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Introduction
Success in today’s competitive business environment requires efficient, reliable, and responsive management of resources to match supply with demand. It is well documented that supply chain disruptions could affect a company’s ability to efficiently deliver the right product at the right time and in the right quantity. Research community has realized the potential for managing and mitigating disruptions. A significant amount of research has been devoted to addressing various aspects of disruptions. The issues addressed include strategic, tactical, and operational. See Ellis et al. (2011) for a thorough literature review.
Despite extensive research efforts, the extant quantitative literature on disruptions management is almost entirely focussed on supply chains in developed economies. Supply chains differ between developed and developing economies (Sahay and Mohan, 2003; Sahay et al., 2006b; Zhao et al., 2006, 2007). The suitability of a disruption management practice or strategy may depend on supply chain characteristics, which could vary based on economic and other country specific factors. Therefore, research efforts directed toward managing disruptions in developing economies could be valuable. Besides, in today’s global marketplace, supply chains and markets span across countries, and the effects of disruptions could cascade between countries and continents. The Japanese Tsunami of 2011 disrupted supply chains across the world. Efficient operations require understanding and managing all echelons of a supply chain, some of which could be located in other countries. This research is an effort toward unraveling the importance of studying and managing disruptions in developing economies.
We focus on understanding the financial impact of supply chain disruptions in Indian companies. Owing to an open market economy, rapid economic development, democratic government, and differences from the western culture and supply chains, India provides a good opportunity to study the importance of effective supply chain management practices in a developing economy. In this paper we consider an “effective” supply chain practice to help avoid and/or mitigate disruptions. Such practices could create value in supply chains by making them reliable and responsive during disruptions. India represents an economy with a significant global trade and impact on global supply chains. We use stock market reactions following a supply chain disruption as a proxy for financial impact of disruptions. Stock market valuation of a company represents the current and future...