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Supply-Chain Concentration and Inefficient Investment

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  • Zhiyang Hui

Abstract

This paper investigates the influen7ce of supply-chain concentration on inefficient investment. We find that concentrated supply chains significantly foster inefficient investment and distort investments in an under-investing way. It suggests that a concentrated supply-chain base detriments investment efficiency. Nevertheless, the adverse impact is mitigated when switching costs are higher, information environment is more transparent, and CEO risk-taking incentives are higher. We also compare the effects in different types of firms and find that SOEs are less vulnerable to supply-chain concentration in terms of underinvestment. Overall, our study sheds light on the economic implications of supply-chain concentration in emerging markets.

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  • Zhiyang Hui, 2023. "Supply-Chain Concentration and Inefficient Investment," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(7), pages 2129-2144, May.
    • Handle: RePEc:mes:emfitr:v:59:y:2023:i:7:p:2129-2144
    DOI: 10.1080/1540496X.2023.2179873
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