Supply chain risk and strategic reconfiguration: evidence from China

While globalization has significantly improved supply chain efficiency, it has also increased the exposure of firms to supply chain risks and vulnerabilities. How firms respond to these risks has therefore become an increasingly important question. Using data on Chinese listed firms from 2009 to 2023, this paper constructs a novel firm-year measure of supply chain risk perception based on textual analysis and examines how firms adjust their supplier networks in response to rising uncertainty. This expansion occurs along both domestic and international dimensions, with firms sourcing from a broader set of countries, consistent with a risk diversification strategy. Moreover, firms shift sourcing towards countries with higher government efficiency, suggesting an institutional channel through which firms enhance supply stability. Importantly, our additional evidence provides limited support for the view that the increase in supplier numbers is primarily driven by firms’ business expansion. These findings provide important implications for both firms and policymakers seeking to enhance supply chain resilience in an increasingly uncertain global environment.