The impact of operational leanness and resilience on managing geopolitical risks: The moderating role of demand uncertainty and betweenness centrality

Abstract

The U.S.-China trade war significantly impacts global supply chain security and stability. This study delves into a particular policy enacted by the U.S. amid the U.S.-China trade war context, targeting foreign investment in China. Our focus is on examining its repercussions on the stock market of relevant high-tech industries in China, and we explore how operational leanness and operational resilience hedge the impact, as well as environmental and network factors moderate these effects based on the complex adaptive systems (CASs) perspective. This study adopts the event study method to analyze the impact of the U.S. investment restriction event in China on the shareholder value of Chinese listed firms. To test our model, we collected data from 812 Chinese listed firms. The U.S. investment restriction event adversely affects the shareholder value of targeted industries in China. Furthermore, we observe a negative correlation between operational leanness and cumulative abnormal returns, while operational resilience exhibits a positive association with cumulative abnormal returns. We also delve into the impact of demand uncertainty and betweenness centrality on these two moderating effects. Our findings reveal that demand uncertainty weakens the positive influence of operational resilience, whereas betweenness centrality strengthens it. However, neither demand uncertainty nor betweenness centrality influences the efficacy of operational leanness. This research enriches the geopolitical risk literature by focusing on a significant investment restriction act. Our study contributes to the different roles of operational leanness and resilience in mitigating geopolitical risks as well as their boundary conditions.