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The interaction between supply networks and internal networks: Performance implications

Chedid, F., Kocabasoglu Hillmer, C. ORCID: 0000-0001-6180-5636 & Ries, J.M. ORCID: 0000-0002-8783-1768 (2021). The interaction between supply networks and internal networks: Performance implications. International Journal of Operations and Production Management, 41(6), pp. 860-881. doi: 10.1108/ijopm-10-2020-0710


Purpose – The importance of the supply network to firm performance is well documented. Until now, the firm and its suppliers have been conceptualized as single entities. Yet, multinational corporations (MNC) are composed of a complex, geographically dispersed internal network of subsidiaries. The supply and internal networks are inherently linked. We study the impact of the interaction of these networks on firm-level financial performance.

Design/methodology/approach – Building on supply network, internal network, and dual embeddedness research, we investigate the interaction of these networks using supply network data from FactSet and internal network data from Orbis. We assess the impact at the MNC level, using measures of firm-level financial performance, physical proximity between the two networks and geographic dispersion of the internal network.

Findings – The results show that the performance effect of physical proximity of the firm with its supply network is negatively moderated by the geographic dispersion of the firm’s internal network. This effect can be traced back to the diminishing marginal profitability of a firm’s assets. Moreover, the benefits of dual embeddedness to the individual subsidiary come at a cost at the firm-level due to the operational challenges of managing a complex subsidiary network.

Research limitations/implications – This study is the first to investigate the supply and internal networks of MNCs simultaneously.

Originality/value – The paper extends supply network literature by considering the internal network of the focal firm and its suppliers. This paper is one of the first studies that offer an understanding of the interaction between supply and internal networks of a focal firm and the effect on financial performance.

Publication Type: Article
Additional Information: This author accepted manuscript is deposited under a Creative Commons Attribution Non-commercial 4.0 International (CC BY-NC) licence. This means that anyone may distribute, adapt, and build upon the work for non-commercial purposes, subject to full attribution. If you wish to use this manuscript for commercial purposes, please contact
Publisher Keywords: Supply network, internal network, dual embeddedness
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Departments: Bayes Business School > Management
SWORD Depositor:
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Text - Accepted Version
Available under License Creative Commons Attribution Non-commercial.

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