Sources of supply chain risk: External environmental factors or strategic choice?

Abstract

Firms face risk in their upstream supply chain with severe negative consequences for operational performance. Although the sources of supply chain risk could provide a first approach to address the risk directly, they are not well understood: Insights into the sources of supply chain risk are derived based on case- or survey-based research. This paper identifies external factors and internal strategic choices as sources of supply risks based on secondary data. Their effects are investigated over time and between firms. To this end, a hybrid regression model is estimated that captures time- and firm-effects in a single empirical model. The results suggest that external factors indeed heavily contribute to supply risk. However, firms can partly employ business strategies to lower their exposure to supply risk.