Event studies in operations and supply chain management: an overview and two empirical studies

Abstract

As the strategic role of operations and supply chain management (OSCM) has been increasingly recognized, the event study method represents one of the most popular methodologies to quantify the impact of OSCM events on firms' shareholder value. Concentrating on the topic of event studies in OSCM, I conduct three studies. The first study is a comprehensive literature review of short-term event studies in OSCM. Analyzing 29 short-term event studies published in renowned OSCM journals between 1995 and 2017, I find that OSCM researchers generally follow the standard procedures in conducting event studies, but pay less attention to some methodological issues ranging from addressing the confounding events to expanding event windows. I provide several recommendations for future event studies in OSCM, such as the opportunity for studying external events in the non-U.S. context, the caution of expanding the event windows, and the need to deal with the self-selection bias. Considering the research opportunities identified in the first study, the second study employs the short-term event study method to examine the transmission effect of natural disasters across national borders. It is unclear whether the disaster affects the disaster-stricken firms' industry peers located in other areas, especially in other countries. Those industry peers might benefit from the disaster due to the competitive advantage gained over the disaster-stricken firms (competitive effect), or they might suffer from the disaster due to their linkages to the disaster-stricken firms (contagion effect). Based on a natural experiment of Kumamoto earthquakes in Japan in 2016, I find that the earthquakes have a negative impact on the stock returns of the semiconductor manufacturers located in China, suggesting that the contagion effect overweighs the competitive effect. Moreover, the negative impact is more pronounced for firms with supply chain linkages with Japanese firms, confirming the contagion effect via interfirm linkages. I also find a positive impact among Chinese firms with higher inventory turnover and higher customer concentration, supporting the operational efficiency perspective. Overall, the study reveals the dynamic effects of a natural disaster across national borders, providing important implications for global supply chain management and competition. While the short-term event study method has been well adopted in the OSCM literature, event studies based on long-term stock returns are relatively scarce, especially for the implementation of new technologies in OSCM. The third study thus employs the long-term event study method to empirically test the impact of 3D printing (3DP) implementation on firm performance in terms of abnormal stock returns. Based on 232 announcements of 3DP implementation made by U.S. public-listed firms between 2010 and 2017, the study shows that firms implementing 3DP enjoy significant higher stock returns compared with their non-implementation industry peers over two years after the implementation. Such stock returns due to 3DP implementation are more pronounced for firms operating in more munificent, more dynamic, and less competitive industry environments, consistent with the operational scope arguments. The study provides important implications for managers to implement 3DP to broaden firms' operational scopes and for researchers to study 3DP from an operational perspective.