When Industries Encounter Black Swan Events: How Competitive Market Boundaries Aggravate Enterprise Risk Spillovers?

ABSTRACT When industries face systemic shocks, enterprise risks extend beyond the effects of isolated incidents and propagate through intricate competitive networks. Existing research predominantly addresses risk spillovers initiated by isolated events, such as financial scandals and product recalls, while neglecting the risk spillover effects associated with firms embedded in multi‐market competitive networks. This study undertakes an empirical analysis within the context of China's electronic information manufacturing industry. The findings reveal that the broader a firm's product market competition boundary, the more pronounced the peer risk spillover effects it encounters. Furthermore, the degree of product diversification and analyst coverage positively moderate the relationship between competition boundaries and risk spillovers. Firms positioned downstream in the supply chain, those with lower corporate social responsibility performance, and non‐state‐owned enterprises experience more significant impacts of competition boundary breadth on risk spillovers. This study conceptualizes the boundaries of product market competition as a crucial lens for comprehending industry risk spillovers, thereby advancing risk spillover research from static event analysis to dynamic network analysis. The findings indicate that, in the context of systemic shocks, expansive competition boundaries exacerbate risk contagion through two primary channels: direct business linkages and indirect cognitive biases. This study offers a novel decision‐making framework for firms to navigate the balance between market opportunities and risk exposure within intricate competitive environments.