Supply Network Formation and Fragility

Elliott, Matthew; Golub, Benjamin; Leduc, Matt V.

doi:10.2139/ssrn.3525459

Cited by 19 publications

(18 citation statements)

References 94 publications

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“…The results are qualitatively similar for EBITDA in columns ( 4) to (6). Consistent with the endogenous network model of Elliott, Golub and Leduc (2020), these findings suggest that firms with more vulnerable supply chains, namely those with fewer alternative suppliers, are hit harder when one of their suppliers is temporarily shut down.…”

Section: Disruptions and Supply Chain Vulnerabilitiessupporting

confidence: 61%

“…In addition, we document a new dimension of supply chain vulnerabilities and estimate how supply chains dynamically evolve in response to this unique type of disruptive shock. These results are especially relevant for the theoretical literature on endogenous production networks that stress the importance of having trading relations with alternative suppliers, and how a network adjusts to a shock (Elliott, Golub and Leduc, 2020;Taschereau-Dumouchel, 2019;Acemoglu and Tabhaz-Salehi, 2020).…”

Section: Introductionmentioning

confidence: 90%

“…Specifically, we look at two dimensions of vulnerability: reliance on few suppliers and input specificity. As firms need several intermediate inputs and services in their production function, they become more vulnerable to sudden interruptions if they cannot easily substitute the supplier that is hit by a shock (Elliott, Golub and Leduc, 2020). Therefore, we hypothesize that affected customers that have fewer suppliers in the same industry of the directly hit supplier may face more production difficulties and therefore display a larger decline in revenues and profitability.…”

Section: Disruptions and Supply Chain Vulnerabilitiesmentioning

confidence: 99%

See 2 more Smart Citations

Pirates without Borders: The Propagation of Cyberattacks through Firms’ Supply Chains

2020

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We document the propagation effects through supply chains of the most damaging cyberattack in history and the important role of banks in mitigating its impact. Customers of directly hit firms saw reductions in revenues, profitability, and trade credit relative to similar firms. The losses were larger for customers with fewer alternative suppliers and suppliers producing high-specificity inputs. Internal liquidity buffers and increased borrowing, mainly through bank credit lines at higher rates due to increased risk, helped affected customers to maintain investment and employment. However, the shock led to persisting adjustments to the supply chain network.

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Section: Disruptions and Supply Chain Vulnerabilitiessupporting

confidence: 61%

Section: Introductionmentioning

confidence: 90%

Section: Disruptions and Supply Chain Vulnerabilitiesmentioning

confidence: 99%

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Pirates without Borders: The Propagation of Cyberattacks through Firms’ Supply Chains

2020

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“…Elliott et al. ( 2020 ) and Jiang et al ( 2021 ) also investigate firms’ incentive to build robust supply chains. Unlike Kramarz et al ( 2020 ) and Esposito ( 2020 ), we focus on the geographic diversification of inputs rather than sales.…”

mentioning

confidence: 99%

Supply Shocks in Supply Chains: Evidence from the Early Lockdown in China

2022

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How do firms in global value chains react to input shortages? We examine micro-level adjustments to supply chain shocks, building on the Covid-19 pandemic as a case study. French firms sourcing inputs from China just before the early lockdown in the country experienced a relative drop in imports that increases from February to April 2020. This shock on input purchases transmits to the rest of the supply chain through exposed firm’s domestic and export sales. Between February and June, firms exposed to the Chinese early lockdown experienced a 5.5% drop in domestic sales and a 5% drop in exports, in relative terms with respect to comparable non-exposed firms. The drop in foreign sales is entirely attributable to a lower volume of exports driven by a temporary withdrawal from occasional markets. We then dig into the heterogeneity of the transmission across treated firms. Whereas the ex-ante geographic diversification of inputs does not seem to mitigate the impact of the shock, firms with relatively high inventories have been able to absorb the supply shock better.

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“…In contrast to the approach in this paper, this literature takes discreteness of decisions seriously and is often studied with a non-Walrasian equilibrating mechanism. Some examples are Oberfield (2017), Lim (2017), Acemoglu and Azar (2020), Acemoglu and Tahbaz-Salehi (2020), Taschereau-Dumouchel (2020), Kikkawa et al (2018), Dhyne et al (2021), andElliott et al (2020). We abstract from these issues in our analysis, assuming that individual firms are infinitesimal and that the mass of entrants and number of links adjusts smoothly in response to perturbations of primitives.…”

Section: Introductionmentioning

confidence: 99%

Entry vs. Rents: Aggregation with Economies of Scale

Baqaee¹,

Farhi²

2020

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We characterize the response of aggregate output to micro shocks in disaggregated economies with entry, non-constant returns to scale, input-output linkages, and distortions. We decompose output changes into technical and allocative efficiency components, and show that the latter depends on changes in rents and quasi-rents across markets. We use this to characterize the social costs of distortions and show the importance of accounting for entry both qualitatively and quantitatively. As an example, we show that the efficiency losses caused by markups in the US rise from around 20% of GDP to around 40% once we account for the entry margin. Our baseline is sensitive not only to the presence of entry, but also to the specifics of how entry is modeled, in ways that our social-costs-of-distortions formulas clarify. Entry can substantively alter the economy's response to shocks even if variable profits and fixed costs are small as a share of GDP.

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Supply Network Formation and Fragility

Cited by 19 publications

References 94 publications

Pirates without Borders: The Propagation of Cyberattacks through Firms’ Supply Chains

Pirates without Borders: The Propagation of Cyberattacks through Firms’ Supply Chains

Supply Shocks in Supply Chains: Evidence from the Early Lockdown in China

Entry vs. Rents: Aggregation with Economies of Scale

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