Strategic Sourcing Under Severe Disruption Risk: Learning Failures and Under-Diversification Bias

Problem definition: We study sourcing behavior in severe conditions where supply disruptions are rare but carry the potential of wiping out several rounds worth of a firm’s profit. Academic/practical relevance: The tradeoff between scale economies from supplier consolidation and risk mitigation from supplier diversification is at the core of firms’ sourcing strategy and one that is empirically understudied. Methodology: We study supplier diversification through a behavioral lens and test theoretically derived predictions under controlled laboratory conditions. Results: Our data provide strong evidence for under-diversification. We posit that this pattern is partly because of the fact that investing in supplier diversification involves an upfront cost to achieve a delayed, and rarely encountered, benefit. Managerial implications: Under-diversification bias is costly, and its causes are difficult to overcome, presenting firms with the daunting task of devising debiasing mechanisms that reinforce a supplier diversification strategy when the rarity of disruptions almost always render supplier consolidation the ex post preferred strategy.

• 저널Manufacturing & Service Operations Management · 23(4) · 761–780
• 토픽Supply Chain Resilience and Risk Management · Strategy and Management
• DOI10.1287/msom.2020.0907
• 저자Kyle H. Goldschmidt, Mirko Kremer, Douglas J. Thomas, Christopher W. Craighead