Article
Identifying the Relation Between a Supply Chain Network’s Structure and Its Overall Financial Performance
Operations and Supply Chain Management: An International Journal
(2021)
Abstract
We construct a data set using financial performance data spanning forty publicly traded companies across several industry sectors over a three-year time-period to identify key structural features of supply networks. The data set for this study allows us to explore supply chain relationships beyond the first tier. For each network within the data set, we examine the network topology via several key structural parameters including node and edge counts, average degree, network diameter, average path length and the power law exponent. We observe that the emergent structure of supply networks is similar (inter-industry), although dominant supply networks are apparent, in some, yet not all the industry sectors. We then link the structural parameters with financial metrics and observe that higher average degree results in decreased overall financial performance of the supply network. Average degree is indicative of how many connections a firm has. A high average degree implies strong inter-connectivity among the firms in the network. Historical analysis of the data (2013-2015) points to an overall decrease in the average degree, especially at the higher tiers. Our analysis suggests that to increase the overall supply network’s financial performance, a low average degree should be targeted.
Keywords
- supply chain network topology,
- empirical research,
- firm performance,
- Tobin’s Q,
- ROA
Disciplines
Publication Date
September, 2021
DOI
10.31387/oscm0470311
Citation Information
Penina Orenstein and Hongfei Tang. "Identifying the Relation Between a Supply Chain Network’s Structure and Its Overall Financial Performance" Operations and Supply Chain Management: An International Journal Vol. 14 Iss. 4 (2021) p. 399 - 409 ISSN: 1979-3561 Available at: http://works.bepress.com/penina-orenstein/30/