Firm-level trade decoupling risk and cross-border supply chain reconfiguration: evidence from Chinese firms
Gaowen Lei, Jiuchang Wei, Ji MaPurpose
This study aims to examine how firm-level trade decoupling risk (TDR) drives the reconfiguration of cross-border supply chains (CBSCs). Specifically, we investigate whether TDR leads to CBSC relationship termination, and how this effect is moderated by home-host bilateral relations and proactive supply chain risk disclosure (SCRD).
Design/methodology/approach
Drawing on host country sentiment (HCS) theory, we conceptualize firm-level TDR as the anticipated institutional pressure borne by firms whose home country faces the prospect of escalating decoupling actions. This pressure is catalyzed by negative host-country public sentiment toward the firm's home country. We proxy for TDR using the intensity of negatively framed decoupling-related media coverage, which we quantify by applying a large language model (LLM). We test our hypotheses using regression models on a sample of 21,796 firm-year observations of CBSC relationships from 1,460 Chinese A-share listed companies during 2017–2022.
Findings
Higher TDR significantly increases the likelihood of firms terminating their CBSC cooperation. We find that this effect is mitigated by favorable home-host bilateral relations and proactive SCRD. Furthermore, TDR drives supply chain reconfiguration, leading firms to establish new relationships in countries with better bilateral ties, a phenomenon known as “friend-shoring”.
Originality/value
This study systematically quantifies firm-level TDR through an LLM-based textual analysis of media data. By operationalizing public sentiment as a quantifiable institutional pressure, this study provides robust micro-level evidence of how it shapes firms' strategic shifts in global supply chains.