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How does digitalization alter the paradox of supply base concentration? The effects of digitalization intensity and breadth

How does digitalization alter the paradox of supply base concentration? The effects of... The highly uncertain and turbulent environments nowadays intensify the paradoxical effects of supply base concentration (SBC) on improving cost efficiency while increasing idiosyncratic risk (IR). Digitalization is regarded as a remedy for this paradox, yet digitization's potentially curative effect has not been empirically tested. Leveraging the lenses of paradox theory and information processing theory (IPT), this study explores how two distinct dimensions of digitalization, i.e. digitalization intensity (DI) and digitalization breadth (DB), reconcile the paradoxical effects of SBC.Design/methodology/approachUsing a panel dataset of 1,238 Chinese manufacturing firms in the period of 2012–2020, this study utilizes fixed-effects regression models to test the proposed hypotheses.FindingsThe authors discover that SBC enhances a firm's cost efficiency but induces greater IR. More importantly, there is evidence that DI restrains the amplifying effect of SBC on IR. However, DB weakens the enhancing effect of SBC on cost efficiency and aggravates the SBC's exacerbating effect on IR.Originality/valueThis study advances the understanding of the paradoxical effects of SBC on cost efficiency and IR from a paradox theory perspective. More importantly, to the best of the authors' knowledge, the authors' study is the first to untangle the differential roles of DI and DB in reconciling the paradox of SBC. This study also provides practitioners with nuanced insights into how the practitioners should use appropriate tactics to deploy digital technologies effectively. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Operations & Production Management Emerald Publishing

How does digitalization alter the paradox of supply base concentration? The effects of digitalization intensity and breadth

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References (110)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0144-3577
DOI
10.1108/ijopm-10-2022-0685
Publisher site
See Article on Publisher Site

Abstract

The highly uncertain and turbulent environments nowadays intensify the paradoxical effects of supply base concentration (SBC) on improving cost efficiency while increasing idiosyncratic risk (IR). Digitalization is regarded as a remedy for this paradox, yet digitization's potentially curative effect has not been empirically tested. Leveraging the lenses of paradox theory and information processing theory (IPT), this study explores how two distinct dimensions of digitalization, i.e. digitalization intensity (DI) and digitalization breadth (DB), reconcile the paradoxical effects of SBC.Design/methodology/approachUsing a panel dataset of 1,238 Chinese manufacturing firms in the period of 2012–2020, this study utilizes fixed-effects regression models to test the proposed hypotheses.FindingsThe authors discover that SBC enhances a firm's cost efficiency but induces greater IR. More importantly, there is evidence that DI restrains the amplifying effect of SBC on IR. However, DB weakens the enhancing effect of SBC on cost efficiency and aggravates the SBC's exacerbating effect on IR.Originality/valueThis study advances the understanding of the paradoxical effects of SBC on cost efficiency and IR from a paradox theory perspective. More importantly, to the best of the authors' knowledge, the authors' study is the first to untangle the differential roles of DI and DB in reconciling the paradox of SBC. This study also provides practitioners with nuanced insights into how the practitioners should use appropriate tactics to deploy digital technologies effectively.

Journal

International Journal of Operations & Production ManagementEmerald Publishing

Published: Nov 27, 2023

Keywords: Supply base concentration; Paradox; Digitalization; Intensity; Breadth; Information processing theory

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