Supply chain disruptions: the influence of industry and geography on firm reaction speed

Responding in a timely manner to product recalls emanating from the supply chain presents tremendous challenges for most firms. The source might be a supplier from the same industry located next door, or one from a completely different sector of the economy situated thousands of miles away. Yet the speed of the firm’s response is crucial to mitigating the consequences of the recall both for the firm, and consumer health and well-being. The purpose of this paper is to investigate the effects of geographic distance, industry relatedness and clustering on firm response time to a supplier-initiated product recall.

The authors test the theoretical framework via an examination of food recall announcements registered with the US Food and Drug Administration over a ten-year period. The authors develop a data set comprising 407 pairs of supplier and affected downstream manufacturing firms, and utilize cross-classified hierarchical linear modeling to understand the drivers of organizational responsiveness.

The results suggest that firm response time is lengthened by geographic distance but reduced when the supplier and affected firm operate in related industry sectors. The authors further find that as more firms in a given industry are affected by the same recall, response time deteriorates.

Product recalls in the agri-food industry are significant events initiated to protect consumer health and ensure the safety of the farm-to-fork food chain. The findings highlight how both geographic- and industry-related factors determine the speed of firm responsiveness to these events.