The rising cost of turmoil: geopolitical crises and supply chain risk

Abstract

From resource dependence theory and political risk theory, this paper empirically examines the impact of geopolitical crises (GC) on supply chain risk (SCR). Research findings reveal that GC significantly exacerbates SCR, operating through three pathways: erosion of supply chain resilience, elevation of client concentration, and deterioration of inventory liquidity. Further analyses indicate this effect is more pronounced among non-state-owned enterprises and during periods of lower economic uncertainty. Notably, corporate political connections act as a buffer against geopolitical shocks, with firms whose executive teams possess higher political ranks exhibiting substantially reduced risk exposure.