Word-of-Mouth Turbulence and Vertical Crisis Spillover in Supply Chains: A Selective Attention Theory Perspective

Workshop’s Topic: This study presents an integrated lens of how the negative effects of organizational crises spread in supply chains. and how turbulence in Word-of-Mouth (WOM) communication via, social media, characterized by unpredictability and uncertainty, influences this spillover. We hypothesize and confirm that selective attention reflected by the valence and variance of WOM, is a key underlying mechanism driving the negative spillover of crisis to supply chain partners. The study further examines how these spillover effects vary depending on the characteristics of supply chain partners, such as their locations (supply-side vs. demand-side) relative to the affected firms. size (small vs. large), and dependency (close vs. weak) on the affected firm. we constructed a multi-source panel dataset that combines data on organizational crises, crisis-related WO, and the market values of supply chain firms in China from 2011 to 2020. For the empirical analysis, we used panel vector autoregression (PVAR) with a generalized method of moments (GMM) estimation, The findings reveal that crisis-induced WOM turbulence significantly intensifies the negative spillover to supply chain partners. Furthermore, the effect of crisis-induced WOM in intensifying negative spillover is more prominent for supply chain partners that are located downstream (vs. upstream), larger (vs. smaller), or with more closely-dependent (vs. loosely-dependent) relationships with the affected firms, We also discover that the supply-side and demand-side of the supply chain exhibit distinct patterns of crisis spillover. Additionally, we find distinct effects of WOM turbulence in operational and social crises. These findings provide valuable theoretical contribution to the research on organizational crisis spillover, WOM firm value relationship, and supply chain risk management. They also offer practical guidance for operation risk management to both managers and investors.

Time and Location: 10:00 AM (GMT+8), Room A523 (School of Management)

Language: Bilingual (Chinese and English)