Navigating sociopolitical waters: exploring the influence of key factors on global supply base concentration

Purpose Various economic, strategic and sociopolitical factors drive the decisions related to the location of global supply chain partners. Yet, research on how sociopolitical factors affect these decisions is not that prevalent. We contribute to this line of research by evaluating the changes in global supply base concentration accounted for by three key sociopolitical factors – populism, state fragility and political constraints – that magnify or attenuate the effects of institutional risks, uncertainties and volatility. Design/methodology/approach Apart from hypothesizing the negative effects of populism and state fragility, political constraints are conjectured to significantly attenuate these negative effects. The proposed hypotheses were motivated using the tenets of institutional economics theory and tested using a comprehensive dataset compiled from six widely used secondary data sources. The panel data spanning 2003–2018 focused on a sample of global US-listed companies with worldwide suppliers. Findings Our results supported three of the four hypotheses. Specifically, the direct effects of populism and state fragility were found to be significant, suggesting that they reduced the number of suppliers in the country. However, political constraints did not moderate the effect of populism on global supply base concentration, while they negatively moderated the effect of the state fragility index. This result showcases the overpowering effect of populism on a country’s market environment. Originality/value Supply chain scholars resoundingly acknowledge the need for more research on the effect of broader sociopolitical factors on global supply chain management. Responding to this call, we evaluate the direct and contingent effects of populism, state fragility and political constraints on global supply base concentration. Our choice of these factors was based on their representation of most of the critical institutional environments prevalent in various countries. One surprising result we found was that populism was found to be pervasive even in countries with strong checks and balances, suggesting its paramount importance to practicing management. Overall, by unraveling the interesting effects of these multidimensional sociopolitical factors, our study makes a valuable contribution to not only theory but also practice.