The Impact of Geopolitical Risk on Firms' Supply Chain Concentration - Evidence from Sino-US Trade Frictions

Yiru Wang

doi:10.54097/5h55dc35

Authors

Yiru Wang

DOI:

https://doi.org/10.54097/5h55dc35

Keywords:

geopolitical risk, supply chain concentration, Sino-US trade friction,

Abstract

Geopolitical risks have substantially heightened uncertainties in the external operating environment for Chinese enterprises, with the Sino-US trade friction emerging as the most consequential factor. Notably, the "Entity List" has served as a principal instrument in U.S. sanctions against China. Utilizing panel data from Chinese A-share listed companies spanning 2009-2023, this study employs the difference-in-differences (DID) methodology to empirically examine how geopolitical risks, exemplified by the Sino-US trade friction, influence corporate supply chain concentration. Robustness checks confirm the validity of our findings. The analysis reveals three key insights: (1) Geopolitical risks, particularly those arising from the Sino-US trade friction, exert a significant positive effect on supply chain concentration, primarily through mechanisms of heightened financial risks and mitigated managerial myopia. (2) Heterogeneity analysis demonstrates that enterprise ownership, technological intensity, and industry competition levels critically moderate this relationship, with state-owned enterprises, technology-intensive firms, and competitive industries experiencing more pronounced trade shocks. (3) This research extends the scholarly discourse on geopolitical risks in supply chain management while proposing actionable policy recommendations for governmental agencies and corporate strategies to enhance trade shock resilience and optimize supply chain configurations.

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