The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/0144-3577.htm

The role of supply chain Supply chain

diversification
diversification in mitigating the and
disruptions
negative effects of supply chain
disruptions in COVID-19
Qiang Wang and Haidi Zhou Received 9 September 2022
Revised 31 January 2023
School of Management, Xi’an Jiaotong University, Xi’an, China, and 19 March 2023
Xiande Zhao Accepted 3 April 2023

China Europe International Business School, Shanghai, China

Abstract
Purpose – This study examines the firm-level financial consequences caused by supply chain disruptions
during COVID-19 and explores how firms’ supply chain diversification strategies, including diversified
suppliers, customers and products, moderate the negative effect on firm performance.
Design/methodology/approach – Based on data drawn from 222 publicly traded firms in China, the authors
use event study methodology to estimate the effects of supply chain disruptions on the financial performance of
affected firms. Regression analyses are conducted to examine the moderating effects of supply chain
diversification.
Findings – Firms affected by supply chain disruptions during COVID-19 experienced a significant decline in
shareholder value in two weeks and a subsequent decrease in operating performance in one year. Diversified
suppliers, customers and products act as shock absorbers to alleviate the negative effects. Further regression
shows a substitution effect between customer and product diversification. Cross-industry comparisons reveal
that service firms experienced more loss than manufacturing firms. Customer diversification mitigates the
adverse effects of supply chain disruptions for both manufacturing and service firms. Supplier diversification
exerts a noteworthy role in manufacturing firms, while product diversification is beneficial for service firms.
Originality/value – The study provides empirical evidence on the magnitude of financial consequences of
supply chain disruptions during COVID-19 in both the short term and long term and enriches the current
understanding of how to build resilience from the supply chain diversification perspective.
Keywords Supply chain disruption, COVID-19, Supplier diversification, Customer diversification,
Product diversification, Event study
Paper type Research paper

1. Introduction
We live on a “viral planet” (Wolfe, 2011). Viruses cause pandemics, which come in waves,
disrupt our lives and change our societies. The latest one, coronavirus disease 2019
(COVID-19), spread rapidly throughout China in early 2020 and then became a worldwide
pandemic. In response to COVID-19, the Chinese government quickly implemented a series of
prevention and control measures, including social distancing, factory shutdowns, mobility
restrictions and the lockdown of cities (Kraemer et al., 2020). These measures effectively
controlled the spread of COVID-19, but they also created huge uncertainties in supply and
demand and disrupted supply chains. The pandemic has therefore brought the vulnerability
of supply chains to the forefront of supply chain management (SCM) research (Handfield
et al., 2020; Finkenstadt and Handfield, 2022).
In recent years, to examine the impact of supply chain disruptions caused by natural or
man-made disasters, much SCM research has devoted attention to different types of disasters
(e.g. Gupta et al., 2016) and their various performance implications for firms (Hendricks and International Journal of Operations
& Production Management
© Emerald Publishing Limited
0144-3577
This research was supported by National Social Science Fund of China [grant number 21BGL013]. DOI 10.1108/IJOPM-09-2022-0567
IJOPM Singhal, 2003, 2005; Hendricks et al., 2020). However, COVID-19 has new characteristics,
spreading globally while changing slowly (Handfield et al., 2022). It differs from typical
disasters in three interrelated aspects: scope, spillover and shifts (Craighead et al., 2020). As
explained by Craighead et al. (2020), COVID-19 affects the whole world and all industries,
spills over among regions and sectors and causes simultaneous shifts in supply and demand.
Although the pandemic has a low probability of occurrence, it disperses quickly and has
substantial negative consequences. It has been documented that more than 94% of Fortune
1,000 companies faced severe supply chain disruptions due to raw material shortages and
production and transportation interruptions as a result of COVID-19 (Fortune, 2020).
Information about supply chain disruptions was quickly transmitted to capital markets,
generating negative sentiment among external investors, which, in turn, hurt firms’ stock
market performance. On February 3, 2020, the first trading day following the massive
outbreak of COVID-19 during the Chinese New Year, Shanghai Composite Index fell by
7.72%, and over 3,000 stocks in the A-share market were halted in China. Apple also
announced that supply chain disruptions caused by the COVID-19 pandemic had led to a
sharp drop in demand in China, with stock price falling 2.6% and market value evaporating
by $34 billion on February 18, 2020 (Horowitz, 2020). Given the significant negative
consequences, it is crucial that firms need to be prepared for large-scale emergencies such as
COVID-19.
More importantly, although COVID-19 affects almost all industries and firms, the
literature indicates that firms adopt different mechanisms to deal with disruptions, leading to
varying performance outcomes (Chowdhury et al., 2020; Kl€ockner et al., 2023; Xiong et al.,
2021). A growing number of scholars start to explore efforts that help build resilience – the
ability to bounce back quickly from a large disruption to the original level of performance –
and mitigate the negative effects in the face of the pandemic (El Baz and Ruel, 2021; Remko,
2020; Tukamuhabwa et al., 2015). Handfield et al. (2020, 2022) also advocated developing
supply chain immunity by building flexibility, traceability and transparency, persistence and
responsiveness, global independence and equitability. Recent studies have highlighted the
merits of the diversification strategy in hedging against supply chain risks (Golmohammadi
and Hassini, 2020; Su and Liu, 2015). While some scholars call for deploying the
diversification strategy to mitigate disruptions, others defend that it also comes with
many challenges (Choi and Krause, 2006). For example, firms with multiple suppliers will
have to spend more time and resources to maintain and coordinate relationships with these
suppliers. More complex systems and processes are needed to ensure that everyone can work
effectively together, which may increase costs and the risk of errors and delays (Arda and
Hennet, 2006; Lin et al., 2021). Moreover, the multiple links among firms may cause contagion
effects, where a single disruption can spread to others quickly, making consequences even
more serious (Mizgier et al., 2015). Given COVID-19’s significant disruptive impacts on firms’
supply chains, further investigation on whether diversification strategies can mitigate the
negative impact or increase the management risks in such large-scale disruptions is called for
(Sharma et al., 2020b).
The diversification strategy has been studied extensively in the strategic management
field. As supply chain risks become more prominent in recent years, researchers in operations
management increasingly focus on supply chain diversification. However, existing research
on the conceptualization and operationalization of supply chain diversification is still
underdeveloped. In particular, empirical studies that comprehensively consider how and to
what extent different supply chain diversification strategies affect firms’ ability to cope with
worldwide supply chain disruptions in such a new scenario are scarce. To fill these research
gaps, our study empirically tests the firm-level financial consequences caused by supply
chain disruptions during this pandemic and examines how these consequences are
contingent on firms’ supplier diversification, customer diversification and product
diversification strategies. Based on data from 222 publicly traded firms in China, analyzed Supply chain
using event study methodology, our study contributes to the extant literature in the following diversification
ways. First, this study provides empirical evidence on the magnitude and severity of financial
consequences of supply chain disruptions due to the COVID-19 pandemic, enriching our
and
understanding of how the supply chain disruptions caused by such devastating disasters disruptions
affect firm performance in both the short term and long term. Second and more importantly,
we contribute to SCM literature by identifying strategic factors that help firms to build
resilience to buffer against disasters from the supply chain diversification perspective. The
findings also advance our knowledge that there is a substitution effect between customer
diversification and product diversification strategies. Finally, the cross-industry
comparisons demonstrate that service firms lose more than manufacturing firms. We
further find that diversifying customers can be an effective strategy to mitigate the negative
impacts of supply chain disruptions for both manufacturing and service firms. While supplier
diversification exerts a noteworthy role in manufacturing firms, product diversification is
more influential for service firms.

2. Theoretical background and literature review

2.1 Supply chain disruption
In SCM literature, supply chain disruption is typically characterized by its probability of
occurrence and its severity (Bode and Wagner, 2015). Wagner and Bode (2008, p. 309), for
example, defined a supply chain disruption as “the combination of (1) an unintended,
anomalous triggering event that materializes somewhere in the supply chain or its
environment, and (2) a consequential situation which significantly threatens normal business
operations of the firms in the supply chain.” Disasters may occur slowly or suddenly, locally
or dispersedly, and disruptions caused by disasters may occur inside or outside the supply
chain (Apte, 2009; Handfield et al., 2022), with highly divergent characteristics (Sodhi et al.,
2012). Several typologies of supply chain disruption are thus proposed. Chopra and Sodhi
(2004) classified supply chain disruption into nine types according to disruption reasons,
while J€uttner (2005) delineated it into three types: supply, demand and environmental
disruptions. More concisely, Sodhi et al. (2012) divided supply chain disruption into two
categories: catastrophic and operational disruption.
The negative short-term and long-term influences of supply chain disruptions on
organizational performance have been well documented by previous scholars (Hendricks and
Singhal, 2003, 2005; Nyamah et al., 2017; Parast and Shekarian, 2019; Parast and
Subramanian, 2021). It can be ascribed to both the global supply networks’ fragility
and growing complexity (Parast and Shekarian, 2019). However, COVID-19 is regarded as the
most catastrophic event to have caused disruptions in global operations and supply chains in
the last few decades (Gunessee and Subramanian, 2020). It occurs slowly, dispersing across
the globe, and shows the domino effect on supply chains (Handfield et al., 2022). It differs from
typical supply chain disruptions in three interrelated aspects: scope, spillover and shifts.
Craighead et al. (2020) explained that COVID-19 affects the whole world and all industries,
spills over among regions and sectors and causes simultaneous shifts in supply and demand.
Queiroz et al. (2022) also documented that COVID-19 causes significant inventory distortions,
which inevitably lead to severe material shortages and logistics paralysis, and they
suggested building supply chain resilience through resource orchestration to deal with
disruptions. The effects of supply chain disruptions caused by COVID-19 have drawn wide
attention among practitioners and scholars. Reports show that at the macro level, the large-
scale supply chain disruptions during COVID-19 have caused material shortages and sharp
declines in global productivity and GDP (Harris, 2020). In its forecast for 2020, the
International Monetary Fund (IMF) expected GDP to fall by 4.3% in the US, 8.3% in the
IJOPM Eurozone and 3.3% in emerging and developing economies (IMF, 2020). McKinsey (2020)
reported that the COVID-19 crisis has caused an average 30% decline in multinational firms’
sales in 2020. Researchers have also paid much attention to the financial consequences of
COVID-19. For instance, Maneenop and Kotcharin (2020) revealed that firms in the airline
industry have a substantial decline in shareholder value. Gavalas et al. (2022) found that the
shipping industry is affected to varying degrees in terms of the dry market, the tanker market
and the shipping stock market. Wang et al. (2022) found that firms in the Hubei province are
more strongly affected than non-Hubei firms in China, and transportation, retail and
insurance firms experience strong adverse effects in terms of stock price, while medical
companies see positive spillover effects. In a cross-country comparison, Kl€ockner et al. (2023)
showed that the decline in shareholder wealth resulting from the COVID-19 pandemic is
significantly different between the US and Chinese firms.
While previous research has provided insights into the financial consequences of supply
chain disruptions from the COVID-19 pandemic, the potential risk mitigation strategies in the
context of such large-scale disruption are still underdeveloped. To address this gap, this
study aims to outline effective risk mitigation strategies from the supply chain diversification
perspective.

2.2 The definition and dimensions of supply chain diversification

As one of the most important strategic decisions faced by business managers, the
diversification strategy concerns the scope of a firm in the competing markets as well as how
managers buy, build and dispose of different businesses to match their abilities and strengths
with potential opportunities (Grant, 1998; Bergh, 2005). Diversification has been well studied
in the strategic management literature (Ramanujam and Varadarajan, 1989), and it is defined
as a means of extending the business base to achieve better growth and/or reduce overall risk
(Booz et al., 1985). Firms usually design and implement diversification strategies through
tools such as acquisitions, internal development and restructuring (Gaughan, 1999). Giroud
and Mueller (2015) provided evidence that diversified companies enjoy a higher return on
investment in the presence of demand shocks. Matvos and Seru (2014) also showed that
diversification leads to more efficient capital allocation to disperse risks.
Supply chain diversification is a relatively new and growing research topic in the SCM
literature, although there has been much effort devoted to exploring different robust supply
chain strategies and examining the value of diversified suppliers or customers (Chod et al.,
2019; Patatoukas, 2012). Some scholars argue that the supply chain should be managed as an
integrated system, while others focus on the significance of decentralizing supply chains
(Flynn et al., 2010; Kistruck et al., 2013). While some of the existing studies on diversification
emphasize diversified products and business segments within the organizations, others focus
on the dominance and dependence between organizations in the supply chain (Kistruck et al.,
2013; Zhu et al., 2021). Although these views address several key elements of supply chain
diversification, the current understanding is scattered and does not form a theoretically
coherent and integral definition.
Further, existing research on the dimensions of supply chain diversification is still
underdeveloped. Some scholars focus on specific dimensions, particularly in terms of
multiple sourcing or diversified customer base, mainly based on the modeling approach or
qualitative analysis, while others regard supply chain diversification as a single construct
(see Table 1). For example, Treleven and Schweikhart (1988) identified the risks and benefits
of the multiple sourcing strategy using the risk/benefits assessment model. Silbermayr and
Minner (2014) examined the trade-off between multiple and single sourcing, as well as
keeping inventory and having a back-up supplier. Moreover, the extant supply chain
literature has ignored the intra-organizational aspects of diversification (i.e. product
diversification), calling for studies to focus on both external supplier and customer
 The focus of supply
Supply chain
Authors (Year) Research purpose chain diversification Method diversification
and
Treleven and • Identify the risk/benefits of Multiple sourcing Risk/benefits
Schweikhart sourcing strategy assessment model disruptions
(1988) (modeling)
Berger and Zeng • Explore how a buying firm Multiple sourcing Decision-tree
(2006) determines the optimal size of its approach (modeling)
supply base in the presence of
risks
Silbermayr and • Explore the trade-off between Multiple sourcing Semi-Markov
Minner (2014) single and multiple sourcing, as decision process
well as keeping inventory and (modeling)
having a back-up supplier
Whitney et al. • Explore the conditions to Sourcing diversification Case study
(2014) temporary sourcing
diversification and the situations
where it is applicable
Mizgier et al. • Calculate the loss distribution Supply base Monte Carlo
(2015) induced by supply chain diversification simulation (modeling)
disruptions for a focal firm
Namdar et al. • Investigate the use of sourcing Multiple sourcing Scenario-based
(2018) strategies to achieve supply mathematical model
chain resilience under (modeling)
disruptions
Runde and • Discuss how to recover the Single construct Qualitative report
Ramanujam economy with resilience
(2020)
Lin et al. (2021) • Examine the relationship Supply base Regression analysis
between supply chain diversification;
diversification and inventory/ customer base
profitability diversification
Savoy and • Investigate how to deal with Single construct Qualitative report
Ramanujam supply chain risks
(2022)
Yin and Ran • Investigate how supply chain Supply base Fuzzy5set
(2022) diversification and digital diversification; qualitative
transformation affect supply customer base comparative analysis
chain resilience diversification (fsQCA)
Table 1.
Xu et al. (2022) • Investigate how supply chain Upstream and Regression analysis Previous research
finance influences firm downstream providing insights into
diversification? concentration supply chain
Source(s): Created by authors diversification

diversification strategies as well as internal product diversification strategies. In fact,

McKinsey (2015) reported that over 70% of the large companies have adopted an internally
diversified product strategy to expand their business, reduce risks, as well as build resilience;
Deloitte (2022) reported that 69% of CFOs believe they will continue to develop an externally
diversified sourcing strategy to deal with uncertainty over the next three years.
Applying the concept of diversification strategy to the SCM context, we define supply
chain diversification as the extent to which a firm strategically diversifies its product types
and supplier and customer base to hedge potential or existing supply chain risks. Supply
chain diversification can thus be divided into three dimensions: supplier, customer and
product diversification. Supplier diversification and customer diversification involve
diversified external partnerships, referring to the scenario where focal firms have multiple
IJOPM suppliers and customers (Golmohammadi and Hassini, 2020; Patatoukas, 2012). Such
connotation is consistent with that of customer breadth proposed by Josephson et al. (2019),
that is, the diversity and scope of a firm’s customer base. It represents the extent to which a
firm’s sales are distributed among the customer base. In contrast, product diversification
focuses on the production activities within the focal firm, involving multiple product types
and/or brand categories (Kistruck et al., 2013). When designing a supply chain diversification
strategy, firms need to comprehensively consider the general environment (e.g. legal,
political, technological, social and ecological environment in which they operate), the
competitive market environment and their firm characteristics. A higher level of supply chain
diversification will guide firms to source from more suppliers, expand a wider range of
customer base and develop more diversified product lines.

2.3 Supply chain diversification and supply chain resilience

Recent research has explored the factors that can enhance supply chain resilience to deal with
supply chain disruptions in the context of the COVID-19 pandemic (Cohen and Kouvelis, 2021).
Strategies that are proposed to build supply chain resilience include flexibility (e.g. multi-
sourcing) as well as robustness in terms of single sourcing (Ivanov, 2018; Namdar et al., 2018;
Tang and Tomlin, 2008; Wagner and Bode, 2006). Single sourcing may maintain a long-term
relationship with the supplier and share sensitive information, which contributes to the
robustness of the supply chain in daily operations (Namdar et al., 2018). Supply chain
diversification, on the other hand, is considered to be a vital flexibility enhancer as it enables
firms to quickly adjust supply chain structure using slack resources during the crisis (Namdar
et al., 2018). For example, Namdar et al. (2018) investigated the use of sourcing strategies to
achieve supply chain resilience via a scenario-based mathematical model. More recently, Yin
and Ran (2022) examined the effects of supply chain diversification and digital transformation
on supply chain resilience via fuzzy-set qualitative comparative analysis (fsQCA).
However, there is considerable disagreement among researchers about the role of supply
chain diversification. Several studies have suggested that supply chain diversification
improves firms’ flexibility in handling multiple operations and production processes, and
helps firms to reconfigure resources as well as the relationships between suppliers and
customers to achieve competitive advantages in the market (Kleindorfer and Saad, 2005).
Craighead et al. (2007) advocated adopting multiple sourcing strategy when dealing with an
unexpected crisis. However, others have emphasized the downsides of maintaining a
diversified supply chain. For instance, firms need to spend more time and resources to
coordinate with multiple suppliers to deal with interruptions. Josephson et al. (2019) also
proposed from the business-to-government (B2G) context that a diverse government
customer base would increase transaction-specific investments and pose challenges to firms’
ability to acquire diverse knowledge of multiple customers, thus weakening the firm value.
Contextually, previous studies on supply chain diversification were mainly conducted under
conventional risks, and whether it will mitigate the negative impact in the context of an
extremely uncertain business environment caused by COVID-19 needs to be further explored
empirically. As such, this study tries to examine whether and how much supply chain
diversification (including external supplier and customer diversification and internal product
diversification) has in fact alleviated the negative impacts of supply chain disruptions in
COVID-19.

3. Research model and hypotheses development

3.1 Conceptual model
Based on the supply chain and strategy literature, we propose a research model to verify the
magnitude and severity of the financial consequences of supply chain disruptions during
COVID-19. We also examine how the consequences are contingent on firms’ supply chain Supply chain
diversification strategies, including supplier diversification, customer diversification and diversification
product diversification. Our research model is shown in Figure 1.
and
disruptions
3.2 Hypotheses development
We first verify the magnitude of the financial consequences of supply chain disruptions
during COVID-19. From the supply side, shortages of key raw materials or interrupted
logistics systems incapacitate normal procurement procedures. Affected firms thus have to
interrupt production, which greatly disrupts the flow of products (Wang et al., 2021). From the
demand side, the overall recession in the market has seriously affected consumers’ confidence
in the future, resulting in a continued decline in consumer demand (Zhang et al., 2020). As
COVID-19 is causing simultaneous shifts in supply and demand, the above impacts are
expected to be more severe. Dramatically, inventory stockout, reduced orders and many other
vulnerabilities in the supply chain seem to happen simultaneously. Many firms have thus
been trapped in insufficient cash flows, exposing problems such as slow capital turnover, low
expected income, poor liquidity and shrinking profits, which present negative signals to
investors. Therefore, we propose the following hypothesis.
H1. The supply chain disruptions in COVID-19 negatively affect firms’ financial
performance.
Next, we discuss the role of firms’ supplier diversification strategy when faced with supply
chain disruptions during the COVID-19. With a more diversified supply base, focal firms rely
on more suppliers to procure the required materials rather than a single supplier
(Golmohammadi and Hassini, 2020; Su and Liu, 2015). We expect that a higher level of
supplier diversification strategy can help firms mitigate the negative effect of supply chain
disruptions during COVID-19. Enhancing operational flexibility has long been considered
essential to deal with supply chain disruptions (Shekarian et al., 2020). Recent literature has
found that during COVID-19, the affected firms rely on supplier diversification to build up
operational flexibility (Lin et al., 2021). In flexible networks, firms can accommodate different
requirements according to the market change and increase alternatives when needed
(Handfield et al., 2020). The outbreak of COVID-19 posed huge threats to supply chains. Firms
were trapped in the dilemma that suppliers stopped production and could not deliver the
required materials (Ivanov and Dolgui, 2021). For firms sourcing from fewer suppliers, it is
difficult to switch to emergent suppliers under disruptive situations. In contrast, firms with
more diversified suppliers can use alternative unaffected suppliers to ensure the continuity of

Figure 1.
Theoretical model
Source(s): Created by authors
IJOPM the procurement and basic operations in a cost-effective and time-efficient manner (Tang
et al., 2014), thereby mitigating the negative effect of supply disruptions.
Firms with more diversified supply portfolios also tend to have more stable supply flows.
For example, compared with those concentrating on a smaller procurement base, firms
engaging with a pool of alternative suppliers have access to more resources, such as
knowledge input, expertise and social capital (Dong et al., 2020; Lin et al., 2021). These
valuable resources help firms to recover to normal supply chain operations more quickly in a
crisis. Finally, the node criticality of the fewer suppliers, which refers to the importance of a
node within a supply chain, will be increased when a firm only purchases from a few major
suppliers (Craighead et al., 2007). The dependence on fewer suppliers is likely to be riskier and
will incur more negative effects or even catastrophic consequences in supply chain
disruptions. Conversely, firms with a more diversified supply base can reduce their
dependence on the critical nodes and hedge against the collapse of a single supplier
(Craighead et al., 2007; Sawik, 2011). The merits of such independence are also highlighted in
Handfield et al.’s (2020, 2022) research, which proposes that maintaining global independence
can protect the security of the national health care supply chain. Therefore, we propose that.
H2. The effect of supply chain disruptions on financial performance in COVID-19 is less
negative for firms with a higher level of supplier diversification.
We now consider how customer diversification strategy affects the magnitude of the financial
consequences of supply chain disruptions. In line with the connotation of customer breadth in
Josephson et al.’s (2019) research, customer diversification refers to the number and the scope
of customers that contribute to a firm’s total revenues (Patatoukas, 2012). Firms with a lower
level of customer diversification will derive a significant portion of their revenue from a
smaller subset of their customer base, while a higher level of customer diversification
indicates that firms distribute their revenue among many customers. We expect that the
customer diversification strategy can help firms mitigate the negative effect of supply chain
disruptions in COVID-19. The prior literature suggests that focal firms may suffer significant
operational failures due to the less diversified customer base when faced with emergencies
(Wagner and Bode, 2006). In the case of a large-scale lockdown in COVID-19, firms with fewer
customers have a higher risk of demand uncertainty because of the sharp drop or even
cancellation of orders from major customers. The established customer-specific investment
between the focal firm and its main customers also makes it difficult to find alternative sales
partners (Irvine et al., 2016). In contrast, firms with a more diverse customer base and
distribution channels are still able to provide products or services to other customers who are
less affected, thereby ensuring the continuity of operations.
Further, firms with a lower level of customer diversification may face funds shortages and
reduced liquidity of cash flow when dealing with disruptions. It has been found that
commercial banks are more concerned about the default risk inherent in customer-
concentrated firms and impose stricter loan constraints (Campello and Gao, 2017), leading to
higher financial costs and liquidity shortages (Dhaliwal et al., 2016). Such disadvantages are
particularly evident during the pandemic, exacerbating the negative effects of disruptions.
On the contrary, firms with a higher level of customer diversification can obtain loans from
commercial banks more easily during the pandemic and are thus able to reallocate resources
more efficiently and recover more quickly from disruptions. Therefore, we propose the
following hypothesis.
H3. The effect of supply chain disruptions on financial performance in COVID-19 is less
negative for firms with a higher level of customer diversification.
Finally, we consider how product diversification moderates the negative effect of supply
chain disruptions during COVID-19. Product diversification reflects the degree to which a
firm operates in different product segments. It has been documented that when dealing with Supply chain
supply chain disruptions, firms with more diversified products have more potential to diversification
transfer internal resources from the less-impacted production lines to those greatly affected,
thereby repairing the damaged operations more effectively (Hendricks et al., 2009). However,
and
for a firm with less diversified products, it may take longer to recover from the shocks due to disruptions
limited capabilities to reconfigure production resources. When it comes to service firms, a
higher level of product diversification indicates offering a more diverse range of services to
hedge against disruption risks. For example, during the COVID-19 pandemic, hostels such as
Hom, Once Again and The Yard in Thailand were hardly hit by the suspension of tourism and
the sharp decrease in the number of tourists, resulting in a decline in the hotel business.
However, they offered a wide range of diversified services, such as online cloud kitchen and
food delivery platform, a grocery store and rental services, making their businesses more
resilient and sustainable (Pongtanalert and Assarut, 2022). On the contrary, the hostels that
offer more homogeneous services were sliding toward bankruptcy. Further, firms with more
diversified product lines have the advantage of the coinsurance effect, which helps reduce
cash flow fluctuations and costs of capital and improve the debt capacity to overcome
extreme market shocks (Hann et al., 2013). Faced with large-scale disruptions during the
COVID-19 pandemic, firms with multiple product lines can absorb the disruptions by
diversifying financing sources and pursuing investment opportunities in less impacted
product segments (Almaghrabi, 2021). Therefore, we propose the following hypothesis.
H4. The effect of supply chain disruptions on financial performance in COVID-19 is less
negative for firms with a higher level of product diversification.

4. Data and methodology

4.1 Data description
Our sample was collected from full-text articles and announcements in the Wind Economic
Database, the most comprehensive business and financial database in China. This database
covers all official announcements made by listed firms as well as business news from
authoritative media institutions; thus, it is appropriate for event study research in China (e.g.
Liu et al., 2020a). We searched for samples in the news database from January 23 through
April 8 in 2020 and identified articles or announcements related to supply chain disruptions
due to COVID-19. We adopted the keywords about supply chain disruptions provided by
Hendricks et al. (2009) and increased the new ones in the context of COVID-19. The keywords
were listed in panel A of Table 2.
We collected 3,687 announcements/articles from the Wind database and carefully read the
full text to identify the relevant listed firms mentioned. We excluded articles that did not
mention specific company names and deleted 105 duplicates. For this step, 258 firms
remained. In further screening, 25 firms from the financial industry were dropped. We
collected financial information from China Stock Market & Accounting Research (CSMAR)
database and eliminated 11 firms that did not have sufficient financial performance
information in the CSMAR database during the COVID-19 outbreak. The final sample
included 222 firms listed on the Shanghai or Shenzhen Stock Exchanges.
Panel B of Table 2 presents the basic financial information for the fiscal year before the
announcement in terms of total assets, sales and market value of equity. Panel C shows the
industry distribution.

4.2 Empirical methodology

We used event study methodology to calculate the loss of shareholder wealth associated with
supply chain disruptions during COVID-19 (Brown and Warner, 1985). Event study is a
IJOPM Panel A: Keywords used in searching for supply chain disruption
Description of the sample firms Keywords

Firms that are directly or indirectly affected by supply pandemic/epidemic/coronavirus/COVID-19/

chain disruptions due to the pandemic prevention and
control measurements, resulting in factory shutdowns,
production delays or service stoppages
outbreak/lockdowns; production/labor/plant/
logistics/supply chain
upstream/supply/supplier/shipment/delivery/raw
materials; downstream/demand/customer/sales/
order; disrupt/interrupt/suspend/glitch/stop/short/
close/shut-down/decrease/decline/drop/delay

Panel B: Firm descriptive statistics

Mean Median SD Maximum Minimum

Total asset (CNY million) 74,800 15,900 188,000 1,730,000 452

Sales (CNY million) 29,900 5,960 81,800 851,000 109
Market value of equity (CNY million) 24,900 8,210 52,400 406,000 1,380

Panel C: The distribution of sample firms by industry

Industry Frequency Percentage (%)

Business service industry 116 52.25

Manufacturing industry 71 31.98
Water conservancy, environment and public facilities management industry 13 5.86
Transportation, warehousing and postal industry 12 5.41
Software and IT industry 4 1.80
Mining industry 3 1.35
Table 2. Others 3 1.35
Keywords and profiles Total 222 100
of sample firms Source(s): Created by authors

standard method to examine the informational events that trigger the diffusion of evidence
into the stock market. It is based on the efficient market hypothesis (EMH), which holds that
emergencies tend to affect investors sentiment and their trading behaviors immediately, and,
in turn, reflect on the stock return. In other words, significant events or announcements
related to the company are immediately reflected in its stock market performance. This
methodology considers the effect of the whole market index on the stock price and provides
rigorous procedures to estimate the abnormal return caused by a particularly significant
event, which has also been used by scholars to examine the impact of the pandemic. For
example, Gavalas et al. (2022) used the event study approach to investigate how the
COVID-19 outbreak impinges on the shipping industry. Wang et al. (2022) also used the event
study method to explore the effect of COVID-19 on the firms’ financial performance. The
event period and the model used to calculate abnormal returns are the two key issues when
using event study methodology.
4.2.1 Selecting the event period. To conduct an event study, we first needed to select the
event period to determine the valid sample firms. We chose to search for the firms in the Wind
Economic Database that declared themselves as having been affected by the pandemic
between January 23, 2020, and April 8, 2020. We made this selection based on the following
reasons. First, the Chinese government began to enforce strict control measures and mobility
restrictions in Wuhan and other cities across China starting on January 23, 2020, at 10 a.m.
These measures delivered a clear message to the public about the severity of COVID-19 and
severely disrupted supply chains. As such, we searched the news and announcements
starting from that date to identify the affected firms. Second, Wuhan, the city hardest hit by
the outbreak, lifted its lockdown on April 8, 2020, which was a very important historical event Supply chain
in the process of controlling the COVID-19 pandemic. Finally, supply chains were recovering diversification
in an orderly manner, with events of disruptions affected by the pandemic significantly
reduced. The work resumption rate and the operating rate exceeded 90% at the beginning of
and
April (Cao, 2020), indicating a substantial restoration from the supply chain disruptions disruptions
nationwide. Therefore, to ensure the purity of our sample data for an event study of supply
chain disruptions in China during COVID-19, we searched the news and announcements from
January 23, 2020, to April 8, 2020, and identified the valid sample firms that were affected.
According to the principle of event study, calendar time was translated into event days,
such that the announcement date is day 0, the trading day before the announcement date is
day
1, the next trading day is day 1 and so forth. The extant event studies generally
estimate the stock market reaction to the day of the event and the day before or after it. It is
common to use one- or two-day event periods to calculate abnormal returns (Hendricks and
Singhal, 2003; Hendricks et al., 2015; Liu et al., 2020a). However, given the severity and scope
of supply chain disruptions during the COVID-19 outbreak, a longer event window was
considered necessary.
As for determining the duration of the event period for this study, we used an event period
of [
1,10] to capture the stock market reactions to the supply chain disruptions during the
COVID-19 pandemic, and we also checked shorter event periods for robustness. To get the
pure effect of the announcement of supply chain disruptions caused by COVID-19 and
prevent our sample firms from being affected by other events (e.g. weather events, factory
fires, M&A issues, etc.), we have double-checked other announcements and news articles
published on official channels relating to the sample firms. We finally found that there were
no other significant events occurred in the event window. We chose to use the 12-day event
window for several reasons. First, in order to prevent the early disclosure of the supply chain
disruption information, we estimated the abnormal return from the day before the
announcement date, as suggested by previous studies (Hendricks and Singhal, 2003; Liu et al.,
2020a). Second, according to recommendations of the experts and requirements of the
prevention and control rules, migrant workers were instructed to quarantine for at least two
weeks after returning to their firms or the cities where the factories are located (Xinhua, 2020).
This meant it would take at least two weeks for the supply chains to recover ‒ that is, 10
trading days. Third, 23.5% of sample firms in the news specifically mentioned that they
would be affected by supply chain disruption for about two weeks (10 trading days), while
others did not mention the duration of the disruption. Therefore, we estimated the abnormal
return from the day before the announcements to the following ten trading days, or [
1, 10].
4.2.2 Estimating abnormal returns and statistical testing. We applied the most commonly
used model in event studies ‒ the market model ‒ to estimate abnormal returns (Brown and
Warner, 1985). The market model assumes a linear association between the stock returns of
specific firms and market returns for a given period of time:
Rit ¼ αi þ βi Rmt þ εit ; (1)

where Rit is the return of stock i on day t; Rmt is the market return on day t; αi is the intercept of
the relationship for stock i; βi represents the systemic risk of stock i that cannot be dispersed
through portfolios; and εit is the error term for stock i on day t. The fluctuation of stock i’s
yield caused by the movement of the stock market yield is represented by βi Rmt . εit is the
idiosyncratic component of firm i’s return that cannot be explained by the stock market
return. We used the value-weighted average market return in the CSMAR data set to
generate Rmt.
We applied the daily returns of 200 days for the estimation period, starting on day
210
and ending on day
11, to estimate αbi and βbi in equation (1), as suggested by previous studies
IJOPM (Hendricks and Singhal, 2003; Ding et al., 2018). Similarly, we required firm i to have at least a
40-day stock return over the 200-day estimation period.
At the event window, the expected return of stock i on day t was
cit ¼ αbi þ βb Rmt :
R (2)
i

The difference between the actual and the expected return is the abnormal return Ait for firm i
on day t:
cit :
Ait ¼ Rit
R (3)

The mean abnormal return for day t for all the sample firms is expressed by:
X
N
Ait
At ¼ : (4)
i¼1
N
¼
where N is the total number of our samples. We computed the mean abnormal return A for the
200-day estimation period as:
¼
Pt¼−11
At
A ¼ t¼−210 : (5)
200
We then estimated the standard deviation from the mean daily abnormal returns for the 200-
day estimation period as:
sffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
 ffi
Xt¼−11
b tÞ ¼
SðA ðAt
AÞ 199 :
2
(6)
t¼−210

We calculated the t-test statistic for day t as:

X
N
At
TSt ¼ pffiffiffiffi : (7)
i¼1
b tÞ N
SðA

The cumulative abnormal return (CAR) for a given period (t1, t2), is:
X
t2
CARðt1 ; t2 Þ ¼ At : (8)
t¼t1

Similar to the test statistic for a single day, TSj for a j-day event period is derived as:
XN Pt2
t¼t1 At
TSj ¼ pffiffiffiffi : (9)
i¼1
b
SðA tÞ N

To determine if our results were disturbed by outliers, we applied two nonparametric tests to
supplement the t-test. We used the Wilcoxon signed-rank test to test if the median abnormal
return was significantly different from 0. We tested for the statistical significance of the
percent negative of the abnormal returns, using the binomial sign test.

4.3 Variable operationalization

4.3.1 Main variables. Supplier (customer) diversification (SD/CD): We used supplier and
customer information in the CSMAR data set to determine the magnitudes of sample firms’
supplier and customer diversification as it is suggested to disclose the proportion of the top
five suppliers and customers to the firm’s total procurement and total sales in the annual Supply chain
report. Following Dhaliwal et al. (2016) and Zhu et al. (2021), we use the reverse sum of the diversification
percentages of procurement/sales from the top five suppliers/customers to measure the
supplier/customer diversification as follows.
and
disruptions
Supplier ðCustomerÞdiversification ¼
Procurement from top five suppliers ðsales to top five customersÞ (10)
−
total procurement ðtotal salesÞ

The range of this variable is from
1 to 0. The closer the value is to 0, the higher the degree of
supplier/customer diversification.
Product diversification (PD): Following Jacquemin and Berry’s (1979) pioneering work, we
adopted the entropy index to measure product diversification as it allows for more fine-
grained analyses and has been widely validated (Kistruck et al., 2013). The entropy index was
calculated as follows:
Xn
PDi ¼ Pj lnð1=PjÞ (11)
j¼1

where Pj is the proportion of jth product of the total revenue of firm i, and n is the total number
of products in firm i. The entropy index is between 0 and ln n. The higher value represents a
greater diversified firm.
4.3.2 Control variables. To control the influences of other factors on our regression
variables, we included the following control variables.
Firm size (FS): Firm size was measured as the natural logarithm of total asset in the most
recent fiscal year ending before the announcement date (i.e. the year 2019).
Firm age (FA): Firm size was measured as the natural logarithm of operating years since
firms were established.
Corporate ownership (CO): We set the state-owned enterprises as 1, and 0 for all others.
Leverage ratio (LR): Leverage ratio was measured as firm i’s book value of debt divided by the
sum of the book value of debt and the market value of equity. The book value of the debt was the
value reported in the most recent fiscal year (i.e. the year 2019) before the date of the announcement.
Growth prospects (GP): Growth prospects were measured as the ratio of the market value
of equity divided by the book value of equity. The higher the ratio, the better the company’s
growth prospects.
Industry competition (IC): We used the Herfindahl index to measure the extent of industry
competition. The Herfindahl index is the sum of the squared fractions of industry sales in
each sample firm in the last fiscal year. The more competitive the industry, the lower the
Herfindahl index.
Table 3 provides a summary of all the variables used in this study.

5. Empirical results
5.1 Firm-level financial consequences of supply chain disruptions
Panel A of Table 4 shows the abnormal returns of the sample firms that announced being
affected by supply chain disruptions during the COVID-19 pandemic. As mentioned above,
we focus on the cumulative abnormal returns (CAR) of 12 trading days [
1,10] as well as
shorter event periods to gain more insights into the affected pattern.
The results suggest that the announcements of supply chain disruption affected by
COVID-19 had a significantly negative impact on the shareholder value of the sample firms,
with the mean and median CAR as well as the percentage of negatively affected firms being
IJOPM Variable Description Reference

Cumulative The cumulative abnormal return from day
1 to day 10 Hendricks et al. (2020)
abnormal return
Supplier - Procurement from top five suppliers/total procurement Dhaliwal et al. (2016),
diversification Zhu et al. (2021)
Customer - Sales from the top five customers/total sales Dhaliwal et al. (2016),
diversification Pn Zhu et al. (2021)
Product j¼1 Pj lnð1=PjÞ; where Pj is the proportion of jth product of
Kistruck et al. (2013)
diversification the total revenue of firm i, and n is the total number of
products in firm i
Firm size The natural logarithm of total asset Li et al. (2022)
Firm age The natural logarithm of operating years since firms were Feng et al. (2015)
established
Corporate ownership Dummy coding that the state-owned enterprises as 1, and Huang et al. (2020)
0 for all others
Leverage ratio Book value of debt divided by the sum of the book value of Jacobs and Singhal
debt and the market value of equity (2020)
Table 3. Growth prospects The ratio of the market value of equity divided by the book Jacobs and Singhal
Measurement details value of equity (2020)
for dependent, Industry The sum of the squared fractions of industry sales in each Hendricks and Singhal
independent and competition sample firm in the last fiscal year (2003)
control variables Source(s): Created by authors

Event Wilcoxon signed- % Binomial sign test

date(s) N Mean t-test Median rank test negative Z-statistics

Panel A: The CAR based on the market model

(
1,1) 222
3.96%
10.44***
4.06%
9.31*** 79.73% 8.79***
(
1,3) 222
5.04%
11.21***
5.58%
9.72*** 85.14% 10.40***
(
1,5) 222
5.06%
11.29***
5.84%
9.97*** 86.04% 10.67***
(
1,10) 222
6.79%
14.17***
8.03%
10.41*** 86.49% 10.81***
Panel B: The CAR based on the Fama–French three-factor model
(
1,1) 222
2.87%
8.17***
2.95%
8.15*** 77.48% 8.12***
Table 4.
(
1,3) 222
4.44%
10.53***
4.69%
9.62*** 84.68% 10.23***
Test results of CAR of
supply chain (
1,5) 222
5.09%
11.67***
6.01%
10.26*** 86.04% 10.67***
disruptions (
1,10) 222
6.95%
14.94***
7.99%
10.80*** 86.94% 10.94***
announcements during Note(s): All tests are two-tailed: ***p < 0.01; **p < 0.05; *p < 0.10
COVID-19 Source(s): Created by authors

significant at the 1% level. The mean (median) CARs for days (
1,1) was
3.96% (
4.06%),
and about 80% of the sample firms saw their shareholder value fall significantly in these three
days. The mean (median) of CAR from day
1 to day 3 was
5.04% (
5.58%). Over 85% of
sample firms experienced negative abnormal returns during this period, significantly higher
than 50%. The mean and median CARs for days (
1,5) were both significantly negative, with
86.04% of sample firms witnessing the loss in these seven days. Finally, the sample firms
suffered an average CAR of
6.79% between day
1 and day 10. The median CAR is

8.03%, and over 86% of them were negatively affected, significantly higher than 50%.

5.2 Regression analyses of abnormal returns

5.2.1 Stage one: basic regression model. To examine how supply chain diversification
moderates the impact of supply chain disruptions on financial performance (hypotheses H2,
H3 and H4), we tested their effects on the cumulative abnormal return from day
1 to day 10 Supply chain
using cross-sectional regression analyses. Accordingly, we analyzed the following diversification
regression model:
and
CARi ¼ β0 þ β1 SDi þ β2 CDi þ β3 PDi þ β4 FSi þ β5 FAi þ β6 COi disruptions
(12)
þ β7 LRi þ β8 GPi þ β9 ICi þ εi;

where CARi is the cumulative abnormal return from day
1 to day 10 of firm i. Both
independent and control variables are mentioned above, and εi represents the error term.
Since 19 companies did not provide sufficient financial data, the final sample size for our
regression analysis was 203.
The correlation coefficients of the variables are shown in Table 5. To control the influence
of outliers on the regression results, we winsorized the continuous variables at 2.5% in each
tail. Model 1 in Table 6 provides the coefficient estimation results for the basic regression
model in equation (12). The maximum variance inflation factor (VIF) is 2.820, much less than
the threshold of 10, indicating that multicollinearity is not a major concern in this study.
Consistent with our hypotheses of H2, H3 and H4, the coefficients of supplier diversification,
customer diversification and product diversification are significantly positive, indicating that
the effect of supply chain disruptions on financial performance in COVID-19 is less negative
for firms with a supplier diversification, customer diversification, or product diversification
strategy.
Regarding control variables, the regression results suggest that the effect of supply chain
disruptions on financial performance in COVID-19 is more negative for old firms. However,
firm size, corporate ownership, leverage ratio, growth prospect and industry competitiveness
do not significantly influence the magnitude of financial consequences of supply chain
disruptions during the COVID-19 pandemic.
5.2.2 Stage two: model expansion. To gain a deeper insight into the relationships between
supplier diversification, customer diversification and product diversification, we further
extended the basic regression model to explore whether complementary or substitution
effects exist among supply chain diversification strategies.
We first added the interaction between customer diversification and product
diversification into the basic regression model (equation (12)). We centered these two
variables and examined the following extended regression model:
CARi ¼ β0 þ β1 SDi þ β2 CDi þ β3 PDi þ β4 CDi * PDi þ β5 FSi þ β6 FAi
(13)
þ β7 COi þ β8 LRi þ β9 GPi þ β10 ICi þ εi;

The regression results are provided in model 2 in Table 6. The coefficients of supply chain
diversification in three dimensions are still positive and significant. The coefficient of the
interaction term is negative and significant, indicating that there is a substitution effect
between customer diversification and product diversification. That is, firms with higher
levels of customer diversification and lower level of product diversification would experience
less financial loss due to the supply chain disruptions during the pandemic.
Figure 2 presents a more in-depth interpretation of the substitution effect. As shown in
Figure 2, the slope for high levels of customer diversification is flatter than that for low
customer diversification. It indicates that at high levels of customer diversification, a unit
increase in product diversification leads to a lower increase in CAR than at low levels of
customer diversification. Therefore, there exists a substitutive relationship between
customer diversification and product diversification. That is, firms with lower product
diversification and higher customer diversification would experience less loss due to supply
chain disruptions during COVID-19.
 variables
Table 5.
IJOPM

value and standard

deviation of regression
The correlations, mean
1 2 3 4 5 6 7 8 9 10

1. CAR 1
2. Supplier diversification 0.231*** 1
3. Customer diversification 0.160** 0.191*** 1
***
4. Product diversification 0.182 0.141**
0.188*** 1
5. Firm size 0.091 0.340*** 0.292***
0.139** 1
6. Firm age
0.105 0.009 0.316***
0.045 0.130* 1
7. Corporate ownership 0.024
0.005 0.057
0.078 0.026 0.002 1
8. Leverage ratio
0.023 0.061 0.324***
0.185*** 0.706*** 0.322*** 0.014 1
9. Growth prospects
0.028
0.110
0.452*** 0.087
0.399***
0.283***
0.013
0.543*** 1
10. Industry competition 0.003 0.141** 0.114
0.038
0.054
0.055 0.042
0.099 0.152** 1
Mean
0.068
0.308
0.165 0.858 23.622 3.080 0.545 0.486 1.990 0.181
SD 0.071 0.216 0.180 0.502 1.641 0.300 0.499 0.278 2.011 0.186
Note(s): All tests are two-tailed: ***p < 0.01; **p < 0.05; *p < 0.10
Source(s): Created by authors
 Variable Model 1 Model 2 Model 3 Model 4

Intercept β0 0.057 (0.450) 0.063 (0.500) 0.051 (0.400) 0.057 (0.450)

Supplier diversification SD 0.151 (2.010)** 0.147 (1.970)** 0.152 (2.020)** 0.149 (1.950)*
Customer diversification CD 0.256 (3.280)*** 0.274 (3.500)*** 0.248 (3.080)*** 0.257 (3.270)***
Product diversification PD 0.189 (2.710)*** 0.210 (2.990)*** 0.188 (2.680)*** 0.189 (2.700)***
Interaction_1 CD*PD
0.129 (
1.890)*
Interaction_2 SD*CD
0.030 (
0.42)
Interaction_3 SD*PD
0.006 (
0.080)
Firm size FS 0.082 (0.790) 0.091 (0.880) 0.083 (0.800) 0.083 (0.790)
Firm age FA
0.225 (
3.150)**
0.243 (
3.390)***
0.219 (
3.000)***
0.226 (
3.130)***
Corporate ownership CO 0.051 (0.760) 0.053 (0.810) 0.049 (0.740) 0.051 (0.760)
Leverage ratio LR
0.081 (
0.740)
0.104 (
0.940)
0.082 (
0.750)
0.082 (
0.740)
Growth prospect GP 0.007 (0.080) 0.002 (0.020) 0.014 (0.160) 0.007 (0.080)
Industry competitiveness IC
0.079 (
1.150)
0.095 (
1.380)
0.078 (
1.120)
0.079 (
1.14)
N 203 203 203 203
F 4.290*** 4.270*** 3.860*** 3.840***
R2 0.167 0.182 0.168 0.167
Adjusted R2 0.128 0.139 0.124 0.123
Note(s): All tests are two-tailed: ***p < 0.01; **p < 0.05; *p < 0.10. In parentheses are the values of the t-test statistics
Source(s): Created by authors
diversification
and

Parameter estimates of
disruptions
Supply chain

regression models
Table 6.

the two-stage
IJOPM 1.6

1.4

1.2

0.8
Low customer
diversification
0.6
High customer
0.4 diversification

0.2
Figure 2.
The interaction effect
of product 0
diversification and Low High
customer product diversification
diversification on CAR
Source(s): Created by authors

We then added the interaction between supplier diversification and customer diversification,
supplier diversification and product diversification into the basic regression model (equation
(12)), respectively. Similarly, we centered the interaction terms and examined the following
extended models:
CARi ¼ β0 þ β1 SDi þ β2 CDi þ β3 PDi þ β4 SDi * CDi þ β5 FSi þ β6 FAi
(14)
þ β7 COi þ β8 LRi þ β9 GPi þ β10 ICi þ εi;
CARi ¼ β0 þ β1 SDi þ β2 CDi þ β3 PDi þ β4 SDi * PDi þ β5 FSi þ β6 FAi
(15)
þ β7 COi þ β8 LRi þ β9 GPi þ β10 ICi þ εi;

The regression results are provided in model 3 and model 4 in Table 6, respectively. The
coefficients of the three dimensions of supply chain diversification remain positive and
significant in two regression models. Both of the coefficients of the interaction terms are
negative but insignificant, indicating that the interactions between these two strategies
(between supplier diversification and customer diversification or between supplier
diversification and product diversification) have no significant effect in mitigating the
negative impact of supply chain disruption during the COVID-19.

5.3 Endogeneity concerns and robustness checks

5.3.1 Endogeneity concerns. Considering that the sample firms were self-selected to declare
supply chain disruptions, our sample may be non-random, and sample selection bias may
exist. This non-randomness is likely to cause one or more of independent variables to be
correlated with the error term in equation (12) (Antonakis et al., 2010; Arora et al., 2020), which
may bias the OLS estimation. We used a Heckman two-step procedure to address this
endogeneity concern (Heckman, 1979). We first included prior ROA, leverage ratio, growth
prospect, firm size and firm age to predict the likelihood of a firm announcing supply chain
disruptions during the COVID-19 in a probit selection model and calculated the inverse of the
Mills ratio (IMR). In the second stage, we added IMR as an extra independent variable to
re-estimate the regression model.
 In the first stage, we matched each of the sample firms within the same industry. The Supply chain
market value of equity of the matching firm was closest to that of the sample firm in the most diversification
recent fiscal year ending before the announcement date (Arora et al., 2020; Hendricks et al.,
2015). For each of the matching firms, we reviewed the official announcements and news from
and
authoritative media institutions to confirm that they did not disclose information about disruptions
supply chain disruptions during the event period.
For the probit selection model, we used prior return on assets (Prior_ROA), leverage
ratio (LR), growth prospect (GP), firm size (FS) and firm age (FA) to predict the
possibility of announcing supply chain disruptions (SCD) during the COVID-19. The model
is as follows:

PrðSCDi ¼ 1Þ ¼ Φðβ0 þ β1 Prior— ROAi þ β2 LRi þ β3 GPi þ β4 FSi þ β5 FAi þ εiÞ; (16)

The results of the model were based on 444 firms (222 sample firms and 222 matched firms).
The log-likelihood of this model was
265.53 (with p-value < 0.01), indicating the significance
of the model. We then estimated the IMR, and added it as an additional independent variable
based on equation (12). The regression model is:

CARi ¼ β0 þ β1 SDi þ β2 CDi þ β3 PDi þ β4 FSi þ β5 FAi þ β6 COi þ β7 LRi

(17)
þ β8 GPi þ β9 ICi þ β10 IMRi þ εi;

The regression results are shown in model 1 in Table 7. The insignificant coefficient of IMR
indicates that selection bias is not a major concern in this study. In addition, the coefficients of
supplier diversification, customer diversification and product diversification are still
significant, similar to that in model 1 in Table 6.
5.3.2 Robustness checks. To test the robustness of our findings, we performed a set of
robustness tests. We first calculated short-term abnormal returns in the stock market using
an alternative model. Then we ran the regression models using alternative variables and the
winsorized data. Finally, we further calculated the abnormal operating performance in long
term and reran the regression models.
5.3.2.1 Calculating abnormal returns using an alternative model. We used the Fama–
French three-factor model (Fama and French, 1993), as shown in equation (18), to re-estimate
the abnormal returns.
Ait ¼ Rit
ðbαi1 þ Rft þ b
βi1 ½Rmt
Rft  þ b
βi2 SMBt þ bβi3 HMLt Þ (18)

where Ait is the abnormal return for firm i on day t; Rit is the actual return of firm i on day t; Rft
is the risk-free return on day t; Rmt is the market return on day t; SMBt is the small-minus-
large-size portfolio return on day t; HMLt is the high-minus-low-book-to-market portfolio
return on day t. It turns out that the market model and the Fama–French three-factor model
have similar results, as shown in panel B of Table 4. The CARs for all four periods are
significantly negative. The results from the Fama–French three-factor model strongly
supported our hypothesis H1 again.
5.3.2.2 Running regression models using alternative variables and the winsorized data.
The regression model was rerun using the alternative CAR for days (
1,10) calculated by
Fama–French three-factor model as the dependent variable. Likewise, we winsorized the
continuous variables at the 2.5% level in each tail. The coefficients of supply chain
diversification are still significantly positive as we expected. The results shown in model 2 of
Table 7 indicate that the more diversified the supplier, customer and product are, the less loss
sample firms experience due to the supply chain disruptions. The regression results are
similar to those in model 1 in Table 6.
 Table 7.
IJOPM

addressing
endogeneity concerns
and robustness checks
Parameter estimates of
the regression model in
Variable Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7

Intercept β0 0.057 (0.390)
0.101 (
0.830) 0.052 (0.400)
0.097 (
0.780) 0.140 (1.010) 0.139 (1.060) 0.352 (2.960)***
Supplier SD 0.182 (2.360)** 0.131 (1.740)* 0.151 (1.980)** 0.136 (1.790)* 0.146 (1.790)* 0.188 (2.450)** 0.165 (2.150)**
diversification
Customer CD 0.284 (3.550)*** 0.261 (3.320)*** 0.253 (3.170)*** 0.255 (3.180)*** 0.231 (2.790)*** 0.263 (3.380)*** 0.175 (2.190)**
diversification
Product PD 0.147 (2.060)** 0.140 (1.990)** 0.191 (2.730)*** 0.140 (1.990)** 0.151 (1.880)* 0.163 (2.230)*** 0.029 (0.400)
diversification
Firm size FS
0.003 (
0.020) 0.203 (1.940)* 0.075 (0.720) 0.189 (1.790)* 0.031 (0.280) 0.043 (0.410)
0.267 (
2.500)**
Firm age FA
0.167 (
1.640)
0.174 (
2.420)**
0.213 (
2.950)***
0.166 (
2.290)**
0.267 (3.420)**
0.271 (
3.720)***
0.176 (
2.400)**
Corporate CO 0.082 (1.220) 0.006 (0.090) 0.043 (0.640)
0.001 (
0.010) 0.043 (0.580) 0.086 (1.260) 0.029 (0.440)
ownership
Leverage ratio LR 0.026 (0.150)
0.091 (
0.820)
0.069 (
0.630)
0.073 (
0.660) 0.010 (0.080)
0.009 (
0.080) 0.401 (3.550)***
Growth prospect GP 0.002 (0.020) 0.033 (0.380) 0.018 (0.210) 0.043 (0.490) 0.054 (0.580) 0.027 (0.310) 0.206 (2.350)**
Industry IC
0.087 (
1.230)
0.081 (
1.170)
0.080 (
1.150)
0.076 (
1.090)
0.094 (1.230)
0.078 (
1.090)
0.204 (
2.890)***
competitiveness
IMR 0.155 (0.990)
N 203 203 203 203 170 185 203
F 4.300*** 4.020*** 4.010*** 3.780*** 3.100*** 4.730*** 3.130***
R2 0.192 0.158 0.157 0.150 0.148 0.196 0.127
Adjusted R2 0.147 0.119 0.118 0.110 0.101 0.154 0.087
Note(s): All tests are two-tailed: ***p < 0.01; **p < 0.05; *p < 0.10. In parentheses are the values of the t-test statistics
Source(S): Created by authors
In addition, we winsorized the continuous variables at the 1% level in each tail and Supply chain
re-estimated the regression model. Model 3 and model 4 in Table 7 present the regression diversification
results using the CAR estimated by the market model and Fama-French three-factor model,
respectively. The coefficients of the three dimensions of supply chain diversification are still
and
significantly positive. disruptions
Furthermore, we reran the basic regression model in equation (12) by trimming the
continuous variables at the 2.5% level and 1% level, respectively. As shown in model 5 and
model 6 in Table 7, the associations between the abnormal return and the supply chain
diversification strategies are still significantly positive. Overall, the empirical results are not
sensitive to the alternative model and the winsorized data. The largely identical results
strongly supported our hypotheses H2, H3 and H4 again.
5.3.2.3 Calculating abnormal operating performance in the long term. We also investigated
the long-term effect of supply chain disruption during the COVID-19 on firms’ abnormal
financial performance. We first confirmed the time period to measure financial performance
change. In this study, considering the impact of events like supply chain disruptions during
the COVID-19 pandemic and the availability of financial data, we examined the performance
change of the sample firms from the quarter of the announcement to the following three-
quarters, that is, one year. Accordingly, calendar time was translated into event time, such
that the quarter during which the supply chain disruptions announcement was issued is
quarter 0, followed by quarter 1, and the quarter before quarter 0 is quarter
1.
We adopted a self-control model to identify the changes in the firm performance of the
samples according to their historical performance before the supply chain glitches
announcements. The self-control model, which is calculated based on the historical
performance of the sample companies themselves, has advantages in controlling
development stages, relationship capitals and other industrial-level factors (Barber and
Lyon, 1996; Liu et al., 2020b). In one year, these factors are not likely to change significantly.
The abnormal performance caused by announcements of supply chain disruptions is
estimated as follows:
AP i;t ¼ Pi;t
EðPi;t Þ ¼ Pi;t
Pi;t0 (19)

where AP i;t is the abnormal performance change of firm i in quarter t, Pi;t is the actual
performance change of firm i in quarter t and EðPi;t Þ is the expected performance change of
sample firm i in quarter t. As suggested by Shou et al. (2021) and Liu et al. (2020b), we used the
performance change of sample firm i in year
1 as the expected performance change,
represented by Pi;t0 : It has been considered appropriate to use year
1 as the base year
because it is free from the impact of supply chain disruptions during the COVID-19.
We used the Wilcoxon signed-rank test and the binomial sign test to test if the median
abnormal return and the percent negative of the abnormal returns were significantly different
from 0. To test the firm-level financial impacts of supply chain disruptions, we mainly focus
on return of assets (ROA), an accounting-based indicator calculated as operating income
divided by total assets (Swift et al., 2019). We also provided the abnormal change of gross
profit margin (the ratio of gross profit to total sales) and operating cost ratio (the ratio of
operating cost to total sales). To gain more fine-grained analyses, we further used the
quarterly data to calculate the abnormal change in the financial indicators quarterly. The
results are presented in Table 8.
Results show that the mean abnormal change in ROA and gross profit margin in a one-
year period is
0.86% and
4.52%, respectively, which are significant at the 5 and 1% levels.
The abnormal operating cost ratio saw a significant increase over one year. Specifically, the
abnormal ROA was significantly negative in the quarter that suffered the disruption (i.e. Q0).
However, it turned positive in the following quarters. The abnormal gross profit margin in Q0
IJOPM Wilcoxon Binomial
signed-rank % sign test
Measures Time N Mean t-test Median test negative Z-statistics

ROA 1 year 222
0.86%
2.05**
0.71%
3.12*** 60.81% 3.15***

Q0 222
0.78%
4.46***
0.55%
4.58*** 64.41% 4.23***
Q1 222 0.30% 2.42** 0.17% 2.69*** 41.89%
2.35**
Q2 222 0.29% 2.50** 0.27% 3.15*** 40.99%
2.62***
Q3 222 0.02% 0.14 0.21% 1.80* 43.69%
1.81*
Gross 1 year 222
4.52%
4.19***
2.64%
4.56*** 63.06% 3.83***
profit Q0 222
13.58%
4.38***
2.53%
3.98*** 62.61% 3.69***
margin Q1 222
58.21%
1.18 0.97% 1.50 54.05% 1.14
Q2 222 69.65% 1.39 0.78% 2.62*** 46.40%
1.01
Q3 222
3.05%
0.79
1.11%
0.87 54.05% 1.14
Operating 1 year 222 7.83 3.139*** 1.19% 4.12*** 39.19%
3.15***
cost ratio Q0 222 35.10% 4.08*** 4.19% 5.39*** 36.04%
4.09***
Q1 222 71.55% 1.11
2.29%
3.12*** 57.21% 2.08**
Table 8. Q2 222
95.46%
1.46
1.97%
4.43*** 60.81% 3.15***
Long-term abnormal Q3 222 39.28% 1.40 0.27% 0.73 49.55%
0.07
operating performance Note(s): All tests are two-tailed: ***p < 0.01; **p < 0.05; *p < 0.10
of sample firms Source(s): Created by authors

also decreased significantly, while it became insignificant in the later quarters. The abnormal
operating cost ratio experienced a significant increase and the median value changed to
significantly negative in the following two quarters. These results indicate that the sample
firms’ performance declined significantly in the year after the announcements of disruptions
during COVID-19. The decline was most pronounced in the quarter in which the disruption
occurred and the financial performance recovered gradually from the following quarters.
5.3.2.4 Running regression models using long-term abnormal operating performance.
Finally, we examined how the supply chain diversification strategies influence the long-term
abnormal operating performance, as shown in the following regression model:
APi ¼ β0 þ β1 SDi þ β2 CDi þ β3 PDi þ β4 FSi þ β5 FAi þ β6 COi þ β7 LRi
(20)
þ β8 GPi þ β9 ICi þ εi;

where APi is the abnormal performance change of ROA of sample firm i over the one-year
period. Model 7 in Table 7 presents the regression result. The coefficients of supplier and
customer diversification are positive and significant at the 5% level. Although the coefficient
of product diversification is positive, it is not significant, manifesting that product
diversification does not influence firms’ long-term abnormal operating performance.

5.4 Post-hoc analyses

5.4.1 Calculating abnormal performance for service and manufacturing firms. To explore the
industry heterogeneity across the service and manufacturing sectors, we calculated the
extent to which these two groups were exposed to supply chain disruption shocks from
COVID-19. Specifically, the service sector consists of 145 firms, including business service
industry, water conservancy, environment and public facilities management industry,
transportation, warehousing, and postal industry, and software and IT industry in Table 2.
Manufacturing sector consists of 71 firms. Table 9 shows the comparative results.
The stock market reaction is quite negative for both service firms and manufacturing firms. Supply chain
For service firms, the mean and median CARs in days (
1,10) are
7.97% and
8.82%, diversification
respectively, both significant at the 1% level. Over 92% of the firms experience negative
abnormal returns during this period, significantly greater than 50% at the 1% level. For
and
manufacturing firms, the mean and median CARs for days (
1,10) are
4.64% and disruptions

5.37%, respectively, with 76.05% of the firms experiencing negative abnormal returns, all
of which are significant at the 1% level. To further study the different impacts of COVID-19
on manufacturing and service firms, we compared the magnitude of the mean CAR between
these two subgroups. We find that the mean CARs of service firms are more negative than
that of manufacturing firms, with a difference of
3.33% and significant at 1% level
(t 5
3.28).
When it comes to the abnormal performance change in ROA, the results show that the
mean and median abnormal ROA in a one-year period in service firms is
1.61% and

1.09%, respectively, which are significant at the 5 and 1% levels. More than 68% of service
firms suffered negative abnormal performance during this period, significantly greater than
50% at the 1% level. For manufacturing firms, the mean and median abnormal ROA are
positive but neither is significant. We further compared the difference of the mean abnormal
performance change in ROA between these two subgroups. The difference is
2.63%, which
is significant at 5% (t 5
2.51). Therefore, we can conclude that service firms suffered more
than manufacturing firms during the outbreak of COVID-19. The implications of this
difference are discussed in Section 6.
5.4.2 Regression analyses for service and manufacturing firms. Next, we examined how the
supply chain diversification strategies influence the abnormal return differently across
service firms and manufacturing firms. We rerun the regression model in equations (13) using
data of the two subgroups.
Model 1 and model 2 in Table 10 show the regression results of equation (13) in service
firms and manufacturing firms, respectively. The results demonstrate that the coefficients of
customer diversification and product diversification are significantly positive in service
firms, while those of supplier diversification and customer diversification are significant and
positive in manufacturing firms. The interaction between customer diversification and
product diversification is significantly negative in service firms yet insignificant in
manufacturing firms. Therefore, we conclude that customer diversification strategy can
significantly absorb the negative outcomes of supply chain disruptions in both service and
manufacturing firms during the COVID-19 pandemic. While supplier diversification strategy
exerts a noteworthy role only in manufacturing firms, product diversification strategy exerts
its role in service firms. Moreover, a significant substitution effect exists between customer
diversification and product diversification for service firms, yet not significant for
manufacturing firms.

Abnormal Wilcoxon Binomial sign

performance Industry type N Mean t-test Median signed-rank test % negative test Z-statistics Table 9.
Abnormal
CAR(
1,10) Service 145
7.97%
17.60***
8.82%
9.64*** 92.41 10.13*** performance of supply
Manufacturing 71
4.64%
4.14***
5.37%
4.02*** 76.05 4.27*** chain disruptions
ROA Service 145
1.61%
2.47**
1.09%
4.69*** 68.97 4.48*** announcements during
Manufacturing 71 1.02% 1.51 0.61% 1.31 54.93 0.71 COVID-19 for
Note(s): All tests are two-tailed: ***p < 0.01; **p < 0.05; *p < 0.10 manufacturing and
Source(s): Created by authors business service firms
IJOPM Variable Model 1 (service) Model 2 (manufacturing)

Intercept β0
0.164 (
1.210) 0.471 (1.800)*

Supplier diversification SD
0.012 (
0.130) 0.353 (2.380)**
Customer diversification CD 0.251 (2.360)** 0.269 (2.100)**
Product diversification PD 0.240 (2.360)** 0.174 (1.340)
Interaction CD*PD
0.252 (
2.530)** 0.050 (0.380)
Firm size FS 0.254 (1.670)*
0.164 (
0.990)
Firm age FA
0.158 (
1.740)*
0.210 (
1.580)
Corporate ownership CO 0.157 (1.860)* 0.047 (0.400)
Leverage ratio LR
0.231 (
1.570) 0.012 (0.070)
Growth prospect GP
0.002 (
0.010)
0.083 (
0.540)
Industry competitiveness IC
0.068 (
0.750)
0.096 (
0.760)
N 131 67
F 2.230** 2.230**
R2 0.157 0.285
Table 10. Adjusted R2 0.086 0.157
Parameter estimates of Note(s): All tests are two-tailed: ***p < 0.01; **p < 0.05; *p < 0.10. In parentheses are the values of the t-test
the regression models statistics
in the post-hoc analysis Source(s): Created by authors

6. Discussion and conclusions

6.1 Major findings
Using event study methodology, this study empirically tested the firm-level financial
consequences caused by supply chain disruptions during the COVID-19 pandemic and
examined how the consequences are moderated by supply chain diversification strategies,
including supplier diversification, customer diversification and product diversification.
First, we find that firms affected by supply chain disruptions in COVID-19 experienced an
average decline of 6.79% in shareholder wealth in the following two weeks. This result is in
line with the negative stock returns that are noted in earlier COVID-19 event studies (Xiong
et al., 2021; Wang et al., 2022). This proportion is higher than the decrease in shareholder value
induced by other supply chain disruption events. For instance, Hendricks et al. (2020) found
that the 2011 Great East Japan Earthquake caused an average decline of 5.21% in affected
firms’ shareholder wealth. Jacobs and Singhal (2017) found that the 2013 Dhaka Rana Plaza
accident did not significantly impact stock returns for global apparel retailers procuring from
Bangladesh. Our study echoes previous research and provides empirical evidence that
supply chain disruptions in COVID-19 caused more severe consequences than other
disruptive events (Ivanov and Dolgui, 2021).
Second, the cross-sectional regression results show that diversified supplier, customer and
product strategies can build up supply chain resilience to mitigate the negative impacts.
These findings are consistent with previous studies that have highlighted the positive impact
of diversification strategies on enterprise risk management (e.g. Chan Kim et al., 1989). We
examine the value of supply chain diversification strategy in a highly risky and turbulent
context, whereas prior research was primarily conducted in more stable environments. More
interestingly, we go one step further to reveal the interplay between two pairs of supply chain
diversification strategies and find the substitution effect between customer diversification
and product diversification strategies. However, the interaction of supplier diversification
and customer or product diversification shows no significant effect in influencing the
negative impact of supply chain disruptions caused by COVID-19. One plausible explanation
is that, unlike the close connection between products and customers, focal firms tend to make
relatively independent decisions when managing supplier and customer strategies
(Tangpong et al., 2008) and leveraging on supply base and product types (Ylim€aki, 2014).
 Moreover, the results of the long-term event study suggest that disruption Supply chain
announcements would cause a significant decrease in affected firms’ operating diversification
performance in one year. The granular analysis reveals that the decline was most
pronounced in the quarter in which the disruption occurred, and it progressively improved
and
from the following quarter. This can be explained by the trend in the percentage change in the disruptions
number of deaths due to COVID-19, which is also mentioned by Kl€ockner et al. (2023) that
COVID-19 had the greatest impact in the first three months. Firms are therefore most
negatively affected by supply chain disruptions in the quarter in which the disruption
occurred. The regression results show that the diversified supplier and customer base can
still act as shock absorbers to alleviate the negative impacts, while product diversification
does not work in the long run.
Finally, we compare the negative financial consequences of supply chain disruptions
across manufacturing and service firms. The results show that service firms experience more
loss than manufacturing firms. Several reasons account for the results. During the outbreak
of COVID-19, the most effective way is to limit and isolate human interaction to reduce the
spread of the virus. Because most activities of the service industries are based on increasing
communication and concentration among people, service firms would be the first to be
affected. From the perspective of supply and demand, the pandemic not only reduced the
demand for services due to the isolation of people but also reduced the supply of services due
to the closure of service producers. Such “disappearing” demand and supply cannot be
“snatched” or “replenished” by working overtime, as manufacturing does. In addition,
manufacturing firms are more likely to redirect themselves to new demand by producing
healthcare equipment. For instance, automotive firms and garment factories such as BYD
and Chanel manufacturers have mobilized their supply chain networks to produce medical
equipment including masks, gowns, disinfectants and respiratory ventilators (Bougro, 2020;
Reuters, 2020). Our study echoes Belhadi et al.’s (2021) research which finds that the
percentage of production cuts in the automotive manufacturing sector ranged from 16.78% to
20.97%, while the whole reduction in the airline services sector is larger, ranging from 42% to
56%. Lastly, our study shows that customer diversification is an effective strategy for both
service and manufacturing firms to mitigate the adverse impacts of supply chain disruptions
caused by COVID-19. However, while supplier diversification plays the same role only in
manufacturing firms, product diversification exerts its role in service firms. Previous
research on diversification has mainly focused on manufacturing firms (e.g. Delbufalo et al.,
2016; Nguyen and Devinney, 1990; Patrick, 2012), with relatively fewer studies examining the
role of supply chain diversification in service firms. Our study indicates that supplier and
product diversification play different roles between service and manufacturing firms,
possibly due to the different structures and characteristics of service and manufacturing
supply chains. The manufacturing supply chains are typically lengthy and complex,
involving the supply of various raw materials (Jain and Benyoucef, 2008). In contrast, service
supply chains usually have a relatively short channel distance from the supplier to the final
customers (Yuen and Thai, 2017). We also find a substitution effect exists between customer
diversification and product diversification for service firms but not manufacturing firms.
This might be due to the fact that products in the service firms are usually non-standardized
and highly customized to meet the specific needs of customers (Fu et al., 2017; Silander et al.,
2017). Service firms thus need to offer a wide range of services to cater to varying customer
demands. In manufacturing, the mechanized and modular production (Jacobs et al., 2011)
enable firms to easily provide mass-customized products to different customers.

6.2 Theoretical implications

This research contributes to the literature on COVID-19 from three aspects. First, although
prior SCM research has examined the impact of supply chain disruptions caused by natural
IJOPM or manmade disasters (Hendricks et al., 2020), COVID-19 differs from typical disasters due to
the unique characteristics of being slow-moving, persistent and dispersed globally (Handfield
et al., 2022). The supply chain disruptions caused by COVID-19 are the results of both natural
and man-made factors: while the spread of the new coronavirus is natural, the
countermeasures (such as lockdowns and factory closedown) are man-made (Lin et al.,
2021). The business environment is extremely turbulent because of the intricate relationship
between viral spread and human defense. Our study shows that COVID-19 brings a larger
decline in financial consequences than those resulting from other supply chain disruption
events, such as the 2011 Great East Japan Earthquake and the 2013 Dhaka Rana Plaza
accident. The findings echo the earlier COVID-19 event studies (e.g. Gavalas et al., 2022; Xiong
et al., 2021; Wang et al., 2022) and empirically confirm that the COVID-19 pandemic has
caused the largest supply chain disruptions in decades, with much more severe impacts than
other disruptive events (Gunessee and Subramanian, 2020). But adding to previous
COVID-19 event studies, which mainly focused on short-term abnormal stock return, we
provide empirical evidence for the magnitude and severity of both short-term stock price
volatility and long-term operational performance change. Based on analyses of secondary
data, this study contributes to SCM literature by enriching our understanding of how supply
chain disruptions due to such devastating disasters dynamically affect firm performance in
both the short and long terms.
Further and more importantly, it is imperative to understand the strategic factors that
help firms to build up resilience to buffer disasters such as the pandemic. Recent studies
propose risk mitigation strategies for the COVID-19 pandemic from several perspectives,
including digitalization (Ivanov and Dolgui, 2021), capacity redundancy (Xu et al., 2020),
information visibility and local sourcing (Remko, 2020), agility (Ivanov, 2020) and so forth.
We enrich this stream of work from firm-specific characteristics to a supply chain
perspective. We comprehensively consider supply chain diversification strategies from
both the external and internal aspects, and show that the organization’s resilience to
significant disruption events is affected not only by the diversified suppliers and customers
externally but also by the internal product diversification. The results enrich supply chain
resilience literature that the robustness approach (which correlates to single sourcing
strategy) may not function well during the pandemic, compared with a multi-sourcing
flexibility approach. It also alleviates the debate in the existing studies on whether it is
necessary for firms to build diversified supply chain structures. Although managing a
diverse supply chain can be costly and require time and effort to coordinate, we find that in
extremely volatile environments, a diverse pool of suppliers, customers and products can
serve as effective risk buffers, helping firms mitigate negative consequences as the benefits
outweigh the costs. Interestingly, we also find a substitution effect between customer
diversification and product diversification, which has received little attention in previous
research. This indicates that firms should not blindly implement customer and product
diversification strategies at the same time. They need to rationally configure the structure
of products and customers in order to build supply chain resilience and effectively deal
with risks.
Finally, the cross-industry comparative analyses reveal different influence patterns of the
supply chain disruptions and supply chain diversification strategies between the service and
manufacturing firms. This not only echoes previous research that the effects of COVID-19
might vary for different business sectors (Belhadi et al., 2021; Sharma et al., 2020a), but also
compares the risk mitigation mechanisms of supply chain diversification between
manufacturing and service firms. We have enriched the literature on supply chain
disruption and supply chain risk management by investigating how firms in different
industries leverage supply chain diversification to build supply chain resilience.
6.3 Managerial implications Supply chain
The findings on the financial consequences of supply chain disruptions in COVID-19 have diversification
significant managerial implications. First, our results reveal the vulnerability and fragility of
supply chains exposed to a sudden public health emergency such as the COVID-19 pandemic.
and
Although such disasters have a low probability of occurrence, they have substantial negative disruptions
consequences for firms. By understanding the magnitude of the consequences, managers can
become better prepared and take precautions against such events. Second, our findings help
managers to design their supply chain structures concerning suppliers, customers and
products more appropriately, through which firms can enhance resilience and recover more
quickly from such events. Furthermore, firms should also consider the negative spillover
effect when adopting both customer diversification and product diversification strategies
simultaneously. Finally, our findings provide managers with insights into how supply chain
diversification strategies can differentially affect the risk management capabilities of
manufacturing and service industries respectively. Overall, our results help managers to
understand how to build resilience from the supply chain diversification perspective.

6.4 Limitations and future research

The empirical findings of this research need to be interpreted in light of several limitations.
First, the sample of firms affected by supply chain disruptions during COVID-19 was drawn
solely from China. As the disease quickly spread worldwide and caused ripple effects in
global supply chains, it would be interesting for future research to study the differences
regarding the impact patterns during different stages of the spread of the pandemic. Second,
care must be taken when extending our findings to other public health emergencies, as our
focus is on supply chain disruptions from COVID-19. Other public health emergencies may
have different characteristics in terms of scope, spillover and shifts. Third, it would be
interesting to investigate how firms’ supply chain structures and strategies change and how
these changes affect firm performance and supply chain performance in the post-pandemic
era. Fourth, future work can dig deeper into supplier diversification by considering the
location of the top suppliers. Finally, future research can collect further data in other more
specific industries (e.g. unpacking the business service industry) to understand the different
impact patterns of the pandemic and risk mitigation strategies. All in all, diversity makes us
more resilient.

References
Almaghrabi, K.S. (2021), “COVID-19 and the cost of bond debt: the role of corporate diversification”,
Finance Research Letters, Vol. 46, 102454.
Antonakis, J., Bendahan, S., Jacquart, P. and Lalive, R. (2010), “On making causal claims: a review and
recommendations”, The Leadership Quarterly, Vol. 21 No. 6, pp. 1086-1120.
Apte, A. (2009), “Humanitarian logistics: a new field of research and action”, Foundations and Trends
in Technology, Information and OM, Vol. 3 No. 3, pp. 1-100.
Arda, Y. and Hennet, J.C. (2006), “Inventory control in a multi-supplier system”, International Journal
of Production Economics, Vol. 104 No. 2, pp. 249-259.
Arora, P., Hora, M., Singhal, V. and Subramanian, R. (2020), “When do appointments of corporate
sustainability executives affect shareholder value?”, Journal of Operations Management, Vol. 66
No. 4, pp. 464-487.
Barber, B.M. and Lyon, J.D. (1996), “Detecting abnormal operating performance: the empirical
power and specification of test statistics”, Journal of Financial Economics, Vol. 41 No. 3,
pp. 359-399.
IJOPM Belhadi, A., Kamble, S., Jabbour, C.J.C., Gunasekaran, A., Ndubisi, N.O. and Venkatesh, M. (2021),
“Manufacturing and service supply chain resilience to the COVID-19 outbreak: lessons learned
from the automobile and airline industries”, Technological Forecasting and Social Change,
Vol. 163, 120447.
Berger, P.D. and Zeng, A.Z. (2006), “Single versus multiple sourcing in the presence of risks”, Journal
of the Operational Research Society, Vol. 57 No. 3, pp. 250-261.
Bergh, D. (2005), “Diversification strategy research at a crossroads: Established, emerging and
anticipated paths”, in Hitt, M.A., Freeman, R.E. and Harrison, J.S. (Eds), The Blackwell Handbook
of Strategic Management, Blackwell, Malden, MA, pp. 355-376.
Bode, C. and Wagner, S.M. (2015), “Structural drivers of upstream supply chain complexity and the
frequency of supply chain disruptions”, Journal of Operations Management, Vol. 36, pp. 215-228.
Booz, A., Allen, J.L. and Hamilton, C. (1985), Diversification: A Survey of European Chief Executives,
Booz, Allen and Hamilton.
Bougro, A. (2020), “How the fashion industry is taking action to help combat coronavirus”, available
at: https://www.vogue.fr/fashion/article/fashion-industry-taking-action-combat-coronavirus-
2020 (accessed 26 February 2023).
Brown, S.J. and Warner, J.B. (1985), “Using daily stock returns: the case of event studies”, Journal of
Financial Economics, Vol. 14 No. 1, pp. 3-31.
Campello, M. and Gao, J. (2017), “Customer concentration and loan contract terms”, Journal of
Financial Economics, Vol. 123 No. 1, pp. 108-136.
Cao, Z. (2020), “Daily Report of resuming work and production on March 31”, available at: http://news.
xinhua08.com/a/20200331/1926958.shtml (accessed 28 June 2021).
Chan Kim, W., Hwang, P. and Burgers, W.P. (1989), “Global diversification strategy and corporate
profit performance”, Strategic Management Journal, Vol. 10 No. 1, pp. 45-57.
Chod, J., Trichakis, N. and Tsoukalas, G. (2019), “Supplier diversification under buyer risk”,
Management Science, Vol. 65 No. 7, pp. 3150-3173.
Choi, T.Y. and Krause, D.R. (2006), “The supply base and its complexity: implications for transaction
costs, risks, responsiveness, and innovation”, Journal of Operations Management, Vol. 24 No. 5,
pp. 637-652.
Chopra, S. and Sodhi, M.S. (2004), “Supply-chain breakdown”, MIT Sloan Management Review, Vol. 46
No. 1, pp. 53-61.
Chowdhury, M., Sarkar, A., Paul, S.K. and Moktadir, M. (2020), “A case study on strategies to deal
with the impacts of COVID-19 pandemic in the food and beverage industry”, Operations
Management Research, Vol. 15, pp. 166-178.
Cohen, M.A. and Kouvelis, P. (2021), “Revisit of AAA excellence of global value chains: robustness,
resilience, and realignment”, Production and Operations Management, Vol. 30 No. 3, pp. 633-643.
Craighead, C.W., Blackhurst, J., Rungtusanatham, M.J. and Handfield, R.B. (2007), “The severity of
supply chain disruptions: design characteristics and mitigation capabilities”, Decision Sciences,
Vol. 38 No. 1, pp. 131-156.
Craighead, C.W., Ketchen, D.J. Jr and Darby, J.L. (2020), “Pandemics and supply chain management
research: toward a theoretical toolbox”, Decision Sciences, Vol. 51 No. 4, pp. 838-866.
Delbufalo, E., Poggesi, S. and Borra, S. (2016), “Diversification, family involvement and firm
performance: empirical evidence from Italian manufacturing firms”, Journal of Management
Development, Vol. 35 No. 5, pp. 663-680.
Deloitte (2022), “How can CFOs prepare for supply chain diversification?”, available at: https://www.
deloitte.com/global/en/our-thinking/insights/topics/business-strategy-growth/supply-chain-
diversification.html (accessed 17 December 2022).
Dhaliwal, D., Judd, J.S., Serfling, M. and Shaikh, S. (2016), “Customer concentration risk and the cost of
equity capital”, Journal of Accounting and Economics, Vol. 61 No. 1, pp. 23-48.
Ding, L., Lam, H.K., Cheng, T.C.E. and Zhou, H. (2018), “A review of short-term event studies in Supply chain
operations and supply chain management”, International Journal of Production Economics,
Vol. 200, pp. 329-342. diversification
Dong, Y., Skowronski, K., Song, S., Venkataraman, S. and Zou, F. (2020), “Supply base innovation
and
and firm financial performance”, Journal of Operations Management, Vol. 66 Nos 7-8, disruptions
pp. 768-796.
El Baz, J. and Ruel, S. (2021), “Can supply chain risk management practices mitigate the disruption
impacts on supply chains’ resilience and robustness? Evidence from an empirical survey in a
COVID-19 outbreak era”, International Journal of Production Economics, Vol. 233, 107972.
Fama, E.F. and French, K.R. (1993), “Common risk factors in the returns on stocks and bonds”, Journal
of Financial Economics, Vol. 33 No. 1, pp. 3-56.
Feng, M., Li, C., McVay, S.E. and Skaife, H. (2015), “Does ineffective internal control over financial
reporting affect a firm’s operations? Evidence from firms’ inventory management”, The
Accounting Review, Vol. 90 No. 2, pp. 529-557.
Finkenstadt, D.J. and Handfield, R. (2022), “The influence of supply chain immunity perceptions on
COVID-19 vaccine willingness in supply chain professionals”, The International Journal of
Logistics Management, Vol. 34 No. 1, pp. 84-105.
Flynn, B.B., Huo, B. and Zhao, X. (2010), “The impact of supply chain integration on performance: a
contingency and configuration approach”, Journal of Operations Management, Vol. 28 No. 1,
pp. 58-71.
Fortune (2020), “94% of the Fortune 1000 are seeing coronavirus supply chain disruptions: report”,
available at: https://fortune.com/2020/02/21/fortune-1000-coronavirus-china-supply-chain-
impact/ (accessed 10 July 2021).
Fu, W., Wang, Q. and Zhao, X. (2017), “The influence of platform service innovation on value co-
creation activities and the network effect”, Journal of Service Management, Vol. 28 No. 2,
pp. 348-388.
Gaughan, P.A. (1999), Mergers, Acquisitions, and Corporate Restructurings, 2nd ed., Wiley, New York.
Gavalas, D., Syriopoulos, T. and Tsatsaronis, M. (2022), “COVID–19 impact on the shipping industry:
an event study approach”, Transport Policy, Vol. 116, pp. 157-164.
Giroud, X. and Mueller, H.M. (2015), “Capital and labor reallocation within firms”, The Journal of
Finance, Vol. 70 No. 4, pp. 1767-1804.
Golmohammadi, A. and Hassini, E. (2020), “Review of supplier diversification and pricing strategies
under random supply and demand”, International Journal of Production Research, Vol. 58
No. 11, pp. 3455-3487.
Grant, R.M. (1998), Contemporary Strategy Analysis, 3rd ed., Blackwell, Oxford.
Gunessee, S. and Subramanian, N. (2020), “Ambiguity and its coping mechanisms in supply chains
lessons from the COVID-19 pandemic and natural disasters”, International Journal of
Operations and Production Management, Vol. 40 Nos 7-8, pp. 1201-1223.
Gupta, S., Starr, M.K., Farahani, R.Z. and Matinrad, N. (2016), “Disaster management from a POM
perspective: mapping a new domain”, Production and Operations Management, Vol. 25 No. 10,
pp. 1611-1637.
Handfield, R., Finkenstadt, D.J., Schneller, E.S., Godfrey, A.B. and Guinto, P. (2020), “A commons for a
supply chain in the post-COVID-19 era: the case for a reformed strategic national stockpile”,
Milbank Quarterly, Vol. 98 No. 4, pp. 1058-1090.
Handfield, R., Apte, A. and Finkenstadt, D.J. (2022), “Developing supply chain immunity for future
pandemic disruptions”, Journal of Humanitarian Logistics and Supply Chain Management,
Vol. 12 No. 4, pp. 482-501.
Hann, R.N., Ogneva, M. and Ozbas, O. (2013), “Corporate diversification and the cost of capital”, The
Journal of Finance, Vol. 68 No. 5, pp. 1961-1999.
IJOPM Harris, R. (2020), “COVID-19 and productivity in the UK”, available at: https://www.dur.ac.uk/
research/news/item/?itemno541707 (accessed 8 May 2021).
Heckman, J.J. (1979), “Sample selection bias as a specification error”, Econometrica, Vol. 47, pp. 153-161.
Hendricks, K.B. and Singhal, V.R. (2003), “The effect of supply chain glitches on shareholder wealth”,
Journal of Operations Management, Vol. 21 No. 5, pp. 501-522.
Hendricks, K.B. and Singhal, V.R. (2005), “An empirical analysis of the effect of supply chain
disruptions on long-run stock price performance and equity risk of the firm”, Production and
Operations Management, Vol. 14 No. 1, pp. 35-52.
Hendricks, K.B., Singhal, V.R. and Zhang, R. (2009), “The effect of operational slack, diversification,
and vertical relatedness on the stock market reaction to supply chain disruptions”, Journal of
Operations Management, Vol. 27 No. 3, pp. 233-246.
Hendricks, K.B., Hora, M. and Singhal, V.R. (2015), “An empirical investigation on the appointments of
supply chain and operations management executives”, Management Science, Vol. 61 No. 7,
pp. 1562-1583.
Hendricks, K.B., Jacobs, B.W. and Singhal, V.R. (2020), “Stock market reaction to supply chain
disruptions from the 2011 Great East Japan Earthquake”, Manufacturing and Service
Operations Management, Vol. 22 No. 4, pp. 683-699.
Horowitz, J. (2020), “Apple’s coronavirus warning just shaved $34 billion off its stock market value”,
available at: https://edition.cnn.com/2020/02/18/investing/premarket-stocks-trading/index.html
(accessed 4 Jan 2022).
Huang, W., Yang, J. and Wei, Z. (2020), “How does servitization affect firm performance?”, IEEE
Transactions on Engineering Management, Vol. 69 No. 6, pp. 2871-2881.
International Monetary Fund (2020), “World economic outlook, october 2020: a long and difficult
ascent”, available at: https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-
economic-outlook-october-2020 (accessed 20 December 2022).
Irvine, P.J., Park, S.S. and Yıldızhan, Ç. (2016), “Customer-base concentration, profitability, and the
relationship life cycle”, The Accounting Review, Vol. 91 No. 3, pp. 883-906.
Ivanov, D. (2018), “Revealing interfaces of supply chain resilience and sustainability: a simulation
study”, International Journal of Production Research, Vol. 56 No. 10, pp. 3507-3523.
Ivanov, D. (2020), “Viable supply chain model: integrating agility, resilience and sustainability
perspectives—lessons from and thinking beyond the COVID-19 pandemic”, Annals of
Operations Research, Vol. 319, pp. 1411-1431.
Ivanov, D. and Dolgui, A. (2021), “A digital supply chain twin for managing the disruption risks
and resilience in the era of Industry 4.0”, Production Planning and Control, Vol. 32 No. 9,
pp. 775-788.
Jacobs, B.W. and Singhal, V.R. (2017), “The effect of the Rana Plaza disaster on shareholder wealth of
retailers: implications for sourcing strategies and supply chain governance”, Journal of
Operations Management, Vol. 49, pp. 52-66.
Jacobs, M., Droge, C., Vickery, S.K. and Calantone, R. (2011), “Product and process modularity’s effects
on manufacturing agility and firm growth performance”, Journal of Product Innovation
Management, Vol. 28 No. 1, pp. 123-137.
Jacobs, B.W. and Singhal, V.R. (2020), “Shareholder value effects of the Volkswagen emissions scandal
on the automotive ecosystem”, Production and Operations Management, Vol. 29 No. 10, pp.
2230-2251.
Jacquemin, A.P. and Berry, C.H. (1979), “Entropy measure of diversification and corporate growth”,
The Journal of Industrial Economics, Vol. 27 No. 4, pp. 359-369.
Jain, V. and Benyoucef, L. (2008), “Managing long supply chain networks: some emerging issues
and challenges”, Journal of Manufacturing Technology Management, Vol. 19 No. 4,
pp. 469-496.
Josephson, B.W., Lee, J.-Y., Mariadoss, B.J. and Johnson, J.L. (2019), “Uncle sam rising: performance Supply chain
implications of business-to-government relationships”, Journal of Marketing, Vol. 83 No. 1,
pp. 51-72. diversification
uttner, U. (2005), “Supply chain risk management: understanding the business requirements from a
J€
and
practitioner perspective”, The International Journal of Logistics Management, Vol. 16 No. 1, disruptions
pp. 120-141.
Kistruck, G.M., Qureshi, I. and Beamish, P.W. (2013), “Geographic and product diversification in
charitable organizations”, Journal of Management, Vol. 39 No. 2, pp. 496-530.
Kleindorfer, P.R. and Saad, G.H. (2005), “Managing disruption risks in supply chains”, Production and
Operations Management, Vol. 14 No. 1, pp. 53-68.
Kl€ockner, M., Schmidt, C.G. and Wagner, S.M. (2023), “The COVID-19 pandemic and
shareholder value: impact and mitigation”, International Journal of Production
Research, Vol. 61 No. 8, pp. 2470-2492.
Kraemer, M.U., Yang, C.H., Gutierrez, B., Wu, C.H., Klein, B., Pigott, D.M., . . . and Scarpino, S.V. (2020),
“The effect of human mobility and control measures on the COVID-19 epidemic in China”,
Science, Vol. 368 No. 6490, pp. 493-497.
Li, Y., Wang, X., Gong, T. and Wang, H. (2022), “Breaking out of the pandemic: how can firms match
internal competence with external resources to shape operational resilience?”, Journal of
Operations Management, Vol. 69 No. 3, pp. 384-403.
Lin, Y., Fan, D., Shi, X. and Fu, M. (2021), “The effects of supply chain diversification during the
COVID-19 crisis: evidence from Chinese manufacturers”, Transportation Research Part E:
Logistics and Transportation Review, Vol. 155, 102493.
Liu, W., Wei, W., Si, C., Xie, D. and Chen, L. (2020a), “Effect of supply chain strategic collaboration
announcements on shareholder value: an empirical investigation from China”, International
Journal of Operations and Production Management, Vol. 40 No. 4, pp. 389-414.
Liu, W., Yan, X., Si, C., Xie, D. and Wang, J. (2020b), “Effect of buyer-supplier supply chain strategic
collaboration on operating performance: evidence from Chinese companies”, Supply Chain
Management: An International Journal, Vol. 25 No. 6, pp. 823-839.
Maneenop, S. and Kotcharin, S. (2020), “The impacts of covid-19 on the global airline industry: an
event study approach”, Journal of Air Transport Management, Vol. 89, 101920.
Matvos, G. and Seru, A. (2014), “Resource allocation within firms and financial market dislocation:
evidence from diversified conglomerates”, The Review of Financial Studies, Vol. 27 No. 4,
pp. 1143-1189.
McKinsey (2015), “Mapping the value of diversification”, available at: https://www.mckinsey.com/
capabilities/strategy-and-corporate-finance/our-insights/mapping-the-value-of-diversification
(accessed 15 December 2022).
McKinsey (2020), “COVID-19: implications for business”, available at: https://www.mckinsey.com/
business-functions/risk/our-insights/covid-19-implications-for-business (accessed 20
December 2020).
uttner, M.P. (2015), “Disentangling diversification in supply chain
Mizgier, K.J., Wagner, S.M. and J€
networks”, International Journal of Production Economics, Vol. 162, pp. 115-124.
Namdar, J., Li, X., Sawhney, R. and Pradhan, N. (2018), “Supply chain resilience for single and multiple
sourcing in the presence of disruption risks”, International Journal of Production Research,
Vol. 56 No. 6, pp. 2339-2360.
Nguyen, T.H. and Devinney, A. (1990), “Diversification strategy and performance in Canadian
manufacturing firms”, Strategic Management Journal, Vol. 11 No. 5, pp. 411-418.
Nyamah, E.Y., Jiang, Y., Feng, Y. and Enchill, E. (2017), “Agri-food supply chain performance: an
empirical impact of risk”, Management Decision, Vol. 55 No. 5, pp. 872-891.
IJOPM Parast, M.M. and Shekarian, M. (2019), “The impact of supply chain disruptions on organizational
performance: a literature review”, Revisiting Supply Chain Risk, Vol. 7, pp. 367-389.
Parast, M.M. and Subramanian, N. (2021), “An examination of the effect of supply chain disruption
risk drivers on organizational performance: evidence from Chinese supply chains”, Supply
Chain Management: An International Journal, Vol. 26 No. 4, pp. 548-562.
Patatoukas, P.N. (2012), “Customer-base concentration: implications for firm performance and capital
markets: 2011 American accounting association competitive manuscript award winner”,
The Accounting Review, Vol. 87 No. 2, pp. 363-392.
Patrick, O.O. (2012), “Product diversification and performance of manufacturing firms in Nigeria”,
European Journal of Business and Management, Vol. 4 No. 7, pp. 226-233.
Pongtanalert, K. and Assarut, N. (2022), “Entrepreneur mindset, social capital and adaptive capacity
for tourism SME resilience and transformation during the COVID-19 pandemic”, Sustainability,
Vol. 14 No. 19, 12675.
Queiroz, M.M., Wamba, S.F., Jabbour, C.J.C. and Machado, M.C. (2022), “Supply chain resilience in the
UK during the coronavirus pandemic: a resource orchestration perspective”, International
Journal of Production Economics, Vol. 245, 108405.
Ramanujam, V. and Varadarajan, P. (1989), “Research on corporate diversification: a synthesis”,
Strategic Management Journal, Vol. 10 No. 6, pp. 523-551.
Remko, V.H. (2020), “Research opportunities for a more resilient post-COVID-19 supply chain–closing
the gap between research findings and industry practice”, International Journal of Operations
and Production Management, Vol. 40 No. 4, pp. 341-355.
Reuters (2020), “Buffett-backed Chinese EV maker BYD says making 5 million masks daily to fight
virus”, available at: https://www.reuters.com/article/us-health-coronavirus-byd-masks-
idUSKBN2100UE (accessed 28 February 2023).
Runde, D.F. and Ramanujam, S.R. (2020), “Diversifying supply chains to reduce risk in the global
economy”, available at: https://www.csis.org/analysis/recovery-resilience-diversifying-supply-
chains-reduce-risk-global-economy (accessed 5 December 2022).
Savoy, C.M. and Ramanujam, S.R. (2022), “Diversifying supply chains: the role of development assistance
and other official finance”, available at: https://www.csis.org/analysis/diversifying-supply-chains-
role-development-assistance-and-other-official-finance (accessed 5 December 2022).
Sawik, T. (2011), “Selection of supply portfolio under disruption risks”, Omega, Vol. 39 No. 2, pp. 194-208.
Sharma, A., Adhikary, A. and Borah, S.B. (2020a), “COVID-19’s impact on supply chain decisions:
strategic insights from NASDAQ 100 firms using Twitter data”, Journal of Business Research,
Vol. 117, pp. 443-449.
Sharma, R., Shishodia, A., Kamble, S., Gunasekaran, A. and Belhadi, A. (2020b), “Agriculture supply
chain risks and COVID-19: mitigation strategies and implications for the practitioners”,
International Journal of Logistics Research and Applications, pp. 1-27.
Shekarian, M., Nooraie, S.V.R. and Parast, M.M. (2020), “An examination of the impact of flexibility
and agility on mitigating supply chain disruptions”, International Journal of Production
Economics, Vol. 220, 107438.
Shou, Y., Shao, J. and Wang, W. (2021), “How does reverse factoring affect operating performance? An
event study of Chinese manufacturing firms”, International Journal of Operations and
Production Management, Vol. 41 No. 4, pp. 289-312.
Silander, K., Torkki, P., Lillrank, P., Peltokorpi, A., Brax, S.A. and Kaila, M. (2017), “Modularizing
specialized hospital services: constraining characteristics, enabling activities and outcomes”,
International Journal of Operations and Production Management, Vol. 37 No. 6, pp. 791-818.
Silbermayr, L. and Minner, S. (2014), “A multiple sourcing inventory model under disruption risk”,
International Journal of Production Economics, Vol. 149 No. 1, pp. 37-46.
Sodhi, M.S., Son, B.G. and Tang, C.S. (2012), “Researchers’ perspectives on supply chain risk Supply chain
management”, Production and Operations Management, Vol. 21 No. 1, pp. 1-13.
diversification
Su, P. and Liu, S. (2015), “Dual sourcing in managing operational and disruption risks in contract
manufacturing”, International Journal of Production Research, Vol. 53 No. 1, pp. 291-306.
and
Swift, C., Guide, V.D.R. Jr and Muthulingam, S. (2019), “Does supply chain visibility affect operating
disruptions
performance? Evidence from conflict minerals disclosures”, Journal of Operations Management,
Vol. 65 No. 5, pp. 406-429.
Tang, C. and Tomlin, B. (2008), “The power of flexibility for mitigating supply chain risks”,
International Journal of Production Economics, Vol. 116 No. 1, pp. 12-27.
Tang, S.Y., Gurnani, H. and Gupta, D. (2014), “Managing disruptions in decentralized supply chains
with endogenous supply process reliability”, Production and Operations Management, Vol. 23
No. 7, pp. 1198-1211.
Tangpong, C., Michalisin, M.D. and Melcher, A.J. (2008), “Toward a typology of buyer–supplier
relationships: a study of the computer industry”, Decision Sciences, Vol. 39 No. 3, pp. 571-593.
Treleven, M. and Schweikhart, S.B. (1988), “A risk/benefit analysis of sourcing strategies: single vs
multiple sourcing”, Journal of Operations Management, Vol. 7 Nos 3-4, pp. 93-114.
Tukamuhabwa, B.R., Stevenson, M., Busby, J. and Zorzini, M. (2015), “Supply chain resilience:
definition, review and theoretical foundations for further study”, International Journal of
Production Research, Vol. 53 No. 18, pp. 5592-5623.
Wagner, S.M. and Bode, C. (2006), “An empirical investigation into supply chain vulnerability”,
Journal of Purchasing and Supply Management, Vol. 12 No. 6, pp. 301-312.
Wagner, S.M. and Bode, C. (2008), “An empirical examination of supply chain performance along
several dimensions of risk”, Journal of Business Logistics, Vol. 29 No. 1, pp. 307-325.
Wang, J., Zhao, L. and Huchzermeier, A. (2021), “Operations-finance interface in risk management:
research evolution and opportunities”, Production and Operations Management, Vol. 30 No. 2,
pp. 355-389.
Wang, Z., Dong, Y. and Liu, A. (2022), “How does China’s stock market react to supply chain
disruptions from COVID-19?”, International Review of Financial Analysis, Vol. 82, 102168.
Whitney, D.E., Luo, J. and Heller, D.A. (2014), “The benefits and constraints of temporary sourcing
diversification in supply chain disruption and recovery”, Journal of Purchasing and Supply
Management, Vol. 20 No. 4, pp. 238-250.
Wolfe, N. (2011), The Viral Storm: the Dawn of a New Pandemic Age, Macmillan, New York.
Xinhua (2020), “Multi-way visits to Shanghai first day of resumption of work”, available at: http://
www.xinhuanet.com/video/2020-02/11/c_1125559285.html (accessed 15 August 2021).
Xiong, Y., Lam, H.K.S., Kumar, A., Ngai, E.W.T., Xiu, C. and Wang, X. (2021), “The mitigating role of
blockchain-enabled supply chains during the COVID-19 pandemic”, International Journal of
Operations and Production Management, Vol. 41 No. 9, pp. 1495-1521.
Xu, Z., Elomri, A., Kerbache, L. and El Omri, A. (2020), “Impacts of COVID-19 on global supply chains:
facts and perspectives”, IEEE Engineering Management Review, Vol. 48 No. 3, pp. 153-166.
Xu, L., Li, B., Ma, C. and Liu, J. (2022), “Supply chain finance and firm diversification: evidence from
China”, Australian Journal of Management, Vol. 48 No. 2, pp. 1-28.
Yin, W. and Ran, W. (2022), “Supply chain diversification, digital transformation, and supply chain
resilience: configuration analysis based on fsQCA”, Sustainability, Vol. 14, p. 7690.
Ylim€aki, J. (2014), “A dynamic model of supplier–customer product development collaboration
strategies”, Industrial Marketing Management, Vol. 43 No. 6, pp. 996-1004.
Yuen, K.F. and Thai, V.V. (2017), “The influence of supply chain integration on operational
performance: a comparison between product and service supply chains”, The International
Journal of Logistics Management, Vol. 28 No. 2, pp. 444-463.
IJOPM Zhang, F., Wu, X., Tang, C.S., Feng, T. and Dai, Y. (2020), “Evolution of operations management
research: from managing flows to building capabilities”, Production and Operations
Management, Vol. 29 No. 10, pp. 2219-2229.
Zhu, M., Yeung, A.C. and Zhou, H. (2021), “Diversify or concentrate: the impact of customer
concentration on corporate social responsibility”, International Journal of Production
Economics, Vol. 240, 108214.

Corresponding author
Qiang Wang can be contacted at: qiangwang@xjtu.edu.cn

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com