Impact of a country’s logistical capabilities on supply chain risk

Abstract

Purpose: This paper aims to examine the relationship between environmental factors, risk perception and decision-making in risk management. Specifically, using attribution theory, the authors study the influence of macro-level logistical capabilities of a host country on a firm’s actual and perceived supply chain risk, and examine if this country-level factor and the firm level perception of risk affect a firm’s decision-making in risk management.

Design/methodology/approach: This study uses a combination of primary data from 932 manufacturing firms from 22 countries and secondary data from the logistics performance index (LPI), and empirically tests the conceptual framework using partial least squares structural equation modeling.

Findings: Key results reveal that a country’s logistical capabilities, measured using LPI, have a significant impact on managers’ risk perception. Firms located in countries with high LPI perceive lower risk in their supply chain both in the upstream and downstream, and therefore do not invest much in external integration, compared to firms in low LPI countries, and hence are exposed to high risk.

Originality/value: This is one of the first empirical studies linking a country’s logistical capabilities with supply chain risk perceptions, objective supply chain risk and supply chain risk management efforts of a firm using the International Manufacturing Strategy Survey database.