Does Disruptive Event Affect Supply Base Size: Evidence from an Emerging Economy

AuthorHari Vishal,Pushpesh Pant,S. P. Sarmah
DOI10.1177/0015732520947903
Publication Date01 Nov 2020
SubjectArticles
Does Disruptive Event
Affect Supply Base
Size: Evidence from an
Emerging Economy
Pushpesh Pant1, Hari Vishal1 and
S. P. Sarmah1
Abstract
This article examines the effect of disruptive event, namely recession, on supply
base management (measured by supply base size) by using a large and longitudi-
nal dataset on Indian manufacturing firms. It is found that the buyer firms have
increased their supply base size at the annual rate of 8.23 suppliers per year per
manufacturer during the pre-recession (2004–2007) period. The strategy of hav-
ing a larger supply base is viable, specifically, in an emerging economy (e.g., India)
as the probability of disruptions is high due to the inadequacy of basic inputs such
as physical infrastructure, logistics services, technology, etc. Therefore, manufac-
turers tend to have a number of suppliers for the same product group to reduce
supplier dependence. Further, we find that buying firms preferred to have a larger
supply base even after a recession (2010–2013). However, they have increased
their supply base size at the annual rate of just 0.2 (compared to 8.3 during
the pre-recession period) suppliers per year per manufacturer during the post-
recession. This study highlights the importance of a disruptive event (proxied by
recession), by examining its association with supply base size in the emerging
economy perspective.
JEL Codes: C1, C5, C8
Keywords
Supply base, supplier, disruption, recession, emerging economy
Article
1 Department of Industrial and Systems Engineering, Indian Institute of Technology, Kharagpur, West
Bengal, India.
Corresponding author:
S. P. Sarmah, Department of Industrial and Systems Engineering, Indian Institute of Technology,
Kharagpur, West Bengal 721302, India.
E-mail: spsarmah@iem.iitkgp.ernet.in
Foreign Trade Review
55(4) 496–510, 2020
© 2020 Indian Institute of
Foreign Trade
Reprints and permissions:
in.sagepub.com/journals-permissions-india
DOI: 10.1177/0015732520947903
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