slack and cash holding). Fixed-effect regression models are applied to test the hypotheses, followed by a series of robustness tests to check the consistency of the results. Findings Consistent with the tenets of resource dependence theory, our analysis reveals a significant negative impact of GPR on SCC. Moreover, we find that this adverse effect is attenuated for firms with higher levels of resilience, more operational slack and greater cash holdings. Further analysis suggests that maintaining a diversified supply chain base during heightened GPR is associated with a firm’s improved financial performance. Originality/value This study contributes to the supply chain management (SCM) literature by integrating GPR into the supply chain risk management framework. Additionally, it demonstrates the roles of diversification and operational resources in addressing GPR-induced challenges.